Essco Geometric v. Harvard Industries

Facts

Diversified had supplied foam to Harvard for over thirty years. Harvard traditionally issued bid requests to potential suppliers, then selected vendors based on price and quality. For over twenty years, Frank Best served as Harvard’s purchasing manager, cultivating a close business relationship with Diversified. In 1988, Best retired, Michael Gray became purchasing manager, and Ed Kruske became Harvard’s new president. Harvard implemented a “world class manufacturing plan” to cut costs and improve quality. In late 1989, Harvard began requesting bids for its 1990-1992 GSA chair contract. After negotiations, Gray signed a letter agreement with Diversified on January 9, 1990, which both parties understood to be an exclusive requirements contract for Harvard’s foam needs for two years. Harvard’s president Kruske had previously issued internal memoranda requiring his approval for purchase orders and requisitions over $50, but these limitations were never communicated to Diversified. For several months, Harvard issued purchase orders to Diversified under the agreement, but in May 1990, Kruske put a hold on Gray’s purchase orders and ultimately decided to make American Excelsior Harvard’s principal supplier instead.