An essential element of a requirements contract is the promise of the buyer to purchase exclusively from the seller either the buyer's entire requirements or up to a specified amount. Absent such a commitment, the requirements contract fails for want of consideration.
Plaintiff meat supplier had offered to supply meat to defendant restaurant, and defendant placed monthly orders with plaintiff. Defendant claimed that the parties had a valid requirements contract, and pursuant to a letter proposal received by defendant, plaintiff was obligated to give defendant advance notice of a price increase. Plaintiff claimed that the letter was only an offer, there was no continuing contract between parties, and each purchase order constituted a separate contract for the amount stated by plaintiff. The plaintiff filed a diversity action for the Mississippi contract. The District Court granted the summary judgment of the plaintiff and despite the defendant's claim that plaintiff was not entitled to increased rates because it had failed to follow contract terms concerning price increases.
Does an offer to supply, together with monthly orders and a proposal letter, form a valid requirements contract?
The Court affirmed the trial court's grant of summary judgment because the parties' agreement was not a valid requirements contract, a letter stating that plaintiff would give advance notification of price increases was an offer that had been revoked, and each purchase order constituted a separate contract for the amount stated by plaintiff. The Court held that although requirements contracts were recognized in Mississippi, the agreement between plaintiff and defendant failed to meet an essential requirement of such a contract -- that the buyer promise to purchase exclusively from the seller, and thus the contract failed for lack of consideration.