![]() OCS further asserted that it had been induced to enter into the agreement by Phibro's fraudulent or negligent misrepresentations, and sought to avoid the presentment of the letter of credit. Claiming that the condition of the inventory substantially impaired the value of the contract as a whole, OCS "rejected" the entire inventory on August 15, 1985, and "cancelled" the contract. In its pleadings OCS alleged that it had inspected the goods in the inventory and determined that Phibro had breached warranties regarding their condition. The terms of the letter of credit required the bank to honor the letter for payment if Phibro presented it with a signed statement that OCS had failed to pay the restocking fee and an invoice for the amount of the restocking fee marked "unpaid." On June 20, 1985, a Texas Commerce Bank issued a letter of credit in the amount of $1,516,000 in favor of Phibro at the request of, and for the account of, OCS. At the time of the agreement, the aggregate purchase price of the consigned inventory equaled approximately $15 million. Phibro's obligations under the consignment agreement were expressly conditioned upon the funding by OCS of a letter of credit equal to 10% of the aggregate purchase price of the inventory under consignment. the 90-day limit for rejecting threaded pipe was withdrawn. OCS agreed to sell merchantable threaded pipe before selling plain-end pipe, andĥ. OCS agreed to allow Phibro to sell the threaded pipe without prior consent from OCS,Ĥ. the restocking fee was changed by reducing the purchase price of pipe in threaded inventory,ģ. the calculation of the consignment fee was changed to require OCS to pay such fee only on merchantable threaded inventory,Ģ. This letter agreement included several renegotiations of threaded-pipe provisions in the earlier contract:ġ. Three weeks later, in a Jletter agreement, OCS stated that it had examined a substantial part of the inventory and had determined that part of the inventory of threaded pipe "may not" meet API specifications so it "may not" pass without objection in the trade as warranted under the agreement of May 29. The May 29 contract also gave OCS the right to reject any material which failed to comply with API specifications as determined by third-party inspections but gave OCS no right to reject material whose non-conforming status was due to deterioration from atmospheric conditions unless the rejection was made within 90 days from May 29 for material stored on third-party yards, or within 15 days from May 29 for material stored at the OCS yard. For its part, OCS agreed to pay Phibro (1) a set price for any goods sold out of Phibro's inventory at the time of sale, (2) a monthly consignment fee (to be paid regardless of actual sales) equal to a percentage of the contract sales price of all unsold goods remaining in inventory at the end of each month, and (3) an inventory restocking fee equal to 10% of the aggregate purchase price of all items remaining in inventory at the "termination" of the agreement by OCS or upon termination by Phibro in the event of a default by OCS. Phibro warranted that the inventory would meet API (American Petroleum Institute) specifications, would be of merchantable quality, and would pass without objection in the trade. The parties' contract, dated May 29, 1985, covered both threaded and unthreaded pipe. ![]() In this appeal OCS has divided its 51 points of error into eight groups that attack, among other things, the jury findings just listed OCS also complains about the trial court's award to Phibro of damages, attorneys' fees and pre-judgment interest, failure to award damages to OCS, and the court's rulings on certain evidentiary matters and on the charge. Those findings included a) that Phibro induced OCS to enter the contract by negligently representing the quality of the pipe but that OCS was estopped from complaining about such misrepresentations and b) that OCS had acted in bad faith when it rejected the entire Phibro inventory. Phibro counter-claimed for breach of contract and for bad faith termination, and alleged that OCS had failed to perform its contractual obligations to pay consignment and restocking fees.Īfter receiving jury findings, the trial court signed a judgment for Phibro on its counter-claim. OCS sued Phibro for breach of the contractual warranties as to quality, for fraudulent inducement, and for negligent misrepresentations. (OCS), by written contract, giving OCS the exclusive right to sell it. (Phibro) consigned most of its oil well pipe inventory to Oil Country Specialists, Ltd.
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