Quick Summary

Structural Polymer Group and Structural Polymer Systems (plaintiffs) sued Zoltek Corporation (defendant) over a breach of a ten-year requirements contract for carbon fiber supply. The dispute centered on whether Zoltek failed to supply Panex 33 or its substitute Panex 35, which led to unfulfilled orders and claimed lost profits by the plaintiffs.
The jury awarded damages for lost profits but not future lost profits, which was later reduced by the district court to remove duplicative damages. The appeals court affirmed this decision, deeming the contract valid and the damages well-supported.
Facts of the Case

Structural Polymer Group, Ltd. and Structural Polymer Systems (plaintiffs) are British corporations that manufacture ‘prepreg’, a building material made using carbon fiber. Zoltek Corporation (defendant) is a Missouri corporation specializing in carbon fiber production. The two companies entered into a ten-year requirements contract where Zoltek would supply the carbon fiber needed by the plaintiffs, specifically a product called Panex 33.
However, in 2002, Zoltek ceased the production of Panex 33 and began producing Panex 35, a similar product. The plaintiffs did not purchase any carbon fiber for two years but later ordered Panex 35 in 2004. Subsequently, two orders for Panex 35 placed by the plaintiffs were unfulfilled, leading to the lawsuit for breach of contract.
Procedural History

- The plaintiffs sued Zoltek for breach of contract alleging lost profits and future lost profits.
- The jury awarded the plaintiffs lost profits based on their calculations for both products but declined to award future lost profits.
- The district court reduced the award to exclude duplicative damages.
- Zoltek’s motions for a new trial and judgment as a matter of law were denied.
- Both parties appealed to the United States Court of Appeals for the Eighth Circuit.
I.R.A.C. Format
Issue

Whether Zoltek Corporation breached their requirements contract with Structural Polymer Group and Structural Polymer Systems by failing to supply the agreed upon carbon fiber, and if so, what damages are due to the plaintiffs.
Rule of Law

In requirements contracts, parties are bound to act in good faith, and damages for breach of contract must be proven with reasonable certainty and not be speculative or conjectural.
Reasoning and Analysis

The appeals court affirmed the district court’s decision, concluding that the requirements contract between the parties was valid and supported by consideration, even though Zoltek stopped producing Panex 33.
The court found that Zoltek’s arguments about mutuality and abandonment were without merit, and that the plaintiffs had proven their lost profits with reasonable certainty based on market conditions and prior purchasing history.
The court also held that statements made by Zoltek’s attorney could be considered as an admission regarding their willingness to perform under the contract.
Lastly, the court found no error in the jury’s damage award calculation or in the instructions given to the jury regarding damages.
Conclusion

The court affirmed the district court’s judgment, upholding the reduced damages award in favor of Structural Polymer Group and Structural Polymer Systems.
Key Takeaways

- A requirements contract is valid when parties are bound to act in good faith, even if initial requirements are zero.
- Lost profits from breach of contract must be ascertainable with reasonable certainty and cannot be speculative.
- Statements made by an attorney during litigation can be considered admissions relevant to the case.
Relevant FAQs of this case
What constitutes good faith in a requirements contract?
Good faith in a requirements contract denotes honesty in fact and the observance of reasonable commercial standards of fair dealing. Each party is expected to act with fidelity to the contracted agreement.
- For example: A retailer who enters a requirements contract with a supplier for all its seasonal inventory must not seek alternative sources that offer lower prices if the supplier meets the contractual terms and delivery schedules.
How are lost profits calculated in breach of contract cases?
Lost profits are calculated by determining the net income that would have been earned had the breach not occurred. This includes projecting revenues minus expenses related to the contract, ensuring that these figures are not speculative.
- For example: A caterer who expects to earn $50,000 from a wedding event but cannot perform due to the venue’s breach of contract may calculate lost profits by subtracting anticipated costs, such as food supplies and labor, from the expected revenue.
Under what circumstances can attorney statements be considered as admissions in contractual cases?
Statements made by attorneys during litigation can constitute admissions if they concede facts that are against their client’s interest or affirmatively state their client’s intent to fulfill contractual obligations.
- For example: An attorney stating in court that ‘my client was ready and willing to deliver the products as per the contract’ could be an admission that affects the case, especially if contract fulfillment is contested.
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