Another actual case: Hess Oil (Hess) and Orange & Rockland Utilities (O&R) enter

Question

Another actual case: Hess Oil (Hess) and Orange & Rockland Utilities (O&R) entered into an agreement whereby Hess agreed to supply all of the oil requirements of O&R at $10 per barrel for the next three years. Soon after the agreement was signed, oil prices on the open market shot up to $30 per barrel and O&R responded by closing down its coal plant and doubling up its oil production. After a while, Hess refused to meet O&R's increased demands. O&R sued Hess based on the fact that Hess had agreed to supply ALL of O&R's oil requirements for the next three years. How should this case be decided???

Explanation / Answer

Hess Oil shall have to pay difference between the agreed price and market price for each barrels required by O&R in next three years. Hess has to pay $20 per barrel. Say, O&R total requirement is 50,000 barrels, then Hess need to pay $1,000,000 to O&R.

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