Also known as: impracticability defense · impracticability · commercial impracticability · UCC 2-615
Written by attorneys — see sources below.
A contractual defense that excuses a party's nonperformance when a supervening event renders performance impracticable without the party's fault and the nonoccurrence of the event was a basic assumption of the contract. The defense discharges the duty to perform unless the parties agreed otherwise or the impracticability is only temporary and does not materially increase the burden after it ends. It applies only to the duty of performance and does not affect claims for breach that have already arisen.
Dominic Drake contracted with Dominion Capital to haul goods daily through a single mountain pass for five years. An unanticipated avalanche led to an indefinite official closure. Drake stopped performance after forty-five days because alternate routes tripled fuel costs. The supervening closure discharged Drake's duty under the contract.
Deborah Dunn contracted to manufacture goods whose production unavoidably invaded Dylan Duffy's adjacent land with emissions. Preventing the invasion proved impracticable despite reasonable efforts. The supervening impracticability discharged Deborah's duty under the contract.
Daphne Doyle agreed to supply parts to Delta Dynamics for six months. A fire closed Doyle's plant for two weeks. Performance resumed afterward without material increase in burden, so the temporary impracticability merely suspended Doyle's duty during the closure.
Diego Duarte repudiated a supply contract with Duarte Shipping. Later investigation revealed that a supervening regulatory ban would have made Duarte's performance impossible before any nonperformance. The duty to pay damages for the repudiation was discharged.
Dustin Donovan was named beneficiary of a contract between two companies. A supervening event rendered the promisor's performance impracticable. Donovan's right to enforce the contract was discharged to the same extent.
Eastern Air Lines and Gulf Oil entered a long-term jet fuel supply contract at a fixed price. World events sharply raised Gulf's costs. Performance remained possible though more expensive, so the defense of impracticability did not excuse Gulf's duty.
Eastern Air Lines, Inc. and Gulf Oil Corporation maintained a business relationship spanning several decades involving the sale and purchase of aviation fuel. On June 27, 1972, following months of arm's length negotiation, the parties executed a contract under which Gulf agreed to supply Eastern's requirements of jet fuel at specified cities in the Eastern system through January 31, 1977. The agreement was Gulf's standard form aviation fuel contract and incorporated a price escalation clause tied to the average of the posted prices for West Texas sour crude oil 30.0-30.9 gravity as listed for Gulf, Shell, and Pan American in Platt's Oilgram Crude Oil Supplement. The contract price mechanism operated against the backdrop of U.S. government price controls in effect from 1972 through the fall of 1973. In late 1973 the Arab oil embargo occurred. OPEC unilaterally increased the price of their crude to the world market some 400% between September, 1973, and January 15, 1974. This triggered implementation of two-tier price controls under which old oil remained frozen at controlled levels while new and released oil prices rose from approximately $5 to $11 per barrel. Platt's continued publishing only the controlled old oil postings for West Texas Sour, and Eastern paid contract prices that rose from 11 cents to 15 cents per gallon. On March 8, 1974, Gulf demanded that Eastern accept a price increase or face cutoff of jet fuel supplies within fifteen days. Eastern filed its complaint in the United States District Court for the Southern District of Florida alleging breach and seeking preliminary and permanent mandatory injunctions. By agreement of the parties a preliminary injunction preserving the status quo was entered on March 20, 1974, requiring Gulf to continue performance and Eastern to pay according to contract terms pending final disposition. Gulf answered and asserted that the contract lacked mutuality, was not a binding requirements contract, and was commercially impracticable. At trial the parties presented evidence concerning Eastern's fuel liftings at Gulf stations, which varied daily, weekly, and monthly due to weather, schedules, aircraft loads, and fuel freighting practices that Gulf had accepted without objection over thirty years of dealing. Gulf introduced evidence of its increased crude oil costs, including intra-company transfer prices that incorporated profits from its overseas and domestic production subsidiaries, while the record showed Gulf recorded net profits after taxes of approximately $800 million in 1973 and more than $1.065 billion in 1974.
View caseThe party must show that a supervening event made performance impracticable without its fault and that the nonoccurrence of the event was a basic assumption of the contract. The defense yields to contrary agreement by the parties.
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Temporary impracticability suspends the duty only while the condition exists. It discharges the duty only if resuming performance afterward would be materially more burdensome than originally contemplated.
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A party's duty to pay damages for repudiation is discharged if later facts show the repudiated duty would have been excused by impracticability before any nonperformance occurred.
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If impracticability causes the contract to cease being binding, the beneficiary's rights are discharged or modified to the same extent.
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