Law School Case Brief
Tractebel Energy Mktg. v. E.I. du Pont de Nemours & Co. - 118 S.W.3d 60 (Tex. App. 2003)
Texas courts excuse performance of a contract for (1) the death or incapacity of a person necessary for performance, (2) the destruction or deterioration of a thing necessary for performance, and (3) prevention by governmental regulation (though not using the term impracticability). Although the defense is referred to as "impossibility" rather than impracticability, it is clear it is approved regardless of the name applied to the defense. Thus, the doctrine of commercial impracticability exists in Texas.
A power plant builder contracted to buy emission reduction credits from the power plant owner, but a change in state regulations revoked those credits, so the owner refused to perform its obligations. The builder sued the owner for breach of contract. The owner used the defense of commercial impracticability as his reason for non-performance. Judgment was entered in favor of the owner, and both parties appealed.
Was the trial court's decision proper?
The appellate court held, while the defense of impracticability was available in Texas, and it was proper, generally, to submit the determination of this defense to the jury, the trial court erroneously instructed the jury on the defense, as there was no evidence supporting it because (1) the contract did not specify the source or ownership of the credits being sold and, thus, the builder could not have known that the validity of the owner's credits was a basic assumption of the contract, as credits from another source could have fulfilled the contract; and (2) there was no explanation of why the owner's abandonment of a lawsuit challenging the revocation of its credits was reasonable. The parties' failure to act on an intention to execute a formal contract later did not mean there was no contract, and there was sufficient evidence that the company that arranged the purchase for the builder was acting as the builder's agent. The jury's finding that the owner did not show impossibility was not error.
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