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Contracts • Excuse of Non-Performance
K#144
Legal Definition
If a seller's performance becomes impossible or impracticable, it is discharged only to the extent of the impossibility or impracticability. Shortages of raw materials or crops are sufficient to discharge a seller's duty, but mere cost increases are rarely sufficient, unless they affect the character of the contract.
Plain English Explanation
When it comes to the sale of goods, impossibility and impracticability will only discharge the portion of the contract that is actually affected by the impossibility or impracticability.
Hypothetical
Hypo 1: Sam needs more corn tortillas for his taco cart. He places an order for 1,000 tortillas with Amy who runs a tortilla factory. While making Sam's order, Amy runs out of raw materials. Due to a worldwide pandemic, the price of those raw materials has gone up 30%, which makes it less likely Amy will be able to profit off of Sam's order. Result: Too bad, Amy. Welcome to the world of business. Sometimes market fluctuations happen. Yes, it sucks that prices have gone up and it may end up costing Amy money, but the law doesn't care much. This isn't harsh enough to be impracticability, which would need to be more extreme and burdensome on Amy.
Hypo 2: Sam needs more corn tortillas for his taco cart. He places an order for 1,000 tortillas with Amy who runs a tortilla factory. While making Sam's order, Amy runs out of raw materials. Unfortunately, a fungus has attacked corn crops around the world and, at the moment, there are no sources for raw materials. Amy only made 500 of Sam's tortillas before running out of materials. Result: Amy owes those 500 tortillas to Sam, but impossibility will discharge her obligation to produce the remaining 500.
Hypo 2: Sam needs more corn tortillas for his taco cart. He places an order for 1,000 tortillas with Amy who runs a tortilla factory. While making Sam's order, Amy runs out of raw materials. Unfortunately, a fungus has attacked corn crops around the world and, at the moment, there are no sources for raw materials. Amy only made 500 of Sam's tortillas before running out of materials. Result: Amy owes those 500 tortillas to Sam, but impossibility will discharge her obligation to produce the remaining 500.
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