Dougherty v. Salt 125 N. E. 94 (1919)

The advantage to Hochster of treating De La Tour’s announcement that he will not employ Hochster is that Hochster can immediately earn money by obtaining other employment and need not wait for June 1, then sue, and eventually recover damages.

 

(a) True

 

(b) False

It seems strange that the defendant, after renouncing the contract, and absolutely declaring that he will never act under it, should be permitted to object that faith is given to his assertion, and that an opportunity is not left to him of changing his mind.

The court’s point is that it was rational Hochster to rely on De La Tour’s assertion that he would not employ Hochster on June 1. 

 

(b) False

If the plaintiff is barred of any remedy by entering into an engagement inconsistent with starting as a courier with the defendant on the 1st of June, he is prejudiced by putting faith in the defendant's assertion: and it would be more consonant with principle, if the defendant were precluded from saying that he had not broken the contract when he declared that he entirely renounced it.

. . . The man who wrongfully renounces a contract into which he has deliberately entered cannot justly complain if he is immediately sued for a compensation in damages by the man whom he has injured; and it seems reasonable to allow an option to the injured party, either to sue immediately, or to wait till the time when the act was to be done, still holding it as prospectively binding for the exercise of this option, which may be advantageous to the innocent party, and cannot be prejudicial to the wrongdoer.

. . .

Judgment for plaintiff.

A party’s breach is only excuses the obligations of the other party if the breach is a material breach. 

The court, therefore, must regard De La Tour’s refusal to employ Hochster as a material breach.

 

(a) True

 

(b) False

Hathaway v. Sabin
22 A. 633 (Vt. 1891)

Munson, J.

The plaintiff declares as "George H. Hathaway, doing business under the name of the 'Redpath Lyceum Bureau.'" . . .

The contract required the defendant to furnish a hall for the concert, and to pay $75 after the entertainment. The plaintiff alleged readiness to perform on his part, and assigned as the breach the defendant's failure to furnish a hall. The court directed a verdict for the plaintiff for $75 and interest. . . . The plaintiff was ready to give the concert, and on giving it would have been entitled to the $75, but he was prevented from giving it by the defendant's failure to furnish a hall. . . .

The defendant . . . contends that he was excused from opening and heating the hall by the apparent impossibility of the musicians' reaching the town. During the 36 hours preceding the evening appointed for the concert a snow-storm of unusual violence prevailed in Montpelier and vicinity which early on the day of the concert rendered the streets of that village and the roads from the surrounding country practically impassable. The quartette by which the concert was to be given was in Barre, having gone from Montpelier the evening before, and trains on the spur from Montpelier to Barre were suspended. Late in the afternoon, however, an irregular train went to Barre, and on this the musicians returned to Montpelier, arriving early in the evening, and going to the hall at the time appointed. It is claimed that the defendant's conduct must be tested by the situation as it was at the time when action on his part became necessary, and that he is saved from liability by the doctrine that, when one party ascertains that the other will not be able to perform what he has undertaken, the party ascertaining this is excused from performing the obligations resting upon him. It is doubtless true that, when one party has put it out of his power to perform, the other party can maintain an action without having tendered performance on his part. But a party who becomes involved in difficulties for which he is not responsible, if ultimately able to perform, is not to be deprived of the benefits of his contract because of an assumption by the other party that the difficulties would prove insurmountable.

The court does not distinguish between reasonable and unreasonable assumptions that “the difficulties would prove insurmountable.”

(a) True

(b) False

Here the defendant was mistaken in supposing that the plaintiff would not be able to perform, and we know of no rule which permits him to plead reasonable cause to believe so in excuse for the failure on his part.  It is apparent, also, that the defendant's course was determined before the time when action on his part became necessary. It was not necessary to commence the heating of the hall until 4 o'clock in the afternoon, but about 10 o'clock in the forenoon the defendant telephoned the manager that, owing to the condition of the streets in Montpelier, it would be impossible to have the entertainment that evening.

The court’s point is that the defendant’s timing was unreasonable. 

The defendant’s assumption that the musicians would not arrive might have been reasonable even though he was unreasonable in not waiting until 4:00 pm to see if that assumption was mistaken.

(a) True

It is evident from this that the defendant based his action upon his belief that there would be no audience, rather than upon the supposition that the musicians could not reach the place of entertainment.  He did not wait until it was necessary to take action about the hall before deciding that there could be no concert. But, at the time when action on his part became necessary, there was nothing in the situation which could relieve him from liability. The contract contains no provision for his protection from such a misfortune, and the loss must fall on him.

. . .

Judgment affirmed.

In the Queen's Bench, 1863.

Blackburn, J.

        In this case the plaintiffs and defendants had, on May 27th, 1861, entered into a contract by which the defendants agreed to let the plaintiffs have the use of The Surrey Gardens and Music Hall on four days then to come, viz., June 17th, July 15th, August 5th, and August 19th, for the purpose of giving a series of four grand concerts, and day and night fetes, at the Gardens and Hall on those days respectively; and the plaintiffs agreed to take the Gardens and Hall on those days, and pay £100 for each day.

        . . . The agreement then proceeds to set out various stipulations between the parties as to what each was to supply for these concerts and entertainments, and as to the manner in which they should be carried on. The effect of the whole is to show that the existence of the Music Hall in the Surrey Gardens in a state fit for a concert was essential for the fulfillment of the contract, such entertainments as the parties contemplated in their agreement could not be given without it.

        After the making of the agreement, and before the first day on which a concert was to be given, the Hall was destroyed by fire. This destruction, we must take it on the evidence, was without the fault of either party, and was so complete that in consequence the concerts could not be given as intended. And the question we have to decide is whether, under these circumstances, the loss which the plaintiffs have sustained is to fall upon the defendants. [The damages claimed in the declaration were for moneys paid by the plaintiffs in advertising the concerts and for sums expended and expenses incurred by them in preparing for the concerts.] The parties--when framing their agreement evidently had not present to their minds the possibility of such a disaster, and have made no express stipulation with reference to it, so that the answer to the question must depend upon the general rules of law applicable to such a contract.

        There seems no doubt that where there is a positive contract to do a thing, not in itself unlawful, the contractor must perform it or pay damages for not doing it, although in consequence of unforeseen accidents the performance of his contract has become unexpectedly burdensome or even impossible. . . . But this rule is only applicable when the contract is positive and absolute, and not subject to any condition either express or implied;

If Jones promises to sell his boat to Smith on the condition that Smith pay $30,000 by Tuesday, Jones has not obligation to sell if Smith fails to pay $30,000 by Tuesday. 

An unconditional obligation is what the court means by a "positive and absolute" one.  It contrasts this with a conditional obligation that only binds the promisor if the condition is fulfilled.

 

(a) Yes

 

(b) No

and there are authorities which, as we think, establish the principle that where, from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless when the time for the fulfillment of the contract arrived some particular specified thing continued to exist, so that, when entering into the contract, they must have contemplated such continuing existence as the foundation of what was to be done; there, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract, but as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor.

The court's view is that the owner of the hall promised the concert promoter the use of the hall

 

(a) unconditionallly.

 

(b) on the condition that the hall exist at the time for the performances.

        There seems little doubt that this implication tends to further the great object of making the legal construction such as to fulfill the intention of those who entered into the contract. For in the course of affairs men in making such contracts in general would, if it were brought to their minds, say that there should be such a condition....

        We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things. Consequently the rule must be absolute to enter the verdict for the defendants.

        Rule absolute.
 

Transatlantic Financing Corp. v. United States

363 F.2d 312 (D.C. Cir. 1966)

J. Skelly Wright, Circuit Judge:

This appeal involves a voyage charter between Transatlantic Financing Corporation, operator of the SS CHRISTOS, and the United States covering carriage of a full cargo of wheat from a United States Gulf port to a safe port in Iran. The District Court dismissed a libel filed by Transatlantic against the United States for costs attributable to the ship's diversion from the normal sea route caused by the closing of the Suez Canal. We affirm.

On July 26, 1956, the Government of Egypt nationalized the Suez Canal Company and took over operation of the Canal. On October 2, 1956, during the international crisis which resulted from the seizure, the voyage charter in suit was executed between representatives of Transatlantic and the United States. The charter indicated the termini of the voyage but not the route. On October 27, 1956, the SS CHRISTOS sailed from Galveston for Bandar Shapur, Iran, on a course which would have taken her through Gibraltar and the Suez Canal. On October 29, 1956, Israel invaded Egypt. On October 31, 1956, Great Britain and France invaded the Suez Canal Zone. On November 2, 1956, the Egyptian Government obstructed the Suez Canal with sunken vessels and closed it to traffic.

On or about November 7, 1956, Beckmann, representing Transatlantic, contacted Potosky, an employee of the United States Department of Agriculture, who appellant concedes was unauthorized to bind the Government, requesting instructions concerning disposition of the cargo and seeking an agreement for payment of additional compensation for a voyage around the Cape of Good Hope. Potosky advised Beckmann that Transatlantic was expected to perform the charter according to its terms, that he did not believe Transatlantic was entitled to additional compensation for a voyage around the Cape, but that Transatlantic was free to file such a claim. Following this discussion, the CHRISTOS changed course for the Cape of Good Hope and eventually arrived in Bandar Shapur on December 30, 1956. 

Transatlantic's claim is based on the following train of argument. The charter was a contract for a voyage from a Gulf port to Iran. Admiralty principles and practices, especially stemming from the doctrine of deviation, require us to imply into the contract the term that the voyage was to be performed by the "usual and customary" route. The usual and customary route from Texas to Iran was, at the time of contract, via Suez, so the contract was for a voyage from Texas to Iran via Suez. When Suez was closed this contract became impossible to perform. Consequently, appellant's argument continues, when Transatlantic delivered the cargo by going around the Cape of Good Hope, in compliance with the Government's demand under claim of right, it conferred a benefit upon the United States for which it should be paid in quantum meruit

The doctrine of impossibility of performance has gradually been freed from the earlier fictional and unrealistic strictures of such tests as the "implied term" and the parties' "contemplation.". . . It is now recognized that "'A thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.'" . . . RESTATEMENT, CONTRACTS § 454 (1932); UNIFORM COMMERCIAL CODE (U.L.A.) § 2-615, comment 3. The doctrine ultimately represents the ever-shifting line, drawn by courts hopefully responsive to commercial practices and mores, at which the community's interest in having contracts enforced according to their terms is outweighed by the commercial senselessness of requiring performance.  When the issue is raised, the court is asked to construct a condition of performance based on the changed circumstances, a process which 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.

 

(a) addresses such cases.

 

(b) does not address such cases.

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.

The first requirement was met here. It seems reasonable, where no route is mentioned in a contract, to assume the parties expected performance by the usual and customary route at the time of contract. Since the usual and customary route from Texas to Iran at the time of contract was through Suez, closure of the Canal made impossible the expected method of performance. But this unexpected development raises rather than resolves the impossibility issue, which turns additionally on whether the risk of the contingency's occurrence had been allocated and, if not, whether performance by alternative routes was rendered impracticable.

Proof that the risk of a contingency's occurrence has been allocated may be expressed in or implied from the agreement. Such proof may also be found in the surrounding circumstances, including custom and usages of the trade. . . .

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. 

Now the court treats custom as just one possible “surrounding circumstance” that may be relevant to determining how the risk was assigned.

 

(a) True

 

(b) False

The contract in this case does not expressly condition performance upon availability of the Suez route. Nor does it specify "via Suez" or, on the other hand, "via Suez or Cape of Good Hope." Nor are there provisions in the contract from which we may properly imply that the continued availability of Suez was a condition of performance. Nor is there anything in custom or trade usage, or in the surrounding circumstances generally, which would support our constructing a condition of performance. . . . The doctrine of deviation supports our assumption that parties normally expect performance by the usual and customary route, but it adds nothing beyond this that is probative of an allocation of the risk

If anything, the circumstances surrounding this contract indicate that the risk of the Canal's closure may be deemed to have been allocated to Transatlantic. We know or may safely assume that the parties were aware, as were most commercial men with interests affected by the Suez situation, . . . that the Canal might become a dangerous area. No doubt the tension affected freight rates, and it is arguable that the risk of closure became part of the dickered terms. UNIFORM COMMERCIAL CODE § 2-615, comment 8.

The argument the court is considering is that, since Transatlantic was aware of the risk of the canal’s closure at the time of contracting, the contract should be interpreted as assigning that risk to Transatlantic. 

 

(b) False

We do not deem the risk of closure so allocated, however.  Foreseeability or even recognition of a risk does not necessarily prove its allocation.  Compare UNIFORM COMMERCIAL CODE § 2-615, Comment 1; RESTATEMENT, CONTRACTS § 457 (1932). Parties to a contract are not always able to provide for all the possibilities of which they are aware, sometimes because they cannot agree, often simply because they are too busy.

The court’s point is that foreseeability of a risk

 

(a) necessarily implies agreement on which party should bear that risk.

 

(b) does not necessarily imply agreement on which party should bear that risk.

Moreover, that some abnormal risk was contemplated is probative but does not necessarily establish an allocation of the risk of the contingency which actually occurs. In this case, for example, nationalization by Egypt of the Canal Corporation and formation of the Suez Users Group did not necessarily indicate that the Canal would be blocked even if a confrontation resulted. The surrounding circumstances do indicate, however, a willingness by Transatlantic to assume abnormal risks, and this fact should legitimately cause us to judge the impracticability of performance by an alternative route in stricter terms than we would were the contingency unforeseen.

We turn then to the question whether occurrence of the contingency rendered performance commercially impracticable under the circumstances of this case. The goods shipped were not subject to harm from the longer, less temperate Southern route. The vessel and crew were fit to proceed around the Cape. Transatlantic was no less able than the United States to purchase insurance to cover the contingency's occurrence. If anything, it is more reasonable to expect owner-operators of vessels to insure against the hazards of war. They are in the best position to calculate the cost of performance by alternative routes (and therefore to estimate the amount of insurance required), and are undoubtedly sensitive to international troubles which uniquely affect the demand for and cost of their services.

The point is that, between Transatlantic and the United States, the former is in the best position to protect itself through insurance against losses causes by the closure of the Suez Canal.

 

(a) Yes

 

(b) No

The only factor operating here in appellant's favor is the added expense, allegedly $43,972.00 above and beyond the contract price of $305,842.92, of extending a 10,000 mile voyage by approximately 3,000 miles. While it may be an overstatement to say that increased cost and difficulty of performance never constitute impracticability, to justify relief there must be more of a variation between expected cost and the cost of performing by an available alternative than is present in this case, where the promisor can legitimately be presumed to have accepted some degree of abnormal risk, and where impracticability is urged on the basis of added expense alone.

We conclude, therefore, as have most other courts considering related issues arising out of the Suez closure, that performance of this contract was not rendered legally impossible. Even if we agreed with appellant, its theory of relief seems untenable. When performance of a contract is deemed impossible it is a nullity. In the case of a charter party involving carriage of goods, the carrier may return to an appropriate port and unload its cargo, The Malcolm Baxter, Jr., 277 U.S. 323, 48 S. Ct. 516, 72 L. Ed. 901 (1928), subject of course to required steps to minimize damages. If the performance rendered has value, recovery in quantum meruit for the entire performance is proper. But here Transatlantic has collected its contract price, and now seeks quantum meruit relief for the additional expense of the trip around the Cape. If the contract is a nullity, Transatlantic's theory of relief should have been quantum meruit for the entire trip, rather than only for the extra expense. Transatlantic attempts to take its profit on the contract, and then force the Government to absorb the cost of the additional voyage. When impracticability without fault occurs, the law seeks an equitable solution, . . . and quantum meruit is one of its potent devices to achieve this end. There is no interest in casting the entire burden of commercial disaster on one party in order to preserve the other's profit. Apparently the contract price in this case was advantageous enough to deter appellant from taking a stance on damages consistent with its theory of liability. In any event, there is no basis for relief.