Town Breaches Contract By Increasing Water Rates: Fid-Bau Portal

Town Breaches Contract By Increasing Water Rates

The Mulberry‐Fairplains Water Association Inc. (MFWA), a North Carolina nonprofit corporation, sold and delivered potable water in Wilkes County. Since 1964, the town of North Wilkesboro continuously sold water to MFWA pursuant to written contracts under which it agreed to furnish MFWA up to 15 million gallons per month. The contract also provided that if North Wilkesboro changed the rate it charged MFWA, it must similarly change the rate charged to customers inside the city limits. In 1989 North Wilkesboro established a new flat rate of $0.77/1,000 gal for water sold to MFWA. Previously, MFWA had been paying $0.347/1,000 gal for all gallons over 1.5 million. MFWA notified the town that it considered the new rate to be a breach of the contract. The town refused to negotiate and billed MFWA at the new rate. MFWA tendered payment based on the former rate. The town returned the payment and informed MFWA it would cut off service. MFWA sued for breach of contract and obtained a temporary restraining order to prevent North Wilkesboro from terminating service. The trial court ruled that the new rate violated the price provision of the contract.