Shaw v. Mobil Oil Corp Case Brief

Summary of Shaw v. Mobil Oil Corp
OR S. Ct. [1975]

Performance and Constructive Conditions

Relevant Facts: The parties entered into a service station lease and a retail dealer K. The K required the dealer to purchase not less than 200,000 gal of gas per year, and Mobil to sell not more than 500,000 gal per year. The lease required 1.4 cents per gal of gas delivered, but “no less than the minimum amt specified in said schedule." The schedule specified $470/mo. In order for the rent per gal to equal the minimum rental per month, Mobil was required to deliver 33,572 gal per mo. Dealer ordered 34,000, but Mobil delivered only 25,678, b/c of Federal request. The K had an excuse clause.

Legal Issue(s): Whether the dealer's promise to pay minimum rental was condition dependent upon oil company's delivery of the amount of gasoline ordered by dealer even though oil company's failure to perform might be excused? Court’s Holding: Yes it was a conditioned or dependent.

Procedure: Pl brought declaratory judgment proceedings; trial ct ruled for Pl (interpreted the clause to mean that Mobil has a duty to deliver to the dealer as much as the dealer ordered. This duty is partially subject to an excuse clause); Df appealed; S. Ct. Reversed.

Law or Rule(s): If one of the promises becomes impossible of performance, the party who made it may be excused from legal duty. His failure to perform is not a breach of K. But the fact that the law excuses him from performance does not justify him in demanding performance by the other party.

Court Rationale: Covenants are dependent or independent based on the intention of the parties as deduced from the terms of the K. If the parties intended that performance by each of them is in no way conditioned upon performance by the other, the covenants are independent. If they intend performance by one to be conditioned upon performance by the other, the covenants are mutually dependent.

The dealer undertook his obligation to pay a minimum rental in reliance on Mobil’s fulfillment of its obligation to deliver the quantity of gasoline ordered by the dealer. The dealer’s promise to pay the minimum rental was conditioned or dependent upon Mobil’s delivery of the amount ordered by the dealer.

A party has no obligation to perform a promise that is conditioned upon the other party’s performance when the other party failed to perform even though the other party’s failure is excused and is not a breach of K. The dealer is not obligated to pay the minimum rental although Mobil might be excused from delivering the quantity ordered.

Plaintiff’s Argument: The Pl’s promise to pay the minimum rent is a dependant promise; conditioned upon Df’s performing its obligation to deliver the quantities of gas ordered.

Defendant’s Argument: Under a provision of the K Df was excused from delivering the quantity ordered b/c of a request by the Fed. Energy office to allocate its gasoline supply among its dealers.

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