Magellan International Corp. v. Salzgitter Handel GmbH

Illinois-based Magellan International Corporation (Magellan) (plaintiff) distributed steel products. Germany-based Salzgitter Hander GmbH (Salzgitter) (defendant) was a steel trader. In January 1999, Magellan and Salzgitter began negotiating a deal in which Salzgitter would help Magellan buy steel manufactured to Magellan’s specifications from a Ukrainian steel mill. On February 15, Magellan and Salzgitter agreed to quality and price terms, which were documented in two February 15 purchase orders. On February 17, Salzgitter purported to accept Magellan’s orders, except that Salzgitter requested price increases. Magellan accepted Salzgitter’s revised pricing in writing that same day. In the ensuing days, the parties continued to debate other terms and conditions, and Salzgitter urged Magellan to open a $1.2 million letter of credit in Salzgitter’s favor to finance the deal. By March 26, the parties resolved their disputes about the sales terms, and Magellan opened the letter of credit. On March 29, Magellan and Salzgitter exchanged correspondence regarding Salzgitter’s demand for changes to the letter of credit, which Magellan rejected. On March 30, Salzgitter told Magellan that it would no longer feel obligated to perform and would sell the steel to other buyers unless Magellan amended the letter of credit. On April 1, Magellan requested cancellation of the letter of credit, leading Salzgitter to begin trying to sell the steel to Magellan’s customers. Magellan sued Salzgitter, alleging that as of March 26 the parties had a valid contract under the United Nations Convention on Contracts for the International Sale of Goods (CISG), which Salzgitter’s March 30 ultimatum anticipatorily repudiated. Magellan sought damages and specific performance. Per Magellan, specific performance was warranted because it could not obtain cover. Salzgitter conceded that the CISG applied but argued that Magellan’s complaint failed to state a claim under the CISG.