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Contracts Keyed to Fuller
Lake River Corp. v. Carborundum Co.
Citation:
769 F.2d 1284 (1985)Facts
Carborundum contracted with Lake River for bagging and distribution services for its Ferro Carbo product. Lake River agreed to install a new $89,000 bagging system, and in exchange, Carborundum guaranteed to ship a minimum of 22,500 tons over three years, with a provision that if the minimum was not met, Lake River could invoice Carborundum for the difference at prevailing rates. Due to a downturn in the steel industry, Carborundum shipped only 12,000 tons (about 55% of the guaranteed amount). Lake River demanded $241,000 under the minimum guarantee clause, which Carborundum refused to pay, claiming it was a penalty. Lake River then withheld 500 tons of bagged Ferro Carbo worth $269,000, claiming a lien. Carborundum incurred $31,000 in additional costs to serve affected customers and counterclaimed for conversion of its product.
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