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N. Ind. Pub. Serv. Co. v. Carbon Cty. Coal Co. - 799 F.2d 265 (7th Cir. 1986)

Rule:

A force majeure clause is not intended to buffer a party against the normal risks of a contract. The normal risk of a fixed-price contract is that the market price will change. If it rises, the buyer gains at the expense of the seller (except insofar as escalator provisions give the seller some protection); if it falls, as here, the seller gains at the expense of the buyer. The whole purpose of a fixed-price contract is to allocate risk in this way. A force majeure clause interpreted to excuse the buyer from the consequences of the risk he expressly assumed would nullify a central term of the contract.

Facts:

Northern Indiana Public Service Company (NIPSCO), an electric utility in Indiana, and Carbon County Coal Company, a partnership that owned and operated a coal mine in Wyoming, entered into a contract whereby Carbon County agreed to sell and NIPSCO to buy approximately 1.5 million tons of coal every year for 20 years, at a price of $24 a ton subject to various provisions for escalation which by 1985 had driven the price up to $44 a ton. The state public service commission ordered NIPSCO to make "economy purchase orders" from other utilities. NIPSCO stopped accepting deliveries and sought a declaratory judgment to have contract performance excused. Carbon County counterclaimed for breach of contract, seeking specific performance. The court awarded damages to Carbon County for the breach. NIPSCO sought review, alleging the court erred in refusing a continuance, that the contract was illegal because Carbon County violated Mineral Lands Leasing Act of 1920 and that the economy purchase orders frustrated NIPSCO's contract performance. Carbon County challenged the denial of specific performance.

Issue:

Was it proper to deny specific performance of the contract?

Answer:

Yes

Conclusion:

The court affirmed, holding that the court committed no error in denying the continuance, any violation of the Mineral Lands Leasing Act was harmless, the frustration doctrine did not excuse performance of a fixed price contract, and the damage remedy was adequate.

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