The opinion of the court was delivered by: Stiehl, District Judge:
Before the Court are the parties cross-motions for summary
This cause was filed by the United States of America on
behalf of the Rural Electrification Administration (REA), The
National Rural Utilities Cooperative Finance Corporation
(CFC), and Soyland Power Cooperative, Inc. (Soyland), seeking
a declaratory judgment that the Wholesale Power Contract
between Soyland and Southwestern Electric Cooperative, Inc.
(Southwestern) is binding and enforceable. Count II of the
complaint for declaratory judgment was previously dismissed by
Plaintiffs seek summary judgment on Count I of the
complaint. Southwestern has filed a cross-motion for partial
summary judgment on paragraphs 35 and 37 of plaintiffs'
Southwestern has filed a counterclaim seeking a declaratory
judgment that the wholesale Power Contract is void, because of
mutual mistake of fact in Count I, and frustration of purpose
in Count II.
Fed.R.Civ.P. 56(c) provides that a district court shall
grant summary judgment "if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to
judgment as a matter of law." In determining whether a
district court properly granted summary judgment, "[a]ll
factual inferences are to be taken against the moving party
and in favor of the opposing party." International
Administrators, Inc. v. Life Insurance Co. of North America,
753 F.2d 1373, 1378 (7th Cir. 1985). In instances in which
"inferences contrary to those drawn by the trial court might be
permissible," a district court's grant of summary judgment must
be reversed. Munson v. Friske, 754 F.2d 683,
690 (7th Cir. 1985). Once a motion for summary judgment has
been made and properly supported, however, the nonmovant does
have the burden of setting forth specific facts showing the
existence of a genuine issue of a material fact for trial.
See Rule 56(e); Posey v. Skyline Corp., 702 F.2d 102, 105 (7th
Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d
336 (1983), (noting that "a bare contention that an issue of
fact exists is insufficient to raise a factual issue").
Although a requisite, the existence of a factual dispute,
nonetheless, is not, standing alone, sufficient to bar summary
judgment. It is well settled that a "factual dispute does not
preclude summary judgment unless . . . the disputed fact is
outcome determinative under the governing law." Egger v.
Phillips, 710 F.2d 292, 296 (7th Cir.), cert. denied,
464 U.S. 918, 104 S.Ct. 284, 78 L.Ed.2d 262 (1983), as cited in Shlay v.
Montgomery, 802 F.2d 918, 920 (7th Cir. 1986).
Plaintiffs have asserted that there is no genuine issue of
material fact as to the validity and enforceability of the
all-requirements contract, and that, therefore, they are
entitled to summary judgment. Southwestern asserts that
material issues of fact exist by claiming the contract is
"void" on the bases of mutual mistake of fact and/or
frustration of purpose, and that a jury should determine
whether these defenses do, in fact, exist.
The matter is before this Court on diversity jurisdiction,
therefore this Court will apply the choice-of-law rules of the
State of Illinois. Baltimore Orioles v. Major League Baseball
Players, 805 F.2d 663, 681 (7th Cir. 1986) cert. denied, ___
U.S. ___, 107 S.Ct. 1593, 94 L.Ed.2d 782 (1987). The parties
are in agreement that the contract in question was entered
into, and is currently being performed, in Illinois, therefore,
Illinois contract law principles control this issue. The basic
issue underlying these motions is whether the contract between
Soyland and Southwestern is binding and enforceable, or whether
it is subject to rescission under either the doctrine of mutual
mistake of fact, or frustration of purpose.
It should initially be noted that defendants seek to have
this Court render the Soyland/Southwestern contract void on
the basis of mutual mistake of fact. It is clear from both the
Restatement of Contracts and Illinois case law that a contract
may be voidable or subject to rescission on this basis, but it
is not void on its face.
The Restatement of Contracts 2d at § 151 defines "mistake" as
a "belief that is not in accord with the facts." Further, § 152
details when a mistake of both parties makes a contract
(1) Where a mistake of both parties at the time
of contract was made as to a basic assumption on
which the contract was made has a material effect
on the agreed exchange of performances, the
contract is voidable by the adversely affected
party unless he bears the risk of the mistake
under the rule stated in § 154.
(2) In determining whether the mistake has a
material effect on the agreed exchange of
performances, account is taken of any relief by
way of reformation, restitution or otherwise.
A party bears the risk of a mistake when
(a) the risk is allocated to him by agreement of