Contracts: Excuse of Performance Based on Later Events: A later unforseen event
- A later unforeseen event that renders the seller’s performance impossible (common law) or impracticable (Article 2) may provide the seller with an excuse for non-performance.
- BAR TIP: Impossibility/impracticability rarely excuses the seller on MBE.
- Destruction of something necessary for performance
- Common Law
- Caldwell leases his hall to Taylor for a concert on June 1. The hall burns down on May 26. Taylor sues Caldwell for breach of contract. Caldwell is excused from performing because destruction of the concert hall makes his performance impossible.
- Article 2 (same general rule, but look out for 2 trick questions)
- Were the goods “identified” to this particular contract?
- Did the buyer bear the risk of loss? (trick question)
- Jerry contracts to sell his Corvette for $26,000. After Jerry tenders the car, but before buyer takes it, a flood destroys the car. Under the risk of loss rules, must Buyer pay for the car? Yes. Jerry is not a merchant here. Risk of loss transferred to buyer when Jerry tendered the car. Buyer has to pay for the contract price.
- S contracts to sell B 100 bales of hay for $800. After the contract, but before the risk of loss has passed to B, fire destroys S’s hay. Is S’s performance excused by the fire? No. Unlike Jerry’s corvette, hay is fungible, not distinctive, and easily replaced. S is not excused from performing.
- Death or incapacity of a person essential for performance – unless there is some evidence that the person who died or became incapacitated had special talents, it will not be an excuse for performance.
- Supervening government regulation or order
- Frustration of purpose (buyer’s remedy)
- Phoebe rents Joe’s apartment for Thanksgiving for its great view of the Macy’s Thanksgiving Day parade. Joe knows why Phoebe is renting his place. The parade is cancelled 2 days before Thanksgiving. Is Phoebe’s performance excused by frustration of purpose? Yes. (1) at the time of the contract, Joe knew what Phoebe’s purpose was. (2) A later unforeseen even thwarts that purpose.
- Phoebe agrees to rent Joe’s store. Joe knows that Phoebe’s purpose in renting the store is to operate a coffee shops. A month later, Starbucks announces that it is operating a coffee shop right next door. Is Phoebe’s performance excused by frustration of purpose. No. Phoebe can still open up a coffee shop. Mere lack of profits is not enough to arise to rise to level of frustration of purpose.