Bayer Corp. v. DX Terminals, Ltd.

214 S.W.3d 586 (2006)

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Bayer Corp. v. DX Terminals, Ltd.

Texas Court of Appeals
214 S.W.3d 586 (2006)

Facts

Bayer Corporation (Bayer) (plaintiff) produced chlorine, which created a by-product called caustic soda that could be used for other purposes, like making bleach. In 1998, Bayer entered into a monthly installment contract with DX Terminals, Ltd. (DX) (defendant). DX agreed to buy and remove from Bayer’s facility between 135,000 and 150,000 tons of caustic soda annually for a five-year period, which equated to between 11,250 and 12,500 tons per month. DX primarily planned to sell the caustic soda to a third-party named Davison Petroleum (Davison). However, in 2000, Bayer began selling caustic soda directly to Davison. Thereafter, from May through August 2001, DX removed approximately 38 percent less caustic soda from Bayer’s facility than the target monthly minimums. Accordingly, Bayer terminated the contract in September 2001. DX sued Bayer for breach of contract and tortious interference with its contract with Davison. Bayer counterclaimed for breach of contract. At trial, the parties presented evidence regarding whether DX’s failure to take contract minimums for four consecutive months substantially impaired the value of the whole contract to Bayer. Bayer argued that the buildup of caustic soda inventory almost caused its entire facility to shut down. Moreover, Bayer presented evidence that it suffered $40,000 in damages for caustic soda that it shipped to DX and DX refused to take. DX presented evidence that Bayer did not have an inventory crisis, that Bayer was incentivized to sell the caustic soda directly to Davison for more profit, and that Bayer’s breach caused it millions of dollars in damages. Additionally, testimony suggested that the parties understood, despite the contract terms, that exactly equal monthly installments were impossible. The trial court denied Bayer’s motion for directed verdict. The jury found that both parties breached the contract and respectively awarded Bayer and DX $40,000 and $7,500,000 in damages. Bayer appealed.

Rule of Law

Issue

Holding and Reasoning (Hedges, C.J.)

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