Background
Haydon Materials and Kosmos Cement Company entered a 2013 Supply Agreement governing Haydon’s sale of limestone aggregate mined from a quarry owned by Kosmos Cement. The agreement used annual Producer Price Index adjustments with limits on yearly increases or decreases. Adjustments exceeding those limits accumulated and were to be made up in later years when the annual adjustment fell below the contractual maximum.
After the quarry and Supply Agreement changed hands, Haydon and Kosmos Cement’s successor agreed to end their relationship through an Asset Purchase and Separation Agreement. Neither that agreement nor the Supply Agreement addressed what would happen to accumulated PPI adjustments upon termination. Haydon claimed $676,577.46 in unpaid adjustments, and Battletown Materials, which assumed Kosmos’s rights under the separation agreement, disputed liability. The circuit court found an implied contractual term requiring payment and granted summary judgment to Haydon without permitting the requested discovery.
The Court’s Holding
The Kentucky Court of Appeals reversed and remanded, holding that summary judgment was premature. Because the contracts were silent about whether accumulated PPI adjustments became collectible upon termination, resolving the asserted implied term required examining the original contracting parties’ intent and extrinsic evidence. Disputes concerning that evidence presented factual issues that could not properly be resolved on summary judgment at that stage.
The court also held that Battletown should have been allowed to conduct discovery. Haydon first raised the implied-term theory in its November 2023 summary-judgment motion, Battletown promptly requested discovery if extrinsic evidence would be considered, and Battletown served discovery before the final summary-judgment order. Given the intervening procedural reversals concerning that motion, the discovery request was reasonable.
Key Takeaways
- Contractual silence about a material issue may require evidence of the contracting parties’ intent before a court can recognize an implied term.
- Disputes over extrinsic evidence used to interpret an ambiguous or materially silent contract generally present factual questions for the fact-finder.
- Summary judgment ordinarily should not be granted before the opposing party has had a sufficient opportunity to obtain discovery relevant to disputed factual issues.
Why It Matters
The decision does not determine whether Haydon is ultimately entitled to the accumulated PPI adjustments. It requires further proceedings and discovery into what Haydon, KCC, and Kosmos intended concerning unpaid carryover amounts when the Supply Agreement ended.
The opinion underscores that courts cannot resolve a fact-dependent implied-contract theory as a purely legal interpretation issue when the written agreements do not address the disputed contingency and the parties’ intent remains undeveloped.