CML Impracticability
Black’s Law Dictionary:
Impracticability
1. A fact or circumstance that excuses a party from performing an act, esp. a contractual duty, because (though possible) it would cause extreme and unreasonable difficulty. • For performance to be truly impracticable, the duty must become much more difficult or much more expensive to perform, and this difficulty or expense must have been unanticipated. [Cases: Contracts  309(1). C.J.S. Contracts §§ 520-522, 524.]
2. The doctrine by which such a fact or circumstance excuses performance. Cf. FRUSTRATION (2); IMPOSSIBILITY (4).
Commercial impracticability. The occurrence of a contingency whose nonoccurrence was an assumption in the contract, as a result of which one party cannot perform. [Cases: Contracts 309(1). C.J.S. Contracts §§ 520-522, 524.]
"The doctrines of Impossibility, Commercial Impracticability or as the Uniform Commercial Code knows it, Excuse by Failure of Presupposed Conditions, comprise unclimbed peaks of contract doctrine. Clearly, all of the famous early and mid-twentieth century mountaineers, Corbin, Williston, Farnsworth and many lesser men have made attempts on this topic but none has succeeded in conquering the very summit.... In spite of attempts by all of the contract buffs and even in the face of eloquent and persuasive general statements, it remains impossible to predict with accuracy how the law will apply to a variety of relatively common cases. Both the cases and the Code commentary are full of weasel words such as 'severe' shortage, 'marked' increase, 'basic' assumptions, and 'force majeure.' " James J. White & Robert S. Summers, Uniform Commercial Code § 3-9, at 155 (3d ed. 1988).
H.R. & S. Sainsbury Ltd. v. Street
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This is an example of a “crop failure” case
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Reluctance to alter the contractual agreement or excuse non-performance:
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“Circumstances in which performance is called for would render it a thing radically different from which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do” Lord Radcliffe in Davis Contractors
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See Sainsbury v. Street, example of part frustration, part breach
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American CML more forthcoming! See S. 261 of the Restatement
CML – H.R. & S. Sainsbury Ltd. v. Street, [1970] 3 All E.R. 1126 (Q.B.): CB2 233 |
Jurisdiction
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Quebec
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Facts
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Street (farmer) K’d with Sainsbury (grain dealer) to sell entire crop of barley, expected at about 275 tons, at £20/ton. Harvest was poor and price of barley rose; Street harvested only 140 tons. Street sold 100 tons to another grain dealer for £27.5 per ton, kept 40 tons for himself. Sainsbury bought barley against the K (meaning what? ) at £30/ton, and sued S for breach of K. Buyer is asking for damages – wants the difference for what he contracted for and what he paid.
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Issues
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Was Street entitled to discharge from the K?
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Holding
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No H.R. & S. Sainsbury Ltd.
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Reasoning
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MacKenna J:
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Implied condition of the K that if through misfortune Street could not deliver the stipulated tonnage, he should not be required to pay damages
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No condition that he need not deliver any if through misfortunate he could not deliver the whole (unreasonable)
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S argues that because HRSSL would’ve been free only to accept 275 tons if price went down, S should be free to sell to another buyer if price went up – unconvincing
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Sale of Goods Act ss. 6-7, dealing with destruction of existing goods, has been held not to apply to Ks for sale of growing crops
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Conditions precedent and subsequent are functionally identical here
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Presumed intention of parties (and of reasonable men) applies
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US Sales Act expressly allows the buyer to require such performance as remains possible after partial destruction of subject-matter of a sale or K to sell
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Farmer is actually liable for paying is the 140 tons x the £7.5 change in price = L 1050 (not the entire 275 tons)
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So the farmer is not excused from failing to deliver the 140 tons of grain to the buyer, but is not forced to pay all of the damages suffered by the dealer – surprising! The dealer loses as well… it’s a lose-lose solution… restitutional measure (“claim for disgorgement(?)”
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Ratio
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In some cases it is unreasonable to compel buyer to accept an odd volume. Can resolve by implying a condition that K shall be wholly discharged, or that where seller is excused buyer has option to accept part delivery.
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Comments
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Farmers make deals all the time to sell their product, and their estimations are often different from their actual produce (e.g. if it’s a bad year, it’s a bad year for everyone price rise, so your K will enforce a lower-than-market price
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But we see that HRSSL has stopped asking for full amount that S grew, even though S promised this much (no reason S couldn’t have gone onto market and purchased the amount he had K’ed to deliver to HRSSL – but a sense that farmers are different from, e.g., speculators who would be held to the full quantity)
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Farmers are seen has having a special economic role – not like other actors; also totally at the mercy of the weather
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Frustration: general term (heading)
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Impossibility: can’t perform – leads to frustration of contract (subheading)
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Hardship: makes performance onerous – also an example of frustration (subheading)
UNIDROIT Principles of International Commercial Contracts: Arts. 6.2.1, 6.2.2, 6.2.3
Section 2 Hardship
Article 6.2.1
Contract to be observed
Where the performance of a contract becomes more onerous for one of the parties, that party is nevertheless bound to perform its obligations subject to the following provisions on hardship.
Article 6.2.2
Definition of hardship
There is hardship where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party’s performance has increased or because the value of the performance a party receives has diminished, and
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the events occur or become known to the disadvantaged party after the conclusion of the contract;
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the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract;
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the events are beyond the control of the disadvantaged party; and
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the risk of the events were not assumed by the disadvantaged party.
Article 6.2.3
Effects of hardship
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In the case of hardship the disadvantaged party is entitled to request renegotiations. The request shall be made without undue delay and shall indicate the grounds on which it is based.
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The request for renegotiation does not in itself entitle the disadvantaged party to withhold performance.
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Upon failure to reach agreement within a reasonable time either party may resort to the court.
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If the court finds hardship it may, if reasonable,
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terminate the contract at a date and on terms to be fixed or
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adapt the contract with a view to restoring its equilibrium
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Restatement (Second) of Contracts §261
Where, after a contract is made, a party’s performance is made impracticable 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 duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
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Principles of European Contract Law
Article 4.102
Initial Impossibility
A contract is not invalid merely because at the time it was concluded performance of the obligation assumed was impossible, or because a party was not entitled to dispose of the assets to which the contract relates.
Excuse Due to an Impediment
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A party’s non-performance is excused if it proves that it is due to an impediment beyond its control and that it could not reasonably have been expected to take the impediment into account at the time of the conclusion of the contract, or to have avoided or overcome the impediment or its consequences.
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Where the impediment is only temporary the excuse provided by this article has effect for the period during which the impediment exists. However, if the delay amounts to a fundamental non-performance, the obligee may treat it as such.
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The non-performing party must ensure that notice of the impediment and of its effect on its ability to perform is received by the other party within a reasonable time after the non-performing party knew or ought to have known of the circumstances. The other party is entitled to damages for any loss…
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