BRC Rubber & Plastics, Inc. v. Continental Carbon Co.

BRC Rubber & Plastics, Inc. (BRC) (plaintiff) manufactured rubber products. Continental Carbon Company (Continental) (defendant) sold carbon black, a key component in rubber. BRC and Continental entered into a contract pursuant to which Continental agreed to supply BRC approximately 1.8 million pounds of carbon black annually for five years, starting January 1, 2010. The contract listed firm base prices. During the first four months of 2011, Continental supplied BRC with approximately 1.3 million pounds of carbon black. Hoping to capitalize on a tight market, Continental then demanded a two-cents-per-pound price increase. BRC objected, arguing that the increase violated the parties’ contract. Continental continued to demand a price increase and failed to timely ship some carbon black to BRC. On May 16, BRC formally invoked § 2-609 of the Uniform Commercial Code (UCC), which provided that a party who has reasonable grounds for insecurity regarding the other party’s performance may demand adequate assurance of performance in writing. If the other party failed to provide timely adequate assurance, the contract was deemed repudiated. Continental’s responses to BRC’s request for adequate assurance were contradictory. On May 20, Continental’s counsel stated that the company would abide by the contract. However, Continental continued to push for a price increase after that date. On June 2, BRC notified Continental that it was treating the contract as repudiated and filed a lawsuit. BRC then bought carbon black from another company. The district court found that BRC properly treated the contract as repudiated and properly covered by buying carbon black elsewhere. Continental appealed to the Seventh Circuit. There, Continental acknowledged that its conduct gave BRC reasonable grounds for insecurity but argued that its assurances were adequate.