Transatlantic Fin. Corp. v. United States

124 U.S. App. D.C. 183, 363 F.2d 312 (1966)

 

RULE:

When the issue of impossibility of performance is raised, the court is asked to construct a condition of performance based on the changed circumstances, a process that involves at least three reasonably definable steps. First, a contingency (something unexpected) must have occurred. Second, the risk of the unexpected occurrence must not have been allocated either by agreement or by custom. Finally, occurrence of the contingency must have rendered performance commercially impracticable. Unless the court finds these three requirements satisfied, the plea of impossibility must fail.

FACTS:

Plaintiff contracted with defendant to deliver a cargo of wheat from Texas to Iran via the Suez Canal. When the Suez closed, the contract became impossible to perform. Plaintiff argued when it delivered the cargo by going around the Cape of Good Hope, instead of the usual route via Suez, it conferred a benefit upon defendant for which it should have been paid in quantum meruit.

ISSUE:

Whether the closure of a usual and customary route renders a contract to deliver cargo impossible to perform.

ANSWER:

No.

CONCLUSION:

The court held that plaintiff was entitled to only the contract price for transporting the cargo because performance of the contract was not rendered legally impossible by the canal's closure. Instead, plaintiff attempted to take its profit on the contract and then force defendant to absorb the cost of the additional voyage. When impracticability without fault occurs, the law seeks an equitable solution. There was no interest in casting the entire burden of commercial disaster on defendant in order to preserve plaintiff's profit.

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