Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp

The Plaintiff, Kelsey-Hayes (Plaintiff), entered into a requirements contract for the purchase of castings, with the Defendant, Galtaco Redlaw Castings Corp. (Defendant). The contract was for a three-year term and it included fixed price terms. The Defendant then began to suffer financial difficulties and made an offer to its customers that it would keep operating in exchange for a price increase of thirty percent. The Plaintiff was not able to find an alternative source of casings so it accepted Defendant’s offer, although it protested that this offer amounted to a breach of contract. Defendant’s other customers did find alternate supplies of castings. Therefore, Defendant offered Plaintiff an additional thirty percent increase in exchange for its remaining in operation solely for Plaintiff’s benefit. Again, Plaintiff felt it had no choice but to accept, as it still had not found a reasonable alternate source for castings. Plaintiff also feared that if it did not accept, it w ould cause its major client, Ford Motor Co., to stop production and destroy Plaintiff’s business reputation. Plaintiff sued for breach of contract, asking for a declaratory judgment releasing it from paying the increased prices. Defendant moved for summary judgment, contending that the price modification invalidated the previous contract.