Oglebay Norton Co. v. Armco, Inc.
52 Ohio St. 3d 232 · Ohio Supreme Court · 1990
Facts
Oglebay Norton Co. and Armco, Inc. had a long-standing, close business relationship, including joint ventures and interlocking directorates, and a 1957 contract for Oglebay to ship Armco's iron ore. The contract included primary and secondary pricing mechanisms. After 1985, the primary mechanism failed because the published rate in "Skillings Mining Review" was no longer available. The secondary mechanism also failed as information on independent vessel operators' rates became publicly unavailable, and subpoenas for this data were quashed. Armco argued that the complete breakdown of these pricing mechanisms rendered the contract unenforceable.
Procedural history
The trial court found that the parties intended to be bound, established a reasonable shipping rate, and ordered continued equitable jurisdiction with mediation. Armco appealed these decisions to the court of appeals. The court of appeals affirmed the trial court's decision on all points. This court (impliedly the state supreme court) is reviewing the court of appeals' decision.
Issue
Did the parties intend to be bound by the contract despite the failure of its primary and secondary pricing mechanisms? If so, may the trial court establish a reasonable shipping rate and continue to exercise equitable jurisdiction, including ordering mediation for future rates?
Holding
Yes, the parties intended to be bound by the contract despite the failure of its pricing mechanisms. Yes, the trial court may establish $6.25 per gross ton as a reasonable rate for the 1986 shipping season. Yes, the trial court may continue to exercise its equitable jurisdiction and order the parties to utilize a mediator if they cannot agree on annual shipping rates.
Rule
If parties intend to be bound by a contract, even if one or more terms (like price) are missing or left to be agreed upon, courts will endeavor to attach a sufficiently definite meaning. When an agreed pricing mechanism fails, a court may determine a "reasonable price" for services, drawing an analogy from UCC Section 2-305(1) and Restatement of Contracts Section 33. Courts may exercise equitable jurisdiction and order specific performance, including negotiation and mediation, if the parties intended to be bound and determining long-term damages would be too speculative, provided the contract terms are sufficiently certain to provide a basis for an appropriate order.
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