Opinion ID: 2616451
Heading Depth: 1
Heading Rank: 5

Heading: Chip Prices

Text: On September 24, 1974, MPI and GP entered into a Wood Chip Contract. MPI agreed to sell, and GP to buy, all wood chips produced by the MPI mill at Roundup and the proposed mill at Lewistown. The price was to be determined by a formula based on the chip export price received by GP under an existing contract with Marubeni Corporation. MPI was to be notified, at stated intervals, of changes in price under the Marubeni contract. A few months later the export chip market suffered substantial changes and GP, as a consequence, renegotiated its ship export contracts. Marubeni Corporation, in return for a reduction in the quantity of chips it was obliged to buy, agreed to a substantial increase in the unit price. It is undisputed that MPI was never notified of this price change, and that its board, therefore, did not know that the base price under MPI's September agreement with GP would be significantly higher than in the past. The Roundup mill did produce some chips which were purchased by GP; the record is not clear whether MPI actually received the higher price to which it was entitled. Plaintiffs contend, however, that if MPI had been properly notified of the increase in the contract price, its production plans for the Roundup mill would have been different. Under the September 24 agreement, MPI had in GP a guaranteed buyer for its entire chip output. There was evidence that many of the logs available at the Roundup mill were not suitable for the manufacture of lumber, but might have been chipped for profitable sale to GP had the increase in the contract price been known. We are inclined to accept plaintiffs' argument that the probable reason that GP did not inform MPI of the increase in the export chip price was that GP already had more chips than it could sell under its renegotiated export contracts. By concealing this information from MPI, plaintiffs contend, GP was improperly elevating its own interests over those of the venture. Although the evidence does not permit any realistic estimate of the financial loss to MPI as a result of GP's failure to inform MPI of the increase in contract prices, we find that this failure was a breach of GP's fiduciary duties as well as its contractual obligations.