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Terry v. Atlantic Richfield Co.

Court of Appeal of California, Third Appellate District

August 26, 1977

Civ. No. 16109

Opinion

 [*964]  [**510]   This is a breach of contract action emanating from the nationwide gasoline shortage of 1973. Defendant Atlantic Richfield Company (ARCO) had agreed to supply all the gasoline "requirements" of plaintiffs, who operated a service station. In May 1973 requests from the federal government impelled ARCO to allocate gasoline supplies among its dealers. Plaintiffs were dissatisfied with their allocation and filed this lawsuit that same month. They sought an injunction plus general and punitive damages. Meanwhile the allocation program was proceeding. Plaintiffs' motion for a preliminary injunction was denied. Eventually ARCO moved for [***2]  a summary judgment. The trial court had before it an extensive array of declarations and depositions. The summary judgment was granted and Terry appeals.

ARCO's "requirements" contracts contained a force majeure clause permitting  [**511]  it to allocate supplies among its customers in case of a gasoline shortage. Before adoption of the Uniform Commercial Code, California law had read into that sort of clause an implied covenant of good faith. ( Milton v. Hudson Sales, Corp., 152 Cal.App.2d 418, 427, 431 [313 P.2d 936].) ] The doctrine of commercial frustration which excuses full performance of supply contracts is now codified in section 2615 of the California Uniform Commercial Code. Subdivision (a) of that  [*965]  section describes the contingencies which will excuse. Subdivision (b) permits partial performance when full performance becomes impossible; it permits the seller to allocate his available supply among his customers in any manner which is fair and reasonable. 1 Subdivision (c) requires seasonable notification of the buyer's estimated quota. By its terms, section 2615 governs except where the seller has assumed a greater obligation. It governs [***3]  here. (See generally, 1 Cal. Commercial Law (Cont.Ed.Bar 1966) § 10.55; Hawkland, The Energy Crisis and Section 2-615 of the Uniform Commercial Code (1974) 79 Com. L.J. 75.)

 [***4]  Plaintiffs opened their station in December 1971. During the first part of 1972 various circumstances kept their sales volume low. Leaks occurred in the storage tanks; tanks had to be replaced; for a time only one grade of gasoline could be stored. Plaintiffs charge that wrongful acts of defendant also impaired their sales capacity, including defendants' failure to advertise their station on freeway billboards and defendants' unreasonable delay in providing an aerial sign large enough to be visible from the freeway. In the first quarter of 1972 plaintiffs sold approximately 38,000 gallons of gasoline; in the second quarter, approximately 60,000 gallons. Sales in 1973, preceding the rationing, were much higher. In the first quarter of 1973, plaintiffs sold 90,000 gallons; in the month of April 57,000 gallons, and in May 50,000 gallons.

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72 Cal. App. 3d 962 *; 140 Cal. Rptr. 510 **; 1977 Cal. App. LEXIS 1784 ***; 22 U.C.C. Rep. Serv. (Callaghan) 669

RICHARD E. TERRY et al., Plaintiffs and Appellants, v. ATLANTIC RICHFIELD COMPANY et al., Defendants and Respondents

Subsequent History:  [***1]  A petition for a rehearing was denied September 21, 1977, and appellants' petition for a hearing by the Supreme Court was denied October 27, 1977.

Prior History: Superior Court of San Joaquin County, No. 113045, Chris Papas, Judge.

Disposition: Judgment affirmed.

CORE TERMS

stations, gasoline, customers, supplies, declarations, Plaintiffs', fair and reasonable, summary judgment, volume, contracts, allocate, shortage, dealers, freeway, Energy, seller, sales, summary judgment motion, issue of fact, Subdivision, hardship, formula, triable, opened

Commercial Law (UCC), Sales (Article 2), General Overview, Contracts Law, Standards of Performance, Partial Performance, General Provisions (Article 1), Application & Construction, Standards of Performance & Liability, Breach, Excuse & Repudiation, Acceptance of Goods, Excuse From Performance, Civil Procedure, Summary Judgment, Entitlement as Matter of Law, Appropriateness, Judgments