Baker v. Ratzlaff
Kansas Court of Appeals
564 P.2d 153 (1977)
Ratzlaff (defendant) agreed to sell popcorn to Baker (plaintiff) at a fixed price, with a termination clause allowing Ratzlaff to cancel and keep undelivered popcorn if Baker failed to pay on delivery; after signing, the market price roughly doubled. Ratzlaff made two deliveries without ever requesting payment at delivery, even though he knew Baker processed payments through a separate office along his delivery route, and after a later phone call in which payment still wasn't mentioned, Ratzlaff terminated the contract for nonpayment -- then promptly resold the popcorn to a third party at the new, much higher market price. Baker, forced to buy replacement popcorn at an even higher price, sued and won damages at trial; both sides appealed.
Whether a seller who terminates a supply contract under a nonpayment termination clause, without ever requesting the payment the clause is nominally based on, and only after the market price for the goods has sharply risen, has exercised that termination clause in good faith.