Chainworks, Inc. v. Webco Industries, Inc.

Webco Industries, Inc. (Webco) (defendant) manufactured and supplied steel tubing. Chainworks, Inc. (plaintiff) was a commercial broker of steel tubing and acted as an intermediary between Webco and third-party purchasers. Webco and Chainworks had a commercial relationship for years, in which they occasionally negotiated contracts based on the costs of steel, which fluctuated. In November 2003, Webco issued a memo with price quotations for steel tubing in the calendar year 2004. The memo stated that prices were “firm” for 2004. Chainworks inquired whether the prices would remain fixed in light of imminent changes in market conditions. Webco responded with an acknowledgement that prices were on the rise but stated that tubing would remain as priced. In early December 2003, Chainworks offered to purchase all its required steel tubing for 2004 from Webco at the memo’s pricing. The steel tubing would be shipped to Tenneco, a third party in Canada. In January 2004, Webco made a shipment of steel tubes to Tenneco along with an invoice for the agreed-upon prices. However, thereafter Webco notified Chainworks of “dramatic developments” in the steel industry that were causing prices to increase. Webco’s steel supplier began imposing surcharges on all steel products. Webco notified Chainworks that Webco was passing on the surcharge to Chainworks and demanded an “acceptance” to the price increase or else Chainworks would face supply interruptions. Chainworks agreed “under duress,” reserved its contract rights and remedies, and noted its lack of alternatives. In August 2004, Webco unilaterally raised the cost of its steel-tubing products, threatening to stop shipments unless Chainworks accepted. Chainworks, again, agreed to the increased prices under duress. Chainworks discontinued the parties’ relationship at year end. In paying its final invoice, Chainworks subtracted the 2004 surcharges and price increases. Chainworks then sued Webco seeking a declaratory judgment that Chainworks was not required to pay the increases. Webco counterclaimed for breach of contract. Chainworks moved for summary judgment. Webco argued that Chainworks agreed to modify the contract and that the original contract became impracticable to perform.