ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, January 8, 2018

Heating oil contracts in the record cold

The news tonight reported on a real-life contracts issue near and dear to my heart, since my grandmother got caught up in an identical situation with her oil. Basically, New England has been in the middle of a two-week stretch of below-freezing temperatures, unusual for us. It's cold here, but not usually -18. Lots of people have contracts with oil companies that provide for automatic tank refill. These contracts are not cheap to enter into. My grandmother's cost hundreds of dollars a year, and that's just for them to show up; we still have to pay for the oil on top of it. But, because everyone's been using more oil than usual, the oil companies have been caught completely unprepared for how many of their automatic-renewal-contract customers have needed oil. How unprepared? Well, my 85-year-old grandmother spent more than 12 hours completely without heat, problematic in the arctic cold we were gripped in. And the problem is: What were our options? We'd paid hundreds of dollars to never be left in a situation, we thought, when our grandmother's tank would go empty. That was supposed to be the point of the contract, that we wouldn't have to worry about her running out of oil. But that was exactly what happened. 

And, as the news report makes clear, once you enter into this contract, you're not allowed to get your oil from anybody else. So we were in a situation where we couldn't get the service we'd paid for, and we were prohibited by contract from getting the service from anyone else. As the news report states, the oil company may waive the fee on a case-by-case basis. But, for many people on limited incomes dealing with already expensive heating costs, taking the risk of being charged a $399 fee might not be acceptable.

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Thank you for sharing this story. One of the unsatisfactory truths of contract law (and law generally) is that it all too often does not matter because the cost of litigation, arbitration, or general transactional costs exceed the amount of damages sought. The less money people have, the less our legal system is in position to help. In your grandmother’s case, she did not get what she bargained for, which leaves little value in the contract. I suppose the contract represents a promise that customers can now measure quality of service, and it provides a record of the oil company’s failure. It is therefore informational to other customers in the market. A class action could create more incentive for the oil company to prepare better in the future, but I suspect that effort is also too costly. I suspect public criticism and bad press would be a better alternative to demand some level of damages. If the oil company does respond, it would be interesting to know how.

Posted by: Bret | Jan 9, 2018 7:08:00 AM

This is an apt summation of the challenges of the situation. We had the same thought about bad press being our best option. My sister actually proposed contacting the news -- which was clearly what other people did.

Posted by: Stacey | Jan 15, 2018 7:01:29 PM

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