Friday, October 5, 2012

Missouri Public Service Co. v. Peabody Coal Co. case brief

Missouri Public Service Co. v. Peabody Coal Co.583 S.W.2d 721

-The coal supplier and the public utility negotiated a contract with an escalation clause based upon the Industrial Commodities Index. Several years into the contract, the coal supplier sought to modify the price term due to economic losses, but the public utility refused. The public utility treated the coal supplier’s notice that it would cease performance as an anticipatory repudiation and obtained a decree of specific performance. On appeal, the coal supplier argued primarily that excuse from performance was lawful under the doctrine of commercially impracticability set forth in Mo. Rev. Stat. § 400.2-615 (1969).
-The court held that venue was proper because the anticipatory breach of contract occurred at meeting held in the county where the public utility filed its suit. The court found no breach of the obligation of good faith imposed on all contracts by Mo. Rev. Stat. § 400-1-203 (1969). The court held that the coal supplier failed to show it was commercially impracticable to perform the contract so as to excuse performance. The divergence between the cost indexes could not be said to be unforeseeable, and the Arab oil embargo was a commonly expected possibility.

Procedural History:
-Appellant coal supplier sought review of a judgment by the Circuit Court of Jackson County (Missouri), which ordered it to specifically perform under its long term contract to supply coal to respondent public utility for the production of electricity.

-The defense of commercial impracticability may be claimed where there is a contingency, the nonoccurence of which was a basic assumption upon which the K was made, and by which occurrence further performance became commercially impracticable.
foreseeability of the future problem and the experience of the parties plays an important role in discovering the basic assumptions
-If you spell out your assumptions in a K such as, “any gross proven inequity that may result in unusual economic conditions not contemplated by the parties can be corrected by arbitration” (Cimaaron), you can bring this to court and perhaps get a specific performance price change. an assumption must be contemplated by both parties, some underling thing to the K.

-The ingredients necessary to establish the claim of “commercial impracticability” are (1) the occurrence of a contingency; (2) the nonoccurrence of which was a basic assumption upon which the contract was made; and (3) by which occurrence further performance has become commercially impracticable.-The doctrine of “commercial impracticability” and central to this concept is that the doctrine may be applicable upon the occurrence of a supervening, unforeseen event not within the reasonable contemplation of the parties at the time the contract was made. Such occurrence must go to the heart of the contract.

The court affirmed the judgment of the lower court.

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