The agreement at issue in this case was a long term requirements contract, in the form of a Cogeneration Energy Supply Agreement, by which steam and water were supplied to the owner of a textile mill. The owner then sold its mill, and there were issues as to the rights and obligations of the buyer.
The Court found that the sale of steam and water involved the sale of goods under the Uniform Commercial Code, and that North Carolina law governed under applicable choice of law principles.
The issue then was whether the buyer had the right to assign its rights under the requirements contract. The Court determined that the buyer was entitled to sell its rights to purchase steam and water, but that the right was subject to the supplier’s right to approve the sale, which was in turn subject to the standard of good faith and fair dealing.