Bolin Farms v. American Cotton Shippers Ass'n

United States District Court for the Western District of Louisiana · Contracts

Contractsforward contractscottonspecific performancemandatory injunctioncontracts to sellmovablesLouisiana Civil Code

Facts

Between January and March 1973, experienced Louisiana cotton farmers entered into forward contracts with experienced cotton buyers to sell and deliver all cotton grown on designated acreage at prices within the then-competitive market range. The contracts contemplated actual physical delivery of the cotton at harvest, not futures trading, and the buyers agreed to purchase whatever cotton was raised on the specified acreage. After cotton prices later rose dramatically, the farmers sued to have the contracts declared null and void so they could sell at higher prices. Some contracts selected Tennessee law, some cotton was subject to crop pledges, and Bolin Farms argued that the partner who signed lacked authority.

Issue

Are the 1973 forward cotton sale contracts enforceable under Louisiana law despite later price increases, crop pledges, choice-of-law clauses, and various attacks on validity, and may the buyers obtain specific performance by mandatory injunction? In the Bolin matter, was the partnership bound by a contract signed by one partner?

Rule

Under Louisiana law, forward contracts for the actual future delivery of crops or other goods are valid and not gambling transactions when the parties intend actual delivery of the physical commodity. Legally entered agreements must be performed in good faith, and where a contract to sell movable goods reflects reciprocal consent as to the thing, price, and terms, specific performance may be enforced when it is the more complete remedy and the circumstances permit. Lesion beyond moiety does not invalidate sales of movables or produce, and value is measured at the time of contracting, not by later market changes. Crop pledges do not void the seller's contract; rather, pledgees must be paid from the purchase price before delivery. A partnership may be bound by an unauthorized partner's act if the partnership was benefited by the transaction or if the partner was held out as having authority in the ordinary course of partnership business.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In February, Elise Martin, an experienced rice farmer near Crowley, Louisiana, signed an agreement with Bayou Delta Commodities, a fictional grain merchant, to sell all rice grown on 180 identified acres at a fixed per-hundredweight price, with delivery after harvest. By August, rice prices had doubled, and Elise refused to perform, arguing the agreement was really an unlawful speculative wager.

Under the majority opinion's reasoning, is Elise likely to prevail?

Explanation. The majority treated forward commodity agreements as valid when they contemplate actual delivery of the physical crop, not mere settlement on market fluctuations. Later price spikes do not transform such contracts into gambling transactions. The key is the parties' intent that the harvested commodity be delivered and received. (Derived from Bolin Farms v. American Cotton Shippers Ass'n (n.d.).)