Monolith Portland Cement Company, a Corporation v. Douglas Oil Company of California, a Corporation

Monolith operates a cement plant near Tehachapi, California. Douglas is an oil producer. One of its products is commercial fuel oil, a residue in distillation of petroleum. Monolith’s plant, as all cement plants, needs fuel to make the clinkers that ultimately become cement. The Tehachapi plant has dual firing equipment. Sometimes natural gas is used and other times it is fuel oil.

For industrial use in California, proper governmental authority authorizes public gas suppliers to make contracts which provide for intermittent service. That is, when domestic demands are high (for example, on cold winter days) the industrial users are cut off, or down. Stated otherwise, the plan is that industry uses the overplus of natural gas not taken by domestic natural gas users. When an industrial user sustains a reduction or cut-off in the gas, if he must keep his plant going, he shifts to partial or complete use of oil. When the gas is again available, he cuts off the oil. Monolith had a gas contract with the Southern California Gas Company. Under this contract, Monolith was obligated to take a certain minimum amount.

On July 15, 1957, the parties entered into a contract for fuel oil which…