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Missouri Public Service Co. v. Peabody Coal Co.

    Brief Fact Summary.

    Plaintiff contracted to buy coal from Defendant at a fixed price. Defendant, faced with escalating costs due to global economic events and increased government regulation, later sought to renegotiate the price and said it would discontinue shipments if a better agreement was not reached. Plaintiff sued to compel specific performance. The trial court ruled in Plaintiff’s favor. Defendant appealed.

    Synopsis of Rule of Law.

    Delay in delivery or non-delivery in whole or in part by a seller is not a breach of his duty under a contract if performance has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made.

    Facts.

    Peabody Coal Co. (Defendant) entered into a contract with respondent Missouri Public Service Co. (Plaintiff) to supply Plaintiff with coal. When Defendant’s costs escalated sharply, Defendant several times attempted to negotiate a higher price per ton of coal delivered under the contract, but negotiations were unsuccessful. Defendant refused to continue delivering coal. Though it had adequate coal supplies and the ability to perform the contract, Defendant argued that its non-performance was justified because excessive economic loss excused non-performance under the doctrine of commercial impracticability. Plaintiff elected to consider Defendant in anticipatory breach of the contract and sued to compel specific performance. The trial court ordered specific performance and Defendant appealed.

    Issue.

    Whether a party may repudiate a contract if it becomes unprofitable for it to continue performance under the contract.

    Held.

    No. The trial court’s ruling is affirmed. Delay in delivery or non-delivery in whole or in part by a seller is not a breach of his duty under a contract if performance has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made.

    Discussion.

    Anticipatory repudiation occurs when either party repudiates the contract with respect to a performance not yet due, the loss of which will substantially impair the value of the contract to the other. The courts look for overt communication of the intent not to continue with performance. Anticipatory repudiation entitles the other party to sue for specific performance. Defendant argues that its performance was excused because Plaintiff acted in bad faith. Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. Although foreseeable economic trends resulted in loss to Defendant, this does not mean that Plaintiff was not within its right to refuse a price modification to take advantage of a good bargain. Defendant’s final argument is based on commercial impracticability. Delay in delivery or non-delivery in whole or in part by a seller is not a breach of his duty under a contract if performance has been made impracticable by the occurrence of a contingency the nonoccurrence of which was a basic assumption on which the contract was made. Neither increased cost nor a rise or a collapse in the market excuse performance unless some unforeseen contingency alters the essential nature of the performance because these are the types of business risks which business contracts made at fixed prices are intended to cover. Here, the price increase is not occurred by some unforeseeable contingency such as war but by miscalibration of a national price index.


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