                                                                           FILED
                                                                       Oct 10 2017, 9:39 am

                                                                           CLERK
                                                                       Indiana Supreme Court
                                                                          Court of Appeals
                                                                            and Tax Court




      ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
      J. Christopher Janak                                       Mark J. Crandley
      Bradley M. Dick                                            Bart A. Karwath
      Paul D. Vink                                               Nicholas K. Kile
      Bose McKinney & Evans LLP                                  Barnes & Thornburg, LLP
      Indianapolis, Indiana                                      Indianapolis, Indiana


                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Watson Water Company, Inc.,                               October 10, 2017

      Appellant-Defendant,                                      Court of Appeals Case No.
                                                                10A01-1607-CC-1542
              v.                                                Appeal from the Clark Circuit Court.
                                                                The Honorable Andrew Adams,
                                                                Judge.
      Indiana-American Water                                    The Honorable William A. Dawkins,
      Company, Inc.,                                            Jr., Magistrate.
                                                                Cause No. 10C01-1402-CC-272
      Appellee-Plaintiff.




      Shepard, Senior Judge

[1]   Watson Water Company, Inc., and Indiana-American Water Company, Inc.,

      are water utility companies serving customers in Clark County. Watson and

      IAWC executed an agreement in 1997, later amended in 2003, for the

      construction of a water main, and then, additionally, for the purchase of a

      certain volume of water. When Watson stopped performing under the terms of


      Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017              Page 1 of 18
      the contract, IAWC sued Watson for breach and for failure to properly exercise

      a right-of-first-refusal clause in the contract. Watson counterclaimed, arguing

      that it was due a refund of payments made to IAWC beyond the cost of

      construction of the water main.


[2]   After a two-day bench trial, the court issued findings and conclusions, holding

      Watson liable under the contract and issuing declaratory relief. It concluded

      that the agreement should remain in place and that Watson was obligated to

      purchase water from IAWC under the terms of the contract. Watson now

      appeals.


                                                     Issues
[3]   The parties raise numerous issues, which we consolidate and restate as follows:


              I.       Whether the findings and conclusions support a judgment
                       against Watson for breach of contract;
              II.      Whether the prior-breach doctrine applies and whether the
                       trial court correctly interpreted the right-of-first-refusal
                       clause; and
              III.     Whether the Uniform Commercial Code applies to this
                       contract.

                                Facts and Procedural History
[4]   On April 28, 1997, Watson and IAWC executed a water supply agreement.

      Appellee’s App. Vol. II, pp. 3-7. IAWC agreed to provide to Watson during

      the term of the contract, or any renewal or extension periods, “potable water in

      such quantity as may be required by [Watson].” Id. at 3. IAWC also agreed to

      provide all of Watson’s “future water supply requirements above and beyond
      Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 2 of 18
      the capacity of its present well fields.” Id. at 4. The term of the agreement was

      for forty years, or until 2037, with automatic ten-year renewals, unless notice

      was provided within a time set forth by contract. Id. at 6. Watson agreed to

      pay IAWC for all water used, and IAWC agreed to submit monthly bills for

      water delivered. Id. at 5. The agreement set forth when payment was due and

      made provisions for additional fees if the bills became delinquent. Id.


[5]   A right-of-first-refusal clause was included and reads as follows:


              In the event [Watson] determines either to sell its entire water
              system or any part thereof or to arrange for the operation of part
              or all of the system by a third party under contract, or
              contemplates a new or revised water purchase agreement,
              [Watson] agrees that [IAWC] shall have a right of first refusal to
              purchase, or provide contract operations, or to sell water to
              [Watson] on the same terms and conditions offered by any third
              party. [IAWC] shall have thirty (30) days from the receipt of notice
              from [Watson] to exercise its refusal right and agree to purchase or
              to provide contract operations pursuant to such terms and
              conditions. If [IAWC] fails to exercise its refusal right, then such
              refusal right will terminate. For purposes of this paragraph, a
              transaction with a third party excludes a reorganization or
              change in the type of Corporation or Company through which
              the Corporation or Company, which is to be reorganized,
              remains in effective control of the reorganized entity.
      Id. at 6 (emphasis added).


[6]   In late 2003, Watson and IAWC executed an amendment, which explicitly

      stated it “shall amend the Water Supply Agreement executed between the same

      parties effective April 28, 1997 (the “Agreement”).” Id. at 9. As a joint

      competitive matter, the parties agreed to allow Watson to purchase water

      Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 3 of 18
      temporarily from Water One, Inc., to serve the Quarry Bluff Subdivision in

      Clark County. IAWC did so to allow it “to plan, construct, and make

      operational a new water main to serve the Quarry Bluff Subdivision in Clark

      County.” Id. IAWC was to make all reasonable efforts to have the main

      operational within one year of the amendment’s execution. Watson agreed to

      perform certain other tasks as respects that joint venture, but these are not

      points of contention in this appeal.


[7]   Once the main was operational, Watson agreed to purchase from IAWC a

      minimum annual volume of water of 77,300,000 at the tariff rate established by

      the Indiana Utility Regulatory Commission. The amendment explained that

      the parties arrived at that volume based on the assumption that IAWC would

      have made a capital investment of $600,000. The parties agreed that if the

      actual cost varied from the assumed cost, the minimum purchase volume would

      be adjusted. In 2007, the minimum volume was increased to 108,300,000

      gallons per year because IAWC’s actual capital investment was $921,214.


[8]   The parties also set forth the following addition to the 1997 Agreement’s right-

      of-first-refusal clause:


              [If] Paragraph #14 of the Agreement is invoked, and [IAWC]
              either fails to exercise its refusal rights and/or does not become
              the purchaser, contract operations provider, or seller of water to
              [Watson] as provided in Paragraph #14, [Watson] agrees to
              immediately pay to [IAWC] its actual cost to plan and construct
              the main and make it operational.




      Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 4 of 18
       Id. at 10. The amendment explicitly stated, “All other terms and conditions of
                                                                                                               1
       the Agreement between the parties shall remain in full force and effect.” Id.


[9]    In 2005, the water main extension became operational. As respects the

       minimum volume purchase requirement, the parties’ course of performance

       was inconsistent. In 2006 and 2009, Watson did not take and pay for the

       minimum volume, and IAWC did not bill full price for the difference. In 2007

       and 2008, Watson took the minimum volume. In 2010 and 2011, Watson did

       not take the minimum volume, IAWC billed for the difference, and Watson

       paid the difference. Beginning in 2012 to 2015, Watson did not take the

       minimum volume and IAWC billed for the difference, but Watson refused to
                                                  2
       pay full price for the difference.


[10]   On January 17, 2012, Watson and River Ridge Development Authority

       executed a reciprocal water supply agreement. Appellant’s App. Vol. II, pp. 84-

       86. Put simply, both Watson and RRDA were willing, in “cases of emergency

       from time to time to buy water” and sell it to each other on an “‘as needed’

       basis.” Id. at 84. On October 26, 2012, the parties executed an addendum to




       1
         Watson, by counsel, attempted to limit the duration of the overall agreement, but the proposals involving
       terms of ten years and fifteen years were each rejected. The parties, represented by counsel, in an arms-length
       transaction, signed the amendment, incorporating the original forty-year duration of the contract.
       2
        In 2009, there was a problem with the meter, and IAWC did not charge Watson for the minimum volume.
       Tr. Vol. II, p. 44.

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017                       Page 5 of 18
       the reciprocal water supply agreement to document the cost of the construction

       and installation of a connection point. Appellant’s Br. at 14.


[11]   About July 23, 2013, Watson and RRDA executed a first amendment to the

       reciprocal water supply agreement. Tr. Vol. XII. The amendment resolved a

       conflict in the differing rates each party charged for water such that when water

       was needed, the lowest rate charged by either party at that time, after

       documentation was exchanged, would reflect the rate billed.


[12]   IAWC sued Watson on February 27, 2014. As amended, the complaint alleged

       breach of contract by Watson’s failure to purchase the required annual

       minimum amount of water from IAWC. IAWC sought damages for Watson’s

       breach and a declaratory judgment that the contract remained in force. Watson

       counterclaimed arguing that it should be repaid all money above the cost of the

       construction of the main. IAWC alleged that Watson’s outstanding balance by

       the end of 2015, excluding late charges and attorneys’ fees was $813,271.66.

       Watson, on the other hand, alleged under its theory that it was only required to

       pay for construction of the water main, and that it had overpaid IAWC

       $376,592.87.




       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 6 of 18
                                3
[13]   Sometime in 2014, after IAWC had filed suit, RRDA and Watson executed a

       second amendment to their reciprocal water supply agreement. Appellee’s

       App. Vol. II, pp. 20-24. The parties agreed as follows:


               RRDA as Exclusive Provider of Watson Water’s Future
               Needs. Subject to the terms of the Agreement and any rulings,
               orders, and/or decisions by administrative agencies or courts
               with legal jurisdiction (including, but not limited to, any
               settlement reached by Watson Water in its pending litigation
               with Indiana-American Water Co., Inc., Cause No. 10C01-1402-
               CC-272), which may overrule, invalidate, supplement, or
               otherwise modify the Agreement, including this Second
               Amendment, Watson Water agrees that RRDA shall be the
               exclusive source of Watson Water’s future water purchases when
               it is unable to internally provide for the water needs of its
               customers. In the event Watson Water contemplates a new or
               revised water supply agreement, Watson Water agrees that
               RRDA shall have a right of first refusal to sell water to Watson
               Water on the same terms and conditions offered by any third
               party. If RRDA fails to exercise its refusal right, then the
               Agreement shall terminate.
       Id. at 22.


[14]   Counsel for Watson sent a letter to counsel for IAWC dated August 14, 2014,

       discussing the possibility of mediation of the pending legal action and

       confirming certain details of conversations. Tr. Vol. XII. Watson’s counsel

       contended that he was aware counsel for IAWC had been supplied with a copy




       3
         The representative of RRDA and the Indiana Department of Natural Resources indicated that their
       signatures were dated December 16, 2014. The representative for Watson has dated his signature as March
       21, 2014.

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017                  Page 7 of 18
       of the second amendment to the Watson/RRDA agreement. Id. Counsel also

       claimed to have confirmed that IAWC received the documents from RRDA on

       May 5, 2014, pursuant to a documents production request. Id. Watson

       asserted that since IAWC had not exercised its right of first refusal within thirty

       days of receipt of the documents, Watson concluded that IAWC did not wish to

       exercise its right. Id. Watson then noted that if IAWC believed that it still held

       a right of first refusal, the matter would need to be addressed at a future

       meeting. Id.


[15]   Watson and IAWC submitted the following stipulations for trial:


               1. The total amount of money Watson has paid to IAWC from
               January 2006 to the present under the Amendment to the Water
               Supply Agreement is $1,297,806.87.
               2. As of January 6, 2016, the total amount that IAWC has billed
               Watson, and remains unpaid, is $813,271.66. A late payment
               charge of $24,398.36 is also sought by IAWC.
               3. Watson claims that it was entitled to invoke, and that it did
               properly invoke, a right of first refusal clause, and that because
               IAWC did not exercise its right, the Water Supply Agreement
               and Amendment terminated as of September 13, 2014. IAWC
               disputes these contentions on numerous bases. As of September
               13, 2014, the total amount that: (1) IAWC billed Watson prior
               to 2014 that remained unpaid; and (2) the amount IAWC would
               have billed for 2014 through September 13, 2014 was
               $438,801.04. IAWC claims that an additional $921,214.00
               would also be owed. Watson disputes that this additional
               amount would also be owed to IAWC by Watson.
               4. Watson is not contending that it cannot take the 108,300,000
               gallon annual minimum requirement from IAWC.


       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 8 of 18
               5. Watson is not contending that IAWC forced water into
               Watson’s system and is not contending that IAWC caused
               Watson’s tank to flood and/or caused any damages to Watson’s
               property.
       Appellant’s App. Vol. II, pp. 179-80.


[16]   After the conclusion of the two-day bench trial in March 2016, the court

       entered findings and conclusions, issuing an order awarding IAWC the

       following: (1) $813,271.66 in unpaid amounts under the contract; (2) late

       charges of $24,398.36; (3) a declaratory judgment that the 1997 agreement and

       the 2003 amendment remain in place and continue through the remainder of

       the forty-year term up to and including 2037; (4) a declaratory judgment that

       Watson is required to continue purchasing an annual minimum water volume

       of 108,300,000 for the remainder of the duration of the contract (through 2037);

       and (5) the trial court’s agreement to entertain a request for attorney’s fees and

       costs assessed against Watson.


                                     Discussion and Decision
                                           Standard of Review
[17]   Prior to trial, Watson filed a motion requesting findings under Trial Rule 52(A).

       Upon review, we shall not set aside such findings or judgment unless clearly

       erroneous. In re Marriage of Gertiser, 45 N.E.3d 363 (Ind. 2015). Appellate

       courts will give due regard to the trial court’s opportunity to judge the

       credibility of the witnesses. Id. We determine whether the evidence supports

       the findings, and then whether the findings support the judgment, and do so


       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 9 of 18
       without reweighing the evidence or reassessing the credibility of witnesses. Id.

       The trial court’s findings are controlling unless the record contains no facts

       supporting them directly or by inference. Id. Our review of legal conclusions is

       de novo. Id.


                                         I. Breach of Contract
[18]   IAWC’s complaint alleges, in part, breach of contract. A breach of contract

       action involves the elements of the existence of a contract, the defendant’s

       breach of the contract, and resulting damages to the non-breaching party.

       Murat Temple Ass’n, Inc. v. Live Nation Worldwide, Inc., 953 N.E.2d 1125 (Ind. Ct.

       App. 2011), trans. denied. At the heart of the various challenges presented in this

       appeal are the parties’ arguments about the interpretation of the terms of the

       agreement and the amendment, which form their contract.


[19]   Interpretation of a contract is a question of law which is reviewed de novo. Dunn

       v. Meridian Mut. Ins. Co., 836 N.E.2d 249 (Ind. 2005). When a contract’s terms

       are clear and unambiguous, courts must give those terms their clear and

       ordinary meaning. Id. Instead of placing provisions of a contract’s terms in

       conflict, courts should interpret those provisions to harmonize them. Id.


[20]   The explicit terms of the 1997 agreement and the 2003 amendment reflect that

       the amendment “shall amend the Water Supply Agreement executed between

       the same parties effective April 28, 1997 (the “Agreement”)”, and that “All

       other terms and conditions of the Agreement between the parties shall remain

       in full force and effect.” Appellee’s App. Vol. II, pp. 9-10. Thus, the court’s

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 10 of 18
       finding that “the Amended Agreement is a single, enforceable contract between

       the parties”, is supported by the record. Appellant’s App. Vol. II, p. 24.


[21]   Also explicit in the terms of the contract is the provision that Watson purchase

       a certain volume of water. Although the volume of water required was initially

       based on an assumed capital investment by IAWC of $600,000, the parties

       explicitly agreed to a future modification of the volume based upon IAWC’s

       actual capital investment. The volume was adjusted to 108,300,000 gallons per

       year at IAWC’s tariff rate for the duration of the contract.


[22]   Although the record reveals that Watson attempted to negotiate a limitation on

       the duration of the minimum volume requirement, the negotiations failed and

       the parties signed the amendment. The trial court’s finding that the purchase

       requirement of the minimum volume of water lasted for the duration of the

       contract, i.e., until 2037, is supported by the record.


[23]   Next, we turn to the issue of Watson’s breach. Watson did not purchase the

       minimum volume for 2012, 2013, 2014, and 2015. One of the stipulations in

       advance of trial was that Watson did not contend that it could not take the

       108,300,000 gallon annual minimum requirement from IAWC. Consequently,

       the court’s finding of breach by Watson is supported by the record.


[24]   As for damages, exclusive of late fees and attorney fees, as of January 6, 2016,

       the total amount that IAWC has billed Watson, and remains unpaid, is

       $813,271.66, an amount stipulated to by the parties prior to trial.



       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 11 of 18
[25]   Therefore, the trial court’s findings that there was a contract, that Watson

       breached the contract, and that IAWC was damaged by the breach, are

       supported by the evidence. IAWC has met its burden of proving Watson’s

       breach of contract. See Indiana-American Water Co., Inc. v. Town of Seelyville, 698

       N.E.2d 1255 (Ind. Ct. App. 1998).


               II. Prior Breach Doctrine and Right of First Refusal
[26]   Watson contends that IAWC is foreclosed from enforcing the contract and

       seeking damages for a breach thereof under the prior breach doctrine and

       alleges the trial court is allowing IAWC to selectively enforce only those terms

       of the contract it chooses. Watson argues that IAWC is being allowed to

       enforce the minimum purchase agreement provision while disavowing the

       right-of-first-refusal clause.


[27]   “When one party to a contract commits the first material breach of that

       contract, it cannot seek to enforce the provisions of the contract against the

       other party if that other party breaches the contract at a later date.” Coates v.

       Heat Wagons, Inc., 942 N.E.2d 905, 917 (Ind. Ct. App. 2011). The issue whether

       a party has materially breached an agreement is a question of fact, dependent

       on a variety of factors. Id. at 917-18.


[28]   Watson has cited to Land Dev. Ltd v. Primrose Mgmt. L.L.C., 952 N.E.2d 563, 571

       (Ohio Ct. App. 2011), for the proposition that the prior breach doctrine is

       applicable only when the non-breaching party treats the contract as terminated

       not continuing. A fair reading of the case, however, suggests that the Ohio

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 12 of 18
       court held that the non-breaching party may select whether to (1) terminate the

       contract or (2) continue on with the contract, so long as the non-breaching party

       also fulfills its obligations under the contract to avoid an inequitable result.


[29]   Watson claims that IAWC later breached the agreement by failing to

       acknowledge what Watson characterizes as its valid exercise of the right-of-first-

       refusal clause.


[30]   We have previously quoted the original language and amendment comprising

       the right-of-first-refusal clause. Suffice it to say, to the extent Watson was

       attempting to do so, we agree with the trial court that Watson did not properly

       avail itself of the clause.


[31]   First, Watson negotiated and executed an initial reciprocal agreement with

       RRDA for the purchase and sale of water as needed. Watson did not provide

       IAWC with the opportunity to match the terms of that agreement or refuse to

       exercise that right. Even though the clause requires notice from Watson to

       IAWC of any contemplated agreement with a third party, none was given.

       IAWC became aware of the terms of Watson’s original and amended

       agreements with RRDA only by way of RRDA’s response to a request for

       production of documents after litigation had commenced. We conclude that

       the thirty-day period for IAWC to exercise its option was never triggered.


[32]   The agreement as amended between RRDA and Watson was contingent on the

       outcome of the litigation between Watson and IAWC. Watson indicated that it

       sought to eliminate its obligation to buy water exclusively from IAWC. The

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 13 of 18
       trial court’s finding that the agreement between RRDA and Watson was a

       sham in order to avoid the contract is supported by the record.


[33]   IAWC sued for damages for Watson’s breach and declaratory relief that the

       contract remained in force. This position follows the terms of the contract. The

       trial court rightly found so.


[34]   The trial court correctly concluded that even if the right-of-first-refusal clause

       was triggered, the only provision that would terminate was the clause, not the

       entire contract. The clause explicitly states that the right of refusal terminates.

       Appellee’s App. Vol. II, p. 6. Notably, the purported agreement between

       RRDA and Watson provides that upon the failure to exercise the right of first

       refusal, the agreement terminates. Id. at 22 (emphasis added). The trial court

       did not err in its interpretation of the clause.


            III. Applicability of the UCC and Damages Calculation
[35]   Next, Watson contends that it is absolved from its breach of contract because

       the UCC applies to an agreement involving the sale of goods. Watson cites to a

       bankruptcy case applying Texas law, In re Sage Enterprises, Inc., 421 B.R. 477

       (B.R. N.D. Ill. 2009), for several propositions under the UCC. First, however,

       we must determine the nature of this contract and whether it was for the sale of

       goods.


[36]   Indiana Code section 26-1-2-306(1) is the codification of the UCC’s provision

       regarding output or requirements contracts. Indiana-American Water Co., Inc.,

       698 N.E.2d 1255. That section reads as follows:
       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 14 of 18
               A term which measures the quantity by the output of the seller or
               the requirements of the buyer means such actual output or
               requirements as may occur in good faith, except that no quantity
               unreasonably disproportionate to any stated estimate or in the
               absence of a stated estimate to any normal or otherwise
               comparable prior output or requirements may be tendered or
               demanded.
[37]   “Generally, the buyer in a requirements contract governed by UCC § 2-306(1) is

       required merely to exercise good faith in determining his requirements and the

       seller assumes the risk of all good faith variations in the buyer’s requirements

       even to the extent of a determination to liquidate or discontinue the business.”

       Id. at 1261. “A requirements contract is one in which the purchaser agrees to

       buy all of its needs of a specified material exclusively from a particular supplier,

       and the supplier agrees, in turn, to fill all of the purchaser’s needs during the

       period of the contract.” Id. at 1259. The good faith requirement imposed under

       the UCC and Indiana Code section 26-1-2-306, prevents requirements contracts

       from being illusory or too indefinite to be enforced. Id. at 1260.


[38]   From time-to-time, there will be variations in the buyer’s requirements. “The

       essential ingredient of the buyer’s good faith under such circumstances is that

       he not merely have had second thoughts about the terms of the contract and

       want to get out of it.” Id. at 1261. On the other hand, if a buyer has a

       legitimate business reason for eliminating its requirements, instead of a desire to

       simply avoid the contract, then the buyer is acting in good faith. Id.


[39]   Here, Watson stipulated that it was not contending that it cannot take the

       108,300,000 gallon annual minimum requirement from IAWC. The inference

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 15 of 18
       to be drawn from the evidence is that Watson attempted to avoid its contract

       with IAWC. Additionally, the record reflects that one of the reasons Watson

       executed the agreement with RRDA and sought to modify it in both capacity

       and duration was to “eliminate an existing water supply agreement they have

       with Indiana-American Water Company.” Appellee’s App. Vol. II, p. 19.


[40]   Under a definitional provision, Indiana Code subsections 26-1-2-105(1) and (2)

       (1995), goods are defined as follows:


               (1) “Goods” means all things (including specially manufactured
               goods) which are movable at the time of identification to the
               contract for sale, other than the money in which the price is to be
               paid, investment securities (IC 26-1-8.1), and things in action.
               “Goods” also includes the unborn young of animals and growing
               crops and other identified things attached to realty as described in
               the section on goods to be severed from realty (IC 26-1-2-107).
               (2) Goods must be both existing and identified before any interest
               in them can pass. Goods which are not both existing and
               identified are “future” goods. A purported present sale of future
               goods or of any interest therein operates as a contract to sell.
[41]   Watson’s argument here is another attack on the duration of the contract, this

       time under the UCC, and would have an impact on the damages calculation.

       The dispositive provision of Indiana’s codification of the UCC, Indiana Code

       section 26-1-2-309 (1986), pertaining to the absence of specific time provisions

       and notices of termination, provides as follows:


               (1) The time for shipment or delivery or any other action under a
               contract, if not provided in IC 26-1-2 or agreed upon, shall be a
               reasonable time.


       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 16 of 18
               (2) Where the contract provides for successive performances but
               is indefinite in duration, it is valid for a reasonable time but
               unless otherwise agreed may be terminated at any time by either
               party.
               (3) Termination of a contract by one (1) party, except on the
               happening of an agreed event, requires that reasonable
               notification be received by the other party, and an agreement
               dispensing with notification is invalid if its operation would be
               unconscionable.
[42]   The parties agreed to a duration of the contract terms, which remained in place

       after negotiations for a shorter term failed. We agree with the trial court that

       Watson’s argument for a “reasonable time” evaluation under the UCC fails.


[43]   Next, regarding damages, Watson argues that the trial court erred by

       concluding that IAWC may recover under the parties’ contract only to the

       extent of the UCC, because the UCC allows recovery under Indiana Code

       section 26-1-2-708 (1986).


[44]   That section provides as follows:

               (1) Subject to subsection (2) and to the provisions of IC 26-1-2-723
               with respect to proof of market price, the measure of damages for
               nonacceptance or repudiation by the buyer is the difference between
               the market price at the time and place for tender and the unpaid
               contract price together with any incidental damages provided in IC 26-
               1-2-710, but less expenses saved in consequence of the buyer's breach.
               (2) If the measure of damages provided in subsection (1) is inadequate
               to put the seller in as good a position as performance would have
               done, then the measure of damages is the profit (including reasonable
               overhead) which the seller would have made from full performance by
               the buyer, together with any incidental damages provided in IC 26-1-2-
               710, due allowance for costs reasonably incurred and due credit for
               payments or proceeds of resale.

       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 17 of 18
       Again, the parties agreed to a minimum purchase volume over the course of

       forty years. IAWC’s rates were regulated by the IURC, a fact that was

       acknowledged by the parties. Thus, the parties were aware that IAWC could

       not have resold the water for a profit. Further, much like the duration

       provision, the parties explicitly agreed to a minimum purchase of a volume of

       water over the course of forty years. The volume requirement was based on the

       capital investment by IAWC, but was not limited to recoupment of that

       investment.


[45]   We find no error in the trial court’s holding that Watson was bound by the

       terms of the agreement with which it agreed at arm’s length with IAWC,

       acknowledging the cost of the production of water in addition to the capital

       expenditure.


                                                 Conclusion
[46]   In light of the foregoing, we affirm the trial court’s findings, conclusions, and

       judgment.


[47]   Affirmed.


       Kirsch, J., and Pyle, J., concur.




       Court of Appeals of Indiana | Opinion 10A01-1607-CC-1542 | October 10, 2017   Page 18 of 18
