Hemenway v. Peabody Coal Co.

In 1969 Peabody Coal (defendant) and Hemenway (plaintiff) signed a mineral lease letting Peabody mine coal for a royalty of 12 cents per ton plus 10% of the difference between the coal's sales price and a base price (which fluctuated only with labor costs, not excise taxes). Peabody sold coal at $28.635 per ton and added $1.10 per ton to pass excise taxes to customers, but paid royalties without including that added charge. Hemenway sued for royalties on the excise-tax amount.

Whether contracts are generally interpreted according to the plain meaning of their terms.