Kaiser-Francis Oil Co. v. Producer’s Gas Co.

Kaiser-Francis Oil Co. (Kaiser) (plaintiff) is a seller of natural gasoline. Producer’s Gas Co. (PGC) (defendant) is a purchaser of gasoline. Kaiser entered into two contracts with PGC for the sale of gasoline taken from wells in which Kaiser had a percentage interest. Each contract contained a “force majeure clause” limiting the liability of either party to perform under the contract if an unforeseen event beyond the control of the parties made performance impossible. Many qualifying “force majeure” events were specifically stated in the contracts, including acts of God, strikes, governmental or regulatory orders, and the inability to secure labor or materials, among others. After Kaiser and PGC entered the contract, the resale price of natural gasoline declined. PGC did not pay Kaiser for gas taken from Kaiser’s wells on the theory that it was purchasing the gas from Kaiser’s co-owners at reduced prices. PGC also declined to pay Kaiser for the minimum contract quantities of the gas which were not taken. Kaiser brought suit in United States district court seeking to enforce the contract with PGC. PGC raised several defenses, including that it was excluded from performance due to the contracts’ force majeure clauses. PGC argued that a decline in the resale price of gasoline amounted to a qualifying “force majeure.” The district court granted summary judgment for Kaiser, and PGC appealed. On appeal, PGC made several arguments, including that the force majeure provision in the contracts extends to a partial lack of demand for gasoline caused by market forces.