Opinion ID: 287373
Heading Depth: 2
Heading Rank: 3

Heading: the option sulphur dispute

Text: 144 Simplot insists that it was and is entitled to delivery of 40,000 long tons of sulphur yearly under the option clause of the contract. Texas Gulf maintains that the option was not meant to cover sulphur ordered for use in the third Simplot sulphur plant. Alternatively Texas Gulf claims that if such use were authorized by the contract, the agreement would be a clear violation of § 2(a) of the Robinson-Patman Act. This latter contention merely restates the argument and citation used to attack the main sulphur contract. Our findings on that point apply here as well. We confine our discussion, therefore, to the matter of contractual interpretation. 145 The Quantity and Terms section of the contract contains the option provision: 146 3.1 A quantity of sulphur ordered by the Buyer for shipment to and consumption in the Plant, such quantity to be 70,000 tons or actual tonnage consumed by Buyer in the Plant, whichever is smaller, during each yearly period; however, Buyer, at its option, may purchase from the Seller 40,000 tons in excess of said tonnage during each yearly period. 147 Simplot maintains that the option provision does not specify any plant at which the 40,000 tons must be used. Texas Gulf asserts that this language must be interpreted in light of the following introductory provisions of the contract. 148 1. Whereas, Buyer is the lessee of a sulphuric acid plant of approximately 700 tons per day capacity now being constructed at Don, Idaho, by Bannock Chemical Company, and 149 2. Whereas, Buyer desires to purchase from Seller sulphur for use and consumption in such plant. WITNESSETH 150 Seller agrees to sell and deliver and Buyer agrees to buy and receive at a sulphuric acid plant to be constructed in 1963 on premises leased by Buyer at Don, Idaho, hereinafter called the Plant, the sulphur hereinafter mentioned, on the following terms and conditions:   . 151 Texas Gulf reads this language with that of the Quantity and Terms section to reach the conclusion that the 40,000 ton option could not be exercised to provide sulphur for the third Simplot plant. 152 The trial court heard the witnesses, considered the oral and documentary evidence and rejected Texas Gulf's interpretation of the option provision. It found: (1) All of Simplot's acid plants were part of a single interconnected, nonseparable and integrated manufacturing unit. (2) Texas Gulf routinely included option sulphur provisions in its sulphur supply contracts. (3) The parties had intended that the 40,000 tons could be used in any plant which Simplot operated at the time the need for the option sulphur arose. (4) Payment for the option would be governed by the price provision for the main sulphur contract. 153 These findings are not clearly erroneous as Texas Gulf contends. On the contrary they logically follow from the evidence presented to the trial court. We note that Texas Gulf's negotiators were experts in the drafting of long term sulphur supply contracts. Had they so intended, the Quantity and Terms section would have been conditioned to limit use of the option sulphur to a particular unit. The failure to do so doubtless reflected the belief that the 40,000 tons could be used in any Simplot plant. 154 Texas Gulf's interpretation of the contract would place a heavy premium on the form of Simplot's expansion. An expansion of Plant 2 or an increase in its productive capacity without expansion would allow the option to be exercised. Construction and denomination of a separate facility, however, would be outside the option. It is far more reasonable to assume that Texas Gulf had no interest in the manner in which the option tonnage was used in Simplot's operations.