Historical case · Supply
Goebel v Linn
Ice supply contracts and business dependence
Drawn from the reported Michigan Supreme Court opinion (47 Mich. 489, 1882) and related sources. The business lessons are BusinessBuilder’s interpretation; not legal advice.
In 1879 a Detroit brewery contracted for all the ice it needed at US$1.75 a ton, rising to US$2 in scarcity. After a mild winter wrecked the ice harvest, the supplier stopped deliveries until a new price was agreed. With beer that would spoil within a day or two, the brewers accepted US$3.50 a ton, then disputed the note in court.
What the case found
- A contract is not continuity. The scarcity clause allocated financial risk, but it could not produce missing ice, secure transport or give the brewers time to find another supplier.
- Two clocks were running. The operating clock measured how long the stock would last without cooling; the legal clock, how long a dispute would take. About 2,500 barrels, worth some US$15,000, were at risk, and a future legal remedy could not keep them cold.
- The court upheld the higher price. The brewers had kept to the new arrangement for nearly eight months without protective steps and had not shown that replacement ice was unobtainable. The judge thought US$3.50 was probably fair in the circumstances.
- Holdup or necessary adjustment? Evidence decides. The same price demand means something different if the supplier could not perform at the old price than if it was exploiting a trapped customer—and the supplier’s costs were never shown.
The structural question
Can a business keep delivering when an input it depends on is threatened?
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Read with the bookChapter 6 (the Holdup Trap) and the Bridge (opportunity and exposure together). It also touches the Fragility Trap (Chapter 7) and key partnerships in the nine blocks (Chapter 9).
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Inside the full case study
The four pricesFrom US$1.75 to the accepted US$3.50—75% above the contract’s own scarcity price—shown in a chart and table.
The court’s reasoningConsideration, duress and Justice Cooley’s hypothetical about a ruined supplier, explained in plain language.
The aftermathHow a second brewer kept his damages claim (Endriss, 1882), a later court’s criticism (Alaska Packers, 1902) and the modern US model law.
A decision exerciseA fictional brewery with 36 hours of cooling left: four possible responses and the questions to settle before paying.
Key ideas in this case
- The Holdup Trap — when specific investments and weak alternatives let a supplier or buyer press for terms you cannot refuse.
- Operating clock versus legal clock — a right to recover money later does little against an interruption that will destroy value now.
- Alternatives must survive the same shock — a second supplier helps only if it can deliver when the first cannot; two suppliers drawing on the same failed source fail together.
