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Contracts Keyed to Barnett
KGM Harvesting Co. v. Fresh Network
Citation:
42 Cal. Rptr. 2d 286 (Cal. Ct. App. 1995)Facts
KGM and Fresh Network entered a contract for the sale and purchase of lettuce. Fresh Network then sold all of the lettuce it received from KGM to a lettuce broker named Castellini, who then sold the lettuce to Club Chef, a company that provided lettuce for the fast food industry. Fresh Network and Castellini both received commissions from the cost-plus nature of their contracts.
When the price of lettuce went up dramatically, KGM refused to supply lettuce to Fresh Network and instead sold the lettuce at a profit of between $800,000 and $1,100,000 to others. Fresh Network then refused to pay KGM for any of the lettuce it had already received and went out on the open market to purchase enough lettuce to satisfy its obligations to Castellini. Castellini covered Fresh Network’s extra expenses except for $70,000, which it passed on to Club Chef, which then passed on at least part of its additional costs to its fast food customers.
KGM sued for outstanding invoices, while Fresh Network sued for damages for the difference between what it was forced to pay for substitute lettuce vs. the contract price of nine cents per pound (approximately $700,000).
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