Impracticability

1. Impracticability Prof Merges – Contracts 4.26.2011

2. Eastern Airlines v. Gulf

7. Eastern Airlines v. Gulf • Facts • History

8. § 2-614. Substituted Performance (1) If without fault of either party the agreed berthing, loading, or unloading facilities fail or an agreed type of carrier becomes unavailable or the agreed manner of performance otherwise becomes commercially impracticable but a commercially reasonable substitute is available, the substitute performance must be tendered and accepted. (2) If the agreed means or manner of payment fails because of domestic or foreign governmental regulation, the seller may withhold or stop delivery unless the buyer provides a means or manner of payment which is commercially a substantial equivalent. If delivery has already been taken, payment by the means or in the manner provided by the regulation discharges the buyer's obligation unless the regulation is discriminatory, oppressive, or predatory.

9. § 2-615. Excuse By Failure Of Presupposed Conditions Except to the extent that a seller may have assumed a greater obligation and subject to Section 2-614: (a) Delay in performance or nonperformance in whole or in part by a seller that complies with paragraphs (b) and (c) is not a breach of the seller's duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

10. (b) If the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, the seller must allocate production and deliveries among its customers but may at its option include regular customers not then under contract as well as its own requirements for further manufacture. The seller may so allocate in any manner that is fair and reasonable. (c) The seller must notify the buyer seasonably that there will be delay or nonperformance and, if allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.

11. Krell v. Henry

12. King Edward VII, King 1900-10

13. At the end of May 1902 the long-drawn-out war in South Africa came at last to an end, and the coronation was fixed for the 26th of June. But on the 24th, amid general consternation, the king was announced to be suffering from perityphlitis, necessitating the immediate performance of an operation; and the coronation, for which unprecedented preparations had been made, had to be postponed. The operation -- performed by Sir Frederick Treves -- was, however, so marvellously successful, and the king's progress towards recovery so rapid and uninterrupted, that within a fortnight he was pronounced out of danger, and soon afterwards it was decided to hold the coronation service on August 9. Though shorn of much of the magnificence which would have been added to it in June by the presence of foreign royalties and the preparations for a great procession through London, the solemnity duly took place on that date in Westminster Abbey amid great rejoicings.

16. Krell v. Henry • Facts • Procedural History

17. Is this an impossibility case?

18. Is this an impossibility case? • No: the building has not burned down

19. Who is arguing “frustration”?

20. Who is arguing “frustration”? • The Δ, lessee of the premises • Is he arguing that the money to pay for the premises was destroyed in a fire?

21. Who is arguing “frustration”? • The Δ, lessee of the premises • Is he arguing that the money to pay for the premises was destroyed in a fire?  No; just that the purpose of the K ceased to exist

22. What is the test for frustration of purpose? • What is the “substance of the K”; does this assume a particular state of things?

23. Did the K mention contingencies? • Apparently not • Which way does this cut? • Shows parties assigned risk of all contingencies to lessee?

24. Risk assigned to lessee? • No; “general and unconditional” language was “not used with reference to the possibility of the particular contingency which afterwards occurred”

25. Did the K mention contingencies? • Apparently not • Which way does this cut? • Shows parties did not contemplate this contingency at all.

26. Epsom Downs/Derby Day Hypothetical • One of the more confused hypotheticals in Anglo-American law . . .

27. Derby Day • Rationale: Cab is not “specially adapted” to allow viewing of Derby; just any other cab. • Problem: The Derby is still the main object and “substance” of the K – as shown by the higher-than-normal price

28. Swift Canadian v. Banet

32. Swift Canadian v. Banet • Facts • Procedural History

33. Swift • K Terms “All at $3.80 each U.S. funds” “F.O.B. Toronto”

34. What is the significance of the FOB term here?

35. What is the significance of the FOB term here? • Swift argues that it serves as an allocation of risk provision • How does this help them in this case?

36. Were the goods in question already loaded onto the carrier in Toronto when the US govt. reg. re: lamb pelts was changed?

37. Not quite; “On or about March 12, 1952, Swift indicated” it was ready to perform • “On or about that date” the regs changed

38. Significance of FOB Toronto • Did the case turn on exactly when the seller placed the goods on the carrier?

39. Significance of FOB Toronto • Did the case turn on exactly when the seller placed the goods on the carrier? • No; FOB Toronto was interpreted as allocating to buyer the risk that importation into the US would become more difficult or expensive

40. Does this seem reasonable to you here? • Why or why not?

41. § 265. Discharge By Supervening Frustration Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.

42. Nispco v. Carbon County Coal Co.

45. Judge Richard Posner

46. K Clause at issue “[Nipsco] may stop taking delivery of coal for any cause beyond its reasonable control . . . Including but not limited to orders or acts of civil authority which wholly or partly prevent the utilizing of the coal . . .”

47. “bets vs. bargains” “A force majeure clause is not intended to buffer a party against the normal risk of a contract.”

48. Frustration vs. impracticability • Buyer vs. seller • “if something has happened to make the performance he would have been paying for worthless to him, an excuse . . . May be proper”

49. Labels aside . . . All are doctrines for shifting risk to the party better able to bear it, either because he is in a better position to prevent the risk from materializing or he can better reduce the disutility of the risk (as by insuring) . . .