Heritage wanted to buy a substance called TBCC from Phibro but, because of uncertainty in the industry, the two companies could not agree on a price for future years. It turned out, though, that the price of TBCC tended to rise and fall with that of copper sulfate, so Heritage proposed that the amount it paid for TBCC would increase an additional $15 per ton for each $0.01 increase in the cost of copper sulfate over $0.38 per pound. 

Two top officers of Heritage and Phibro met in the Delta Crown Room at LaGuardia Airport to negotiate the purchase contract. At the end of their meeting, the Phibro officer hand wrote a document stating the terms of their deal and agreeing to the Heritage pricing proposal. 

Negotiations between the two companies continued, leading to some changes and additions to their Crown Room agreement. In a draft prepared by Phibro, the $.01 number was changed to $0.1, that is, from 1¢ to 10¢. In other words, in the original draft, Heritage agreed to a first increase if copper sulfate went above 39¢ per pound, an additional price rise at 40¢, and so on. But in the Phibro draft, Heritage’s first increase would not occur until the price of copper sulfate went to 48¢ a pound, with a second rise at 58¢.In short, the Phibro draft was much more favorable to Heritage than the Heritage proposal had been. 

At some point during the negotiations, the lawyer for Heritage asked his client if the $ 0.1 figure was accurate. The Heritage officer said that the increase in this amount was meant to be payment for other provisions that favored Phibro. There is no evidence that this statement was true. The contract went through eight drafts and numerous changes but, after the Crown Room meeting, the two sides never again discussed the $0.1 figure.

After the execution of the agreement, Heritage discovered a different mistake. When Heritage brought the error to Phibro’s attention, Phibro agreed to make the change even though it was to Phibro’s disadvantage to do so.

All was peaceful until the price of copper sulfate went to $ 0.478 per pound.Phibro believed that, because the price was above $.38 per pound, it was entitled to an increased payment. Heritage responded that the increase would not occur until the price went above $.48. Phibro then looked at the agreement and for the first time noticed the $ 0.1 term. Phibro contacted Heritage to say that the $ 0.1 term was a typo and not what the two parties had originally agreed in the Delta Crown Room. Heritage refused to amend the agreement and Phibro filed suit. 

Questions:

1. Should the court enforce the contract as written or as the parties agreed in their Crown Room meeting? Which number is correct -- $.10 or $.01?

2. Who changed the contract price measure from $0.01 to $0.1?

3. Which party received the benefit of that change? 

4. Why do you think the court decided for Heritage?