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Simcala, Inc. v. American Coal Trade

821 So. 2d 197 (2001)

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Simcala, Inc. v. American Coal Trade

Alabama Supreme Court
821 So. 2d 197 (2001)

RW

Facts

Simcala, Inc. (defendant) entered into a requirements contract with American Coal Trade, Inc. (ACT) (plaintiff) for the purchase of the estimated quantity of coal Simcala would need during 1998. Simcala suspended its purchases in mid-May when one of its furnaces broke down, allegedly due to the poor quality of ACT’s coal. Simcala resumed its purchases in late June but suspended them once more in October 1998, when the mine from which ACT sourced its coal closed. ACT said it could find coal from another source by the end of October, but Simcala made no further purchases. Simcala’s total purchases for 1998 were just 41 percent of what the contract stipulated. ACT sued Simcala for breach of contract. The trial court found no evidence that Simcala had acted in bad faith. However, the court found that Simcala had violated an Alabama statute, adapted from § 2-306 of the Uniform Commercial Code (UCC), that required good faith in the performance of a requirements contract, “except that no quantity unreasonably disproportionate to any stated estimate . . . may be tendered or demanded.” Simcala appealed to the Alabama Supreme Court, contending that the statute prohibited only contract orders that were unreasonably higher than the amount specified in the contract.

Rule of Law

Issue

Holding and Reasoning (Lyons, J.)

Dissent (Woodall, J.)

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