Note: Fuel purchase contracts between Eagle Fuels, LLC (Seller), and Ray Perrin, Millennium Super Stop, LLC, and Millennium Super Stop II, LLC (Buyers) contained a provision which stated that "[a] $60,000.00 letter of credit or motor fuel surety bond shall be required to guarantee payment for all fuel purchases." Buyers did not obtain the standby letters of credit or bonds, and Seller refused to waive the contract term.

Seller sued Buyers for breach of contract. Buyers asserted the affirmative defense of impossibility of performance, arguing that the contract provision requiring them to obtain the LCs was a condition precedent. Seller moved for partial summary judgment on Buyers' affirmative defense, arguing that "the requirement to obtain letters of credit or motor fuel bonds was not a condition precedent to the performance of the contracts and, therefore, defendants' affirmative defense fails as a matter of law."

The U.S. District Court for the Western District of Missouri, Hays, J., denied Seller's motion for partial summary judgment. The Judge reasoned that "the requirement of a letter of credit or motor fuel surety bond was a condition precedent by necessary implication in that [Seller] would not deliver fuel to [Buyers] and conversely, [Buyers] could not purchase fuel from [Seller], until [Buyers] had acquired the contracted letter of credit or fuel bond." The Judge further stated that whether Buyers can prevail on their affirmative defense depends on whether they made a good faith effort to acquire letters of credit or fuel bonds.



The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.