Orange and Rockland Utilities, Inc. v. Amerada Hess Corp.

In December 1969, Orange and Rockland Utilities, Inc. (Orange) (plaintiff) contracted to purchase fuel at a fixed price per gallon from Amerada Hess Corp. (Hess) (defendant). Orange and Hess agreed that fuel should be supplied through a requirements contract lasting for a period of five years. Orange provided estimates of the requirements it would use for each year of the contract. Orange also included a clause stating that it could require an unlimited amount of fuel from Hess should Orange’s requirements increase. Shortly after Hess began performance on the contract, however, the price of fuel almost doubled. Additionally, Orange began routinely demanding that Hess supply up to sixty percent more fuel than Orange originally estimated requiring in the contract. The reason for Orange’s greatly increased demand was that Orange discovered it could make more money buying the fuel from Hess at the fixed price under the contract and reselling the fuel to other parties at the higher market price. This arrangement was not contemplated by Orange and Hess in the original requirements contract. Hess refused to supply to Orange any extra fuel beyond ten percent above the quantities estimated in the contract. Orange brought suit in New York state court against Hess seeking to enforce the contract. The trial court held that Orange did not incur its requirements under the contract in good faith, and denied relief to Orange. Orange appealed.