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Nanakuli Paving and Rock Co. v. Shell Oil Co., Inc., 664 F.2d 772, 32 UCC Rep.Serv. 1025

Facts

Nanakuli, the second largest asphaltic paving contractor in Hawaii, had a long-term supply contract with Shell for asphalt. In January 1974, when Shell raised the price of asphalt from $44 to $76, Nanakuli claimed that Shell breached their 1969 contract by failing to price protect them on 7200 tons of asphalt. Nanakuli argued that price protection was a customary practice in the asphaltic paving trade in Hawaii and was incorporated into their agreement with Shell, as evidenced by Shell's previous actions of price protection during earlier price increases.

Nanakuli, the second largest asphaltic paving contractor in Hawaii, had a long-term supply contract with Shell for asphalt. In January 1974, when Shell raised the price of asphalt from $44 to $76, Nanakuli claimed that Shell breached their 1969 contract by failing to price protect them on 7200 tons of asphalt. Nanakuli argued that price protection was a customary practice in the asphaltic paving trade in Hawaii and was incorporated into their agreement with Shell, as evidenced by Shell's previous actions of price protection during earlier price increases.

Issue

Did Shell Oil Company breach its contract with Nanakuli Paving and Rock Company by failing to provide price protection when it raised the price of asphalt?

Did Shell Oil Company breach its contract with Nanakuli Paving and Rock Company by failing to provide price protection when it raised the price of asphalt?

Rule

The court applied the Uniform Commercial Code (U.C.C.) principles regarding trade usages and the interpretation of contracts, emphasizing that the actual performance of a contract and the customary practices in a specific trade can inform the understanding of contractual terms.

The court applied the Uniform Commercial Code (U.C.C.) principles regarding trade usages and the interpretation of contracts, emphasizing that the actual performance of a contract and the customary practices in a specific trade can inform the understanding of contractual terms.

Analysis

The court found that the District Judge did not abuse his discretion in defining the applicable trade as the asphaltic paving trade in Hawaii. The jury could reasonably conclude that Shell's previous actions of price protection indicated an understanding of the contract terms rather than a waiver. Furthermore, the court noted that the express price terms could be construed as consistent with the trade usage of price protection, given the unique circumstances of the Hawaiian market.

The court found that the District Judge did not abuse his discretion in defining the applicable trade as the asphaltic paving trade in Hawaii. The jury could reasonably conclude that Shell's previous actions of price protection indicated an understanding of the contract terms rather than a waiver. Furthermore, the court noted that the express price terms could be construed as consistent with the trade usage of price protection, given the unique circumstances of the Hawaiian market.

Conclusion

The Court of Appeals reversed the District Court's decision, reinstating the jury's verdict in favor of Nanakuli, concluding that there was substantial evidence to support the finding that Shell breached its contract.

The Court of Appeals reversed the District Court's decision, reinstating the jury's verdict in favor of Nanakuli, concluding that there was substantial evidence to support the finding that Shell breached its contract.

Who won?

Nanakuli Paving and Rock Company prevailed in the case because the jury found substantial evidence that Shell breached the contract by failing to provide price protection, which was a customary practice in the asphaltic paving trade.

Nanakuli Paving and Rock Company prevailed in the case because the jury found substantial evidence that Shell breached the contract by failing to provide price protection, which was a customary practice in the asphaltic paving trade.

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