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

Continental Carbon (Continental) (defendant) sold a material used in rubber products. BRC Rubber & Plastics (BRC) (plaintiff) made rubber products. The companies entered an agreement in which Continental agreed to sell BRC approximately 1.8 million pounds of material annually for five years at fixed prices. The agreement also gave Continental a right of first refusal: before BRC could purchase product from another seller at a lower price, BRC had to give Continental the chance to match that price. During the first year, Continental shipped 2.6 million pounds of material to BRC. However, because of market changes, Continental struggled to keep up with demand the following year. BRC placed an order, but Continental neither confirmed nor shipped that order. When BRC eventually demanded immediate shipment, Continental explained that it did not have the material. BRC then purchased replacement material at a higher price from a third party. Over the following days, there were multiple communications between BRC and Continental in which Continental tried to negotiate price increases. BRC sued Continental alleging, among other things, that Continental anticipatorily repudiated the contract by failing to provide adequate assurance of future performance. In response, Continental argued in part that the parties’ agreement did not constitute a binding contract because it merely extended an open offer for orders and therefore lacked mutuality and consideration. The district court held that the agreement was unenforceable and Continental therefore could not be liable for breach or anticipatory repudiation. BRC appealed to the Seventh Circuit.