This case involves a dispute over a chlorine supply contract. The plaintiff was a large indoor waterpark in the northeast that was supplied chlorine by the defendant major chemical manufacturer. It was alleged that the defendant imprudently employed a cost-plus contract. An expert in chlorine manufacturing contracts was sought to opine on the dispute.
Question(s) For Expert Witness
- 1. Please describe your experience in buying/selling chlorine.
- 2. Are you familiar with cost-plus terms in the context of a chlorine supply contract?
Expert Witness Response E-058630
I have been involved in chlorine for many years. I worked in the chlor-alkali chemical division at a global materials supplier from 1980 until 2013. This division had a chlorine business very much like those of the major chemical companies. My primary focus was on caustic products, but chlorine and caustics are very closely tied together so I was heavily involved in chlorine sales. Cost-plus deals on chlorine are very reasonable, particularly in specific instances. For a case in which a supplier invests lots of money, it is prudent to use a cost-plus structure that guarantees a return on the investment. The idea of a cost-plus sales agreement when a company has invested considerable assets to supply another company is not at all uncommon. When I was working with the global materials supplier, we made contracts with cost-plus elements and also a component linked to the market. We also made multiple cost-plus proposals, including a recent dealing at another chemical manufacturer where we proposed to build assets for a company and charge with a cost-plus arrangement.
Expert Witness Response E-058660
I spent 28 years in sales roles at a chemicals company and 19 years as a regional manager for the company. My career was mainly focused on caustic soda, but everyone in the caustic business knows what’s going on with chlorine and vice versa because the products are so closely connected. As a regional manager, I dealt with the execution of contracts. To say that cost-plus contracts don’t exist is nonsense. It is not the typical way to sell chlorine, but it normal when chlorine is sold to a large customer at one location. There aren’t dozens of cost-plus agreements on chlorine because there are not many large chlorine customers, but there are probably a few more in the industry. Deals of this size would be executed at the top levels.