Contracts that are valid must be mutual and binding upon both parties.
The parties entered into a multi-year contract for the purchase and sale of cases of whiskey at pre-established prices. The contract provided that the wholesaler could purchase any number of cases per year up to a prescribed limit. The wholesaler could choose to not purchase any cases if it so desired. In the fourth year of the contract, the price of whisky rose substantially. The wholesaler demanded the entire year's allotment. The distiller deliver about one-fourth of the demand. The wholesaler argued that the contract was an enforceable mutual agreement and filed a breach of contract against the distiller. The circuit court entered a verdict in favor of the distiller. The case was appealed.
Did the contract have mutuality of obligation?
The court held that the wholesaler's action was not cognizable because the contract lacked mutuality of obligation. The court stated that contracts that were valid must be mutual and binding upon both parties. The court found that the mutuality was lacking because the contract was not binding on the wholesaler, and that it was not enforceable by the distiller.