Paramount Petroleum Corp. v. Superior Court

Real party in interest Building Materials Corporation of America doing business as GAF Materials Corporation (GAF) brought the instant breach of contract action against petitioner Paramount Petroleum Corporation (Paramount). GAF had entered into a long-term contract with Paramount by which Paramount would supply GAF with its requirements for asphalt coating for GAF’s manufacture of roofing shingles. The asphalt coating was to be made from Oriente crude oil (Oriente), from Ecuador. Rather than linking the price of the asphalt coating to the price of Oriente, the parties agreed to link the contract price to that of another type of oil, West Texas Intermediate (WTI), as the prices of the two oils had, historically, moved up and down together, and WTI was readily quoted. Several years into the contract, changed circumstances led to the decoupling of the market price for Oriente and the market price for WTI. Specifically, there was an excess of oil competing with WTI and its price dropped dramatically, while Oriente’s price remained relatively high. As a result, from Paramount’s point of view, it became economically infeasible for it to continue to supply GAP with asphalt…