Transatlantic Financing Corp. v. US case brief

Transatlantic Financing Corp. v. US; (DC Ct of Appeals, 1966); CB 1027; Notes 64

Impracticability
• Facts: K for shipping from Texas to Iran through “usual and customary route”, the Suez Canal, war breaks out, D claims impossibility of performance, new route costs 15% more.
• Terms: contract for shipment of goods from Texas to Iran; custom was to go via Suez Canal (contract price based on this); Suez Canal gets shut down; P takes alternative more expensive route without Ds permission. P claims quantum meruit because contract had become impracticable; they are seeking the value of what they did even though it wasn’t what was agreed to.
• Holding: Court says alternate route is not impracticable. Court holds that P can only recover what was agreed since contract was void. Court uses a three-prong test for impracticability:
• 3 step approach to invoke excuse of impracticability:

1. Some anticipated event must occur/unexpected change in circumstances;

2. Risk of the unexpected occurrence hadn’t been negotiated, parties did not agree about “what should we do if this happens”

3. Any alternative was so outside of parties anticipation, it would be unreasonable to expect them to perform it. occurrence of unintended circumstances renders performance impracticable. (in this case the court held that this was not commercially impracticable)