415 F. Supp. 429 (1975)
Eastern Air Lines, Inc. and Gulf Oil Corporation maintained a business relationship spanning several decades involving the sale and purchase of aviation fuel.1 On June 27, 1972, following months of arm's length negotiation, the parties executed a contract under which Gulf agreed to supply Eastern's requirements of jet fuel at specified cities in the Eastern system through January 31, 1977.2 The agreement was Gulf's standard form aviation fuel contract and incorporated a price escalation clause tied to the average of the posted prices for West Texas sour crude oil 30.0-30.9 gravity as listed for Gulf, Shell, and Pan American in Platt's Oilgram Crude Oil Supplement.3
The contract price mechanism operated against the backdrop of U.S. government price controls in effect from 1972 through the fall of 1973.4 In late 1973 the Arab oil embargo occurred.5 OPEC unilaterally increased the price of their crude to the world market some 400% between September, 1973, and January 15, 1974.6 This triggered implementation of two-tier price controls under which old oil remained frozen at controlled levels while new and released oil prices rose from approximately $5 to $11 per barrel.7 Platt's continued publishing only the controlled old oil postings for West Texas Sour, and Eastern paid contract prices that rose from 11 cents to 15 cents per gallon.8
On March 8, 1974, Gulf demanded that Eastern accept a price increase or face cutoff of jet fuel supplies within fifteen days.9 Eastern filed its complaint in the United States District Court for the Southern District of Florida alleging breach and seeking preliminary and permanent mandatory injunctions.10 By agreement of the parties a preliminary injunction preserving the status quo was entered on March 20, 1974, requiring Gulf to continue performance and Eastern to pay according to contract terms pending final disposition.11
Gulf answered and asserted that the contract lacked mutuality, was not a binding requirements contract, and was commercially impracticable.12 At trial the parties presented evidence concerning Eastern's fuel liftings at Gulf stations, which varied daily, weekly, and monthly due to weather, schedules, aircraft loads, and fuel freighting practices that Gulf had accepted without objection over thirty years of dealing.13 Gulf introduced evidence of its increased crude oil costs, including intra-company transfer prices that incorporated profits from its overseas and domestic production subsidiaries, while the record showed Gulf recorded net profits after taxes of approximately $800 million in 1973 and more than $1.065 billion in 1974.14
Whether the June 27, 1972 agreement between Eastern Air Lines, Inc. and Gulf Oil Corporation constitutes a valid and enforceable requirements contract?15
Under the Uniform Commercial Code as adopted in Florida, a requirements contract is valid and enforceable where the quantity is measured by the actual good faith requirements of the buyer, and the party determining quantity must operate in good faith according to commercial standards so that requirements approximate a reasonably foreseeable figure. F.S. 672.306 (U.C.C. § 2-306(1)).16
Yes. The June 27, 1972 agreement constitutes a valid requirements contract under Florida's adoption of U.C.C. § 2-306.17 The contract measures quantity by Eastern's actual good faith requirements at the contract cities.18 The parties have consistently interpreted the contract to require Eastern to purchase its fuel from Gulf at those locations and Gulf to supply Eastern's reasonable demands.19
This interpretation has governed their conduct over many years and several contracts.20 The court concludes that the document is a binding and enforceable requirements contract.
The June 27, 1972 agreement is a valid and enforceable requirements contract under Florida law.21
Whether Eastern Air Lines, Inc. breached the contract through its fuel freighting practices?22
Good faith under the Uniform Commercial Code means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. U.C.C. § 2-103(1)(b).23 Established courses of performance, courses of dealing, and usages of trade govern the interpretation of requirements contracts, and fuel freighting is an accepted practice in the aviation industry when conducted without manipulation beyond normal operating variations.24
No. Eastern's fuel freighting practices do not constitute a breach.25 Throughout the history of commercial aviation, including 30 years of dealing between Gulf and Eastern, airlines' liftings of fuel have been subject to substantial variations due to weather, schedule changes, size of aircraft, aircraft load, local airport conditions, ground time, availability of fueling facilities, whether the flight is on time or late, passenger convenience, economy and efficiency of operation, fuel taxes, into-plane fuel service charges, fuel price, and the judgment of the flight captain. All these factors are known to oil companies, including Gulf, and taken into account in their fuel contracts.26 Gulf's witnesses pointed to examples of numerically large swings in monthly liftings by Eastern at Gulf stations.27
Gulf never complained of this practice and accepted it as normal procedure.28 The court concludes that fuel freighting is an established industry practice and Eastern has not violated the contract.29
Eastern Air Lines, Inc. did not breach the contract through its fuel freighting practices.30
Whether Gulf Oil Corporation's performance of the contract became commercially impracticable due to increases in crude oil prices and the advent of two-tier government price controls?31
Under U.C.C. § 2-615, commercial impracticability requires a failure of a presupposed condition that was an underlying assumption of the contract, which failure was unforeseeable, and the risk of which was not specifically allocated to the complaining party.32 Increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance.33 The burden of proving each element rests on the party claiming excuse.34
No. Gulf has not established commercial impracticability under U.C.C. § 2-615.35 The language of the contract is clear and unambiguous regarding the price escalation indicator.36 The parties intended to be bound by the specified entries in Platt's.37 On this record the court cannot determine how much it costs Gulf to produce a gallon of jet fuel for sale to Eastern or whether Gulf loses money on its sale of jet fuel to Eastern.38
Gulf's witnesses testified that they could not make such a computation.39 The record shows that Gulf recorded substantial profits in 1973 and 1974.40 Even if hardship had been established, the events associated with the energy crises were reasonably foreseeable at the time the contract was executed.41
Gulf Oil Corporation's performance of the contract did not become commercially impracticable.42
Whether Eastern Air Lines, Inc. is entitled to a permanent injunction requiring specific performance of the contract?43
The Uniform Commercial Code provides that in an appropriate case specific performance may be decreed. U.C.C. § 2-716(1).44 This case is a particularly appropriate one for specific performance.45 The parties have been operating for more than a year pursuant to a preliminary injunction requiring specific performance of the contract.46 Gulf has stipulated that it is able to perform.47 Cessation of supply would result in chaos and irreparable damage to Eastern.48
Yes. Having found the contract valid and enforceable with no defenses established, the proper remedy is specific performance.49 The parties have been operating for more than a year pursuant to a preliminary injunction.50 Gulf has stipulated that it is able to perform.
Gulf supplies Eastern with 100,000,000 gallons of fuel annually.51 If Gulf ceases to supply this fuel, the result will be chaos and irreparable damage.52 Under the U.C.C. a more liberal test applies for specific performance than for classic equitable relief.53 Eastern is entitled to Gulf's fuel at the prices agreed upon in the contract.54
A decree of specific performance is the ordinary relief in these circumstances.55 The preliminary injunction is made permanent.56
Eastern Air Lines, Inc. is entitled to a permanent injunction requiring specific performance of the contract.57