Examples:

• • Prime was able to harness Logan Paul & KSI’s immense social media reach, with a combined 50M+ following, to drive initial demand.
  • Some limited-edition Prime flavors sold for over $100 per bottle on the resale market in 2022 as supplies couldn’t match the viral hype.
  • But as more established players launched competing products, Prime’s influencer-fueled buzz began to lose steam.
  • Refresco dedicated a whole production line at its Truesdale, MO facility just for Prime in exchange for a long-term volume commitment.

Key Takeaways:

• • Influencer brands like Prime can soar on celebrity-driven hype, but sustaining sales is challenging as buzz ebbs and flows.
  • To secure reliable production as demand surged, Prime made a multi-year exclusive supply deal with Refresco’s Missouri plant.
  • But as Prime’s sales slowed faster than expected, it allegedly refused to honor its contractual purchase commitments to Refresco.
  • The Refresco lawsuit shows the major risks suppliers take on when hitching themselves to viral brands’ rollercoaster sales cycles.

FAQs:

• • What is Refresco’s core business? Refresco is an independent beverage manufacturer that produces drinks for other brands.
  • Who owns Prime Hydration? Prime was co-founded by celebrity influencers Logan Paul and KSI through their company Congo Brands.
  • Why did Prime’s sales cool in 2024? Reasons included fading social media hype, more competition, lawsuits alleging false advertising, and seasonal slumps.
  • When was the Refresco-Prime deal signed? The parties entered the exclusive supply agreement, focused on Refresco’s Truesdale, MO facility, in April 2023.
  • How did Refresco dedicate production to Prime? Refresco agreed to set up a production line at its Truesdale, MO plant exclusively for Prime products.

Examples:

• • Refresco agreed not to let any other brands use the Prime-dedicated production line, giving up other potential revenue.
  • New molds and machinery were needed to produce Prime’s proprietary bottle shape, which Refresco had to buy and install.
  • The agreement required Prime to order at least 18.5M cases/year from Refresco, or 55.5M total cases over the 3-year term.
  • This “take or pay” structure aimed to ensure Refresco recouped its upfront costs even if Prime orders dipped below forecasts.

Key Takeaways:

• • By dedicating production capacity exclusively to Prime, Refresco took on major opportunity costs and risks.
  • The bespoke equipment needed for Prime’s custom bottles required Refresco to make significant capital investments upfront.
  • Prime’s multi-year volume commitment and take-or-pay clause were meant to protect Refresco if Prime’s orders fell short.
  • But such protections only work if the customer follows through – Refresco alleges Prime now refuses to honor the deal.

FAQs:

• • What does it mean to dedicate a production line? Refresco agreed to use the line solely for Prime and no other customers from 2023-2026.
  • Why did the line need new equipment? Specialized molds and machinery had to be installed to make Prime’s unique bottle shape and size.
  • How much did Prime commit to buy? The deal required Prime to purchase at least 18.5M cases/year, or 55.5M cases total, from Refresco.
  • What is a take-or-pay clause? It requires the buyer to either “take” the agreed volume of product or “pay” a penalty for falling short.
  • Why would Refresco want these terms? To ensure it could recoup the costs and foregone revenue of dedicating production to Prime.

Examples:

• • The contract required Refresco to retrofit the line within 30 days, which it did, having it ready for final testing by March 2024.
  • Prime’s early 2024 sales slump was driven by fading hype, increased competition, false ad lawsuits, and failure to predict seasonal demand drops.
  • Refresco repeatedly asked Prime for April/May 2024 order forecasts, which Prime stalled on and never provided.
  • On March 20, 2024, Prime told Refresco it decided not to do the final line testing or provide opening orders.
  • Prime then claimed on April 5 that the deal had terminated earlier and denied having any remaining obligations.

Key Takeaways:

• • Prime’s dramatic boom and bust sales cycle meant orders failed to materialize as it had projected when the deal was signed.
  • Despite encouraging Refresco’s ongoing investment in line setup throughout 2023, Prime allegedly slow-walked and dodged providing firm commitments as the 2024 launch approached.
  • Refresco claims Prime refused to give final go-ahead for production launch and later repudiated the agreemententirely.
  • The complaint paints a picture of Refresco investing heavily to perform its end of the deal while Prime evaded its purchase obligations.

FAQs:

• • When did Refresco finish the line setup? Refresco says it had the line ready for final testing to produce Prime products by March 2024.
  • What factors tanked Prime’s 2024 sales? Fading buzz, new competitors, false ad suits, and failure to anticipate a seasonal slump.
  • How did Prime allegedly stall on the launch? Refresco claims Prime wouldn’t give forecasts, order commitments or final approval to begin production.
  • When did Prime refuse to start production? On March 20, 2024, Prime allegedly said it would not do the final line testing or initial orders.
  • What is repudiation? Repudiation is when a party unequivocally refuses to perform its remaining obligations under a contract.

Examples:

• • The breach of contract claim alleges Prime violated the agreement’s volume commitments, pricing, and other terms.
  • To calculate the $67M+ damages, Refresco likely used the contract’s take-or-pay provision, plus its upfront investments.
  • Under promissory estoppel, even if the original deal ended, Prime could still owe for later broken promises that Refresco relied on.
  • Equitable estoppel argues it would be unfair to let Prime cancel after Refresco sunk major costs into performing its side of the deal.
  • The request for injunctive relief seeks a court order stopping Prime from abandoning its purchase duties going forward.

Key Takeaways:

• • Refresco’s core claim is breach of contract – that Prime violated the clear terms of the Truesdale Agreement regarding minimum purchases.
  • The huge $67M damages demand likely includes take-or-pay penalties plus Refresco’s upfront costs in reliance on Prime’s commitments.
  • The estoppel claims argue even if the original deal lapsed, Prime still owes for Refresco’s detrimental reliance on Prime’s later promises.
  • Beyond money damages, Refresco wants a ruling keeping Prime bound by the deal so it can’t walk away from future obligations.
  • Refresco seems to have strong arguments for breach based on the clear contract terms, but much depends on the specific evidence.

FAQs:

• • What is a breach of contract claim? A valid agreement along with a claim that a party failed to meet the agreement’s obligations.
  • Where does the $67M damages figure come from? Likely from adding Refresco’s take-or-pay penalties and upfront costs in relying on the deal.
  • What is promissory estoppel? A doctrine preventing parties from reneging on promises others reasonably relied on to their detriment.
  • How is equitable estoppel different? It stops parties from taking inconsistent positions that unfairly harm others who counted on their original stance.
  • What is injunctive relief? A court order compelling or prohibiting certain actions, often to stop ongoing or threatened contract breaches.

Examples:

• • Prime argues the deal ended when a fuller agreement wasn’t reached by a certain date, but Refresco says that deadline was waived.
  • With Prime stalling, Refresco demanded proof Prime would perform; Prime’s failure to provide it could strengthen the breach claim.
  • Prime may say Refresco should have cut its losses, but Refresco can argue it did so by e.g. winding down updates and seeking a new buyer.
  • Prime would struggle to show unforeseeable, unavoidable events wholly destroyed the contract’s value as needed for frustration.
  • The force majeure clause likely covers only extreme uncontrollable events like natural disasters or government orders.

Key Takeaways:

• • Prime’s core defense seems to be that the deal ended before any breach, but Refresco has strong arguments the term was extended.
  • Refresco bolstered its case by demanding assurances after sensing Prime wouldn’t perform, which Prime didn’t adequately provide.
  • Prime has an uphill battle to show Refresco failed to mitigate losses or that the deal’s purpose was entirely frustrated.
  • The force majeure clause likely doesn’t apply without a specific event making performance impossible, not just unprofitable.
  • Refresco seems well-positioned legally, but the case’s outcome depends on the evidence and skill of each side’s attorneys.

FAQs:

• • Can Prime prove the deal terminated? It will be difficult if Refresco shows the key deadlines were waived or extended by the parties’ later conduct.
  • What is the right to demand assurances? Under the UCC, worried parties can demand proof the other side will perform; failure to provide it helps prove breach.
  • Does Refresco have to mitigate losses? Yes, but not if it would be too difficult or the breaching party caused disproportionate loss.
  • When does frustration of purpose apply? Only when unforeseeable events totally, permanently destroy a contract’s value for a blameless party.
  • What events trigger force majeure clauses? Typically only extreme, unavoidable occurrences like disasters that physically prevent performance.

Questions:

1. What are the key elements of a breach of contract claim?
   1. Offer, acceptance, consideration
   2. Valid contract, breach, causation, damages
   3. Negotiation, drafting, execution, filing
   4. Termination, cancellation, rescission
2. Which of the following isn’t a usual remedy for breach of contract?
   1. Monetary damages
   2. Restitution
   3. Criminal penalties
   4. Specific performance
3. What does a “take or pay” contract clause typically require?
   1. Supplier must deliver or refund money
   2. Parties must mediate before suing
   3. Buyer must purchase minimum amounts or still pay
   4. Loser must pay winner’s attorney fees
4. Under the UCC, what can a party do if it has reasonable grounds to believe the other side won’t perform?
   1. Immediately cancel the contract
   2. Demand adequate assurance of performance
   3. Get a court injunction to compel performance
   4. Suspend its own performance entirely
5. True or false: Frustration of purpose discharges a party’s duties only if the frustrating event was unforeseeable.
   1. True
   2. False

Answers & Explanations:

1. B. A valid, enforceable contract, material breach of a duty under that contract, and resulting damages are the core components of a breach claim. Offer, acceptance and consideration relate to contract formation. Negotiation, drafting and execution are contract creation steps. Termination and rescission deal with ending contracts.
2. C. Monetary damages, restitution, and specific performance (an order requiring precise fulfillment of the contract terms) are all civil remedies commonly available for breach of contract. Criminal penalties like fines or jail time generally don’t apply to contract breaches except in rare cases involving additional unlawful conduct.
3. C. In a “take or pay” contract, the buyer commits to either purchase (“take”) a minimum quantity of goods from the seller, or pay the seller a penalty for failing to do so. This assures the seller a baseline revenue stream even if the buyer’s purchases fall below expectations. Mediation, attorney fees, and refund terms can be in contracts but aren’t functions of “take or pay” clauses.
4. B. Under UCC 2-609, if a party has reasonable grounds for insecurity about the other’s performance, it can demand adequate assurance in writing that the other will perform as promised. Without reasonable assurances, the worried party may treat that failure as a repudiation of the contract. The UCC doesn’t allow unilateral cancellation, specific performance, or total suspension of one’s own duties based solely on insecurity.
5. A. True. For frustration of purpose to excuse a party’s nonperformance, the frustrated purpose must have been a basic assumption of the contract, the frustration must be substantial and severe, and the event that frustrated the purpose must have been unforeseeable when the contract was made. If the event was foreseeable, parties are expected to address it via force majeure, contingency, or other risk allocation clauses.

Disclaimer

The information in this article discussing the Refresco v. Prime/Congo lawsuit and general commercial litigation concepts is provided for educational and informational purposes only.

Laws and court procedures vary by jurisdiction, and legal claims and defenses depend heavily on the specific facts and evidence in each case. If you are dealing with a business contract dispute or litigation matter, you should consult with a qualified attorney in your area to obtain personalized guidance and explore your options. Most reputable commercial litigation lawyers offer no-cost, no-obligation initial consultations.