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Dispute over fuel supply contract leads to cancellation

Businesses and entities contracting with each other for services agree to meet certain requirements. A failure to do so can lead to significant consequences for all parties involved.

A recent dispute between a municipal airport and the company that it contracted with to supply fuel has presented numerous unique circumstances. For starters, the LLC status of the company was listed as suspended on the Secretary of State's website for California. However, a letter from the Franchise Tax Board revealed that it was a mistake and the company is in fact still in good standing.

The city in charge of the airport claims that it was not part of its decision to terminate the fuel supply contract with the company though. They do state, however, that the company had a suspended status at the time the contract was amended, which prevented the company from legally entering into such an amendment and voiding it.

The city claims that the company was non-compliant with the contract and charged extremely high prices that began to drive away customers. The city has since been in charge of the fuel service, but the company feels that they had no legal right to terminate the contract.

When parties agree to a contract, they are required to fulfill the obligations and entitled to the benefits outlined within. If one of the parties fails to perform an obligation, it is known as a breach of contract. A breach may be found through a failure to perform according to the terms of the contract, to perform on time or not performing at all.

If a breach occurs, the non-breaching party may seek to enforce the terms of the contract, or they may choose to cancel the contract and pursue damages for any financial injury they sustained as a result of the breach. These remedies can be requested through mediation or legal action by one of the parties.

Parties enter into a contract with the expectation that the other party will fulfill their duties as outlined so that they are able to realize the benefits of the contract. If they fail to do so, the injured entity may seek any available remedies to either force performance or cancel the contract. Seeking guidance or assistance could help them with their cause of action.

Source: Tracy Press, "More wrinkles emerge in airport fuel saga," Sam Matthews, Feb. 13, 2014

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