Brief Fact Summary. Generally, oil shipped between Texas and India travels through the Suez Canal. Two parties contracted to ship oil between these two places, but due to strife in the Middle East, the tanker had to go through the Cape of Good Hope (the "Cape"), which was more expensive and not accounted for in the contract price.
Synopsis of Rule of Law. The doctrine of commercial impracticability will relieve a party of its responsibility to perform if performance "can only be accomplished with extreme and unreasonable difficulty, expense, injury or loss."
Mere increase in cost alone is not a sufficient excuse for non-performance.View Full Point of Law
Issue. Was passage through the Suez Canal the exclusive method by which the Plaintiff was to perform? In other words, was the Plaintiff's obligation conditioned upon the canal being passable?
• Does the doctrine of commercial impracticability apply here?
Held. No. The parties' agreement made no reference to a fixed route. The contract only specified that the cargo was to go from Texas to India at a set rate. The court refused to find that the route through the Suez Canal "was to be the exclusive method of performance". The agreement does not say so and "it seems to have been well understood in the shipping industry that the Cape route is an acceptable alternative in voyages of this character." The fact that the parties thought the route through the Suez Canal was the most probable does not resolve this issue. Neither does the fact that the ATRS rate was based on a Suez Canal passage.
• The doctrine of commercial impracticability will relieve a party of its responsibility to perform if performance "can only be accomplished with extreme and unreasonable difficulty, expense, injury or loss." The court found that there was no "extreme or unreasonable difficulty apparent here." Further, "[m]ere increase in cost alone is not a sufficient excuse for non-performance." There must be an "extreme and unreasonable" expense. The increase in expense here, 1/3 of the contract price is not significant.
Discussion. This case demonstrates that the doctrine of commercial impracticability is not very forgiving in that a 1/3 increase in the parties' contract price is not actionable.