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Family Snacks of N.C. v. Prepared Prods. Co. - 295 F.3d 864 (8th Cir. 2002)

Rule:

Options as to assortment of goods are specifically reserved to the buyer under Mo. Rev. Stat. § 400.2-311(2) where no other arrangement has been made. This section rejects the test which mechanically and without regard to usage or the purpose of the option gave the option to the party "first under a duty to move" and applies instead a standard commercial interpretation to these circumstances. 

Facts:

Under the supply agreement, the purchaser agreed to buy $10 million worth of snack food products from the supplier on a "cost plus" basis. The agreement included a formula for calculating the price of the products that was based on manufacturing costs. The purchaser bought nothing under the agreement. The purchaser claimed that the agreement was illusory and unenforceable and that the supplier's failure to provide the purchaser with necessary pricing information limited the purchaser's ability to solicit orders.

Issue:

Did the qualifications on the supplier's performance render the agreement illusory and unenforceable?

Answer:

No

Conclusion:

The appellate court found that qualifications on the supplier's performance did not render the agreement illusory under Missouri law, which governed the agreement, because those qualifications were not unrestricted. It was unnecessary for the agreement to specify prices because the parties agreed to a process for determining prices. As the agreement did not state which party had to initiate performance, Mo. Rev. Stat. § 400.2-311(2) placed the responsibility on the purchaser to first identify the products it wished to buy before the supplier was obligated to provide a price for those products.

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