1. 1 George Mason School of Law Contracts II Mistake This file may be downloaded only by registered students in my class, and may not be shared by them F.H. Buckley fbuckley@gmu.edu

2. Mistake and Impossibility  An regret contingency occurs: what are the possibilities? 2

3. Mistake and Impossibility  An regret contingency occurs: what are the possibilities? Both parties want out and write a termination agreement 3

4. Mistake and Impossibility  An regret contingency occurs: what are the possibilities? One party only wants out and argues:  Breach by the other party  Condition precedent, mistake, frustration 4

5. What are the possibilities?  So when should the event give rise to liability by one of the parties  See last day on least-cost risk-bearing 5

6. What are the possibilities?  So when should the event put an end to obligations under the contract, without any liability? 6

7. Catastrophic Events  Force majeure clause  A party is not liable for failure to perform the party's obligations if such failure is as a result of Acts of God (including fire, flood, earthquake, storm, hurricane or other natural disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is declared), civil war, rebellion, revolution, insurrection, military or usurped power or confiscation, terrorist activities, nationalization, government sanction, blockage, embargo, labor dispute, strike, lockout or interruption or failure of electricity or telephone service, or change in government regulations which makes performance of obligations under this contract impracticable. 7

8. Catastrophic Events  Force majeure clause Why no least cost risk avoiders here? 8

9. Catastrophic Events  Force majeure clause Why no least cost risk avoiders here?  No one can efficiently reduce the risk  No one is better able to evaluate risk  Risk not diversifiable 9

10. Express and Implied Excuses  Conditions precedent (subsequent)  Mistake  Impracticability, Impossibility, Frustration 10

11. Mistake and Impossibility 11 Time Formation of Contract

12. Mistake and Impossibility 12 Time Formation of Contract Mistake, Condition Precedent

13. Mistake and Impossibility 13 Time Formation of Contract Mistake, Condition Precedent Impossibility, Impracticability Frustration, Condition Subsequent

14. How to tell them apart? 14 Time Formation of Contract Mistake, Condition Precedent Impossibility, Impracticability Frustration, Condition Subsequent Cf. Restatement § 152, comment b

15. How to tell them apart?  A horse is sold for breeding purposes. Unknown to the parties, the horse is sterile. This is only discovered later. Mistake or Frustration? 15

16. How to tell them apart?  A supply contract bases prices on production costs, according to a cost index based on historical experience. Subsequently prices rise unexpectedly. Mistake or Frustration? 16

17. Who is mistaken?  Mutual Mistake: Both parties  Unilateral Mistake: one party only 17

18. What kind of an event voids a contract?  Error as to identity  Error as to substance  Error which has a material effect on the exchange value of the contract 18

19. Error as to Identity  Raffles v. Wichelhaus at 712 19 Peerless IPeerless II

20. Error as to Identity  Raffles v. Wichelhaus Was there any way to enforce this? 20

21. Error as to Identity  Raffles v. Wichelhaus Was there any way to enforce this?  Restatement 20(1)(a), illustration 2 21

22. Error as to Identity  What if both had meant the same ship?  Illustration 1 22

23. Error as to Identity  What if objectively it was clear that the contract referred to a particular ship, but one party is mistaken? 23

24. Error as to Identity  What if objectively it was clear that the contract referred to a particular ship, but one party is mistaken? 20(1)(a): “has reason to know” 24

25. Error as to Identity  What if both parties know of the other’s mistake? 20(1)(b), Illustration 2 25

26. Error as to Identity  What if one party is mistaken and the other party knows of his mistake? 20(2)(a), Illustration 3 26

27. Error as to Identity  Restatement §20 Mutual mistake: 20(1) Unilateral mistake: 20(2) 27

28. Error as to Identity  What if one party is mistaken and the other party knows of his mistake? What’s the logic behind this? 28

29. Error as to Identity of a party  Farmer Macdonald sells his farm to McInerney. Macdonald thinks that McInerney is a principal, but in reality he is an agent for Texas Gulf Sulfur. If TGS had revealed its identity, Macdonald would have realized that there were minerals under his land. 29

30. Error as to Identity  Farmer Macdonald sells his farm to McInerney. Macdonald thinks that McInerney is a principal, but in reality he is an agent for Texas Gulf Sulfur. If TGS had revealed its identity, Macdonald would have realized that there were minerals under his land. Restatement § 153, comment g on undisclosed principals 30

31. 31 George Mason School of Law Contracts II Mistake This file may be downloaded only by registered students in my class, and may not be shared by them F.H. Buckley fbuckley@gmu.edu

32. Next week  Finish Mistake  Excuse (plus Scott 84-93)  Frustration 32

33. Regret contingencies  When should the event put an end to obligations under the contract, without any liability, at the option of one party? 33

34. How to tell them apart? The traditional view 34 Time Formation of Contract Mistake, Condition Precedent Impossibility, Impracticability Frustration, Condition Subsequent Cf. Restatement § 152, comment b

35. Mistakes Who is mistaken?  Mutual Mistake: Both parties  Unilateral Mistake: one party only 35

36. Mutual Mistake  Kinds of mistakes: Both parties make the same mistake: Bargaining over a ship that has sunk Parties at cross-purposes: I sell you Rose 2d and you think you’ve bought Rose 3d 36

37. What kind of an event voids a contract?  Error as to identity  Error as to substance  Error which has a material effect on the exchange value of the contract 37

38. Error as to Substance 38

39. Error as to Substance: Sherwood v. Walker at 712 39 Hiram Walker Rose

40. Another Hiram Walker product 40 Hiram Walker Canadian Club

41. 41

42. Aberlone, Rose of By Brainerd Currie 42 'T is the middle of night before the exam, And there's nothing to eat but a cold bit of ham. A dismal specter haunts this wake-- The law of mutual mistake; … In many a hypothetical With characters alphabetical, In many a subtle and sly disguise There lurks the ghost of her sad brown eyes. That she will turn up in some set of facts is Almost as certain as death and taxes: For students of law must still atone For the shame of Rose of Aberlone.

43. Sherwood v. Walker 43  Was there a mistake?

44. Sherwood v. Walker 44  What is a “basic assumption” in 152- 53? Substance of the thing vs. quality or accident  Error in substantibus  Error going to “the root of the matter”

45. Sherwood v. Walker 45 Barren Cow  What is Rose’s essence: “cowness” or “barren cowness” Fertile Cow

46. Mutual Mistake  Restatement § 152 Has a material effect on the agreed exchange Comment c: resulting imbalance is so severe that he cannot fairly be required to carry it out Is that the case here? 46

47. Sherwood v. Walker 47  Did the mistake have a material effect on the exchange of performances? [(1420-50)*0.055 =] $75.35 vs. about $875

48. Sherwood v. Walker 48 Barren Cow  Assumption of risk: Was Walker in a better position to know the condition of the cow? Fertile Cow

49. Sherwood v. Walker 49  Should the onus have been on the seller to specify a condition subsequent?

50. Qu. Backus v. MacLaury p. 729 50  Why no mistake here?

51. Qu. Backus v. MacLaury p. 729 51  No mistake: Buyer realized the calf might be sterile and took the risk

52. Qu. Backus v. MacLaury p. 729 52  No mistake: Buyer realized the calf might be sterile and took the risk How was this different from Hiram Walker?  No one took the risk that Rose was fertile

53. Qu. Backus v. MacLaury p. 729 53  No mistake: Buyer realized the calf might be sterile and took the risk How was this different from Hiram Walker?  Was there more of an assumption of risk here?

54. Unilateral Mistake  Restatement § 153  Mistake of both as to a basic assumption  Has a material effect on the agreed exchange  Parties did not agree that one would bear the risk  Either unconscionability or unilateral 54

55. Unilateral Mistake  Distinguish two cases: Class A Unilateral Mistake  A is mistaken and B is unaware of the mistake: unconscionability needed 55

56. Unilateral Mistake  Distinguish two cases: Class A Unilateral Mistake  A is mistaken and B is unaware of the mistake: unconscionability needed Class B Unilateral Mistake  A is mistake and B is aware of the mistake: unconscionability not needed 56

57. Anderson v. O’Meara 718 57 Seller sells submarine trenching equipment

58. Anderson v. O’Meara 718 58 Buyer thinks he’s buying a Sweep Dredge

59. Anderson v. O’Meara 59  The District Court found a mutual mistake. Why did the Circuit Court disagree?

60. Anderson v. O’Meara 60  Was there a unilateral mistake? And of what type, in my classification?

61. Anderson v. O’Meara 61  Was there a unilateral mistake? And of what type, in my classification?

62. Anderson v. O’Meara 62  Was there a unilateral mistake? And of what type, in my classification?  Class A: unconscionability needed

63. Anderson v. O’Meara 63  Would it be unconscionable to hold buyer to the contract?

64. Anderson v. O’Meara 64  So why was the contract upheld? Seller didn’t know what it was to be used for Buyer should have communicated the purpose Who was the least cost risk avoider?

65. Duty to Investigate 65  Gartner p. 727 Did one person have a special duty to investigate?

66. Duty to Investigate 66  Winkelmans v. Erwin p. 729 How would you decide this? Mutual or unilateral?

67. Duty to Investigate 67  Winkelmans v. Erwin p. 729 Did one person have a special duty to investigate? Was Thompson the agent of the seller? And did the buyers reasonably rely on her?

68. Duty to Investigate 68  Winkelmans v. Erwin p. 729 How would you decide this? Held: Mistake

69. Duty to Investigate 69  Jeselsohn p. 729 Held: mutual mistake  The buyer could not have discovered the error by consulting the registry of deeds

70. Unilateral Clerical Mistakes 70  Elsinore at 728

71. Unilateral Clerical Mistakes 71  Elsinore at 728 Does it matter that the error was only $3K on a $90K bid  Cf. Restatement §§ 152, comment c and 153, comment d

72. Unilateral Clerical Mistakes 72  Elsinore at 728 Does it matter that the error was only $3K on a $90K bid Does it matter that the bidder notified the school board the next day?

73. “As is” clauses  Messerly at p. 725 73

74. Unilateral Mistakes: Irmen v. Wrzesinski at 724 74 $349 on E-Bay

75. Irmen v. Wrzesinski 75  Can the doctrine of unilateral mistake be a rule of economic inefficiency?  How is this case like Laidlaw v. Organ?

76. Irmen v. Wrzesinski 76  How is this case like Laidlaw v. Organ?  Note that the seller has every incentive to acquire the information, as he can command a higher price if he reveals it.  While the buyer can only profit from the info he acquires if he is permitted to be silent.

77. Irmen v. Wrzesinski 77  So when does forcing information through the doctrine of unilateral mistake serve efficiency goals?

78. Irmen v. Wrzesinski 78  Does it matter what the buyer believes?  Buyer believes that the seller is ignorant of the card’s value and is selling it for $12  Buyer believes that the seller is aware of the card’s value and is selling it for $1200

79. Irmen v. Wrzesinski 79  Does it matter what the buyer believes?  Buyer believes that the seller is ignorant of the card’s value and is selling it for $12  Buyer believes that the seller is aware of the card’s value and is selling it for $1200  A Class A or Class B unilateral mistake?

80. 80 George Mason School of Law Contracts II Mistake This file may be downloaded only by registered students in my class, and may not be shared by them F.H. Buckley fbuckley@gmu.edu

81. Next day  Finish Impracticability and Frustration 81

82. What kind of an event voids a contract?  Error as to identity Restatement § 20  Error as to substance Hiram Walker, Anderson  Error which has a material effect on the exchange value of the contract 82

83. Mutual Mistake: Alcoa 730  What was the deal? 83

84. Mutual Mistake: Alcoa  What was the deal? Alcoa to convert alumina (aluminum oxide) for Essex EssexAlcoa 84 Alumina Aluminum

85. Mutual Mistake: Alcoa  How was the pricing arrived at? 85 You can’t lose, Alcoa. Believe me!

86. Mutual Mistake: Alcoa  How was the pricing arrived at? 86 And since housing prices can only go up, we need low interest rates so the improvident can buy second homes

87. Mutual Mistake: Alcoa  How was the pricing formula arrived at? 87

88. Mutual Mistake: Alcoa  How was the pricing arrived at? 88 Of course, we all know that the future will resemble the past Non-labor production cost = 0.03/lb. +/- 0.03

89. Mutual Mistake: Alcoa  What happened to non-labor costs? 89

90. So what happened to oil prices in 1977? 90

91. Mutual Mistake: Alcoa  Why did Essex want the supply of aluminum? 91

92. Mutual Mistake: Alcoa  Why did Essex want the supply of aluminum  And what did it end up doing with the aluminum it bought? 92

93. Mutual Mistake: Alcoa  Why did Essex want the supply of aluminum  And what did it end up doing with the aluminum it bought? Was this prohibited by the contract?  What if this had been seen as a requirements contract under 2-306? 93

94. Mutual Mistake: Alcoa  Why did Essex want the supply of aluminum  And what did it end up doing with the aluminum it bought? Was this prohibited by the contract?  Cf. quantities on p. 732 94

95. Mutual Mistake: Alcoa  What was the mutual mistake, if any? Basic assumption or material effect or both? 95

96. Mutual Mistake: Alcoa  What was the mutual mistake, if any? A “present actuarial error or a mistake as to the future? Restatement § 151  How would you state this as a present “fact”  Should it matter which it is? 96

97. Mutual Mistake: Alcoa  What was the mutual mistake, if any? A “present actuarial error or a mistake as to the future?  Is Leasco different? 97

98. Mutual Mistake: Alcoa  Did Alcoa assume the risk? 98

99. Mutual Mistake: Alcoa  Did Alcoa assume the risk? Express language Trade custom Implied term: 739 “conscious ignorance of the facts”: a calculated gamble 99

100. Mutual Mistake: Alcoa  Did Alcoa assume the risk?  How would you have drafted the contract on Alcoa’s behalf? 100

101. Mutual Mistake: Alcoa  Did Alcoa assume the risk?  How would you have drafted the contract on Alcoa’s behalf? Essex put in a price cap, so why didn’t Alcoa put in a cost cap? 101

102. Mutual Mistake: Alcoa  Did Alcoa assume the risk?  How would you have drafted the contract on Alcoa’s behalf? A Gross Inequity clause: Beaver Creek at 775 infra 102

103. Mutual Mistake: Alcoa  Did Alcoa assume the risk?  How would you have drafted the contract on Alcoa’s behalf? Recitals: Whereas Essex seeks a supply of aluminum for its own use; and whereas both parties seek to be protected against price and cost fluctuations… 103

104. How do you think the parties would bargain to allocate such risks?  What about the inclusio unius canon?  Or the contra proferentem canon?: 740-41 104

105. Mutual Mistake: Alcoa  What kind of a remedy? Why wasn’t rescission ordered? 105

106. Mutual Mistake: Alcoa  What kind of a remedy? Reformation: how was the new price arrived at? 106

107. Mutual Mistake: Alcoa  What kind of a remedy? The practice of foreign countries p. 744  Split the difference?  How does “fairness” cut? 107

108. How many contracts do you think were affected by the oil crisis 108

109. How do you think the parties would bargain to allocate such risks?  What about the case where no one could have foreseen the problem? 109

110. When is a mistake a mistake: Atlas 745 110 Atlas Corp. uranium “tailings” pile

111. When is a mistake a mistake  What was the “mistake”? 111

112. When is a mistake a mistake  What was the “mistake”? That the health hazard was much greater than had been thought And why wasn’t that a mistake at law? 112

113. When is a mistake a mistake  What was the “mistake”? That the health hazard was much greater than had been thought And why wasn’t that a mistake at law?  A mistake is a mistaken belief about an existing fact: Alcoa, Restatement § 151  But there is no mistaken belief about a fact whose existence was not known. 113

114. When is a mistake a mistake  What was the “mistake”? That the health hazard was much greater than had been thought And why wasn’t that a mistake at law?  Is this a sensible distinction, in terms of risk allocation? 114

115. When is a mistake a mistake  What was the “mistake”? That the health hazard was much greater than had been thought And why wasn’t that a mistake at law?  Is this a sensible distinction, in terms of risk allocation? Which looks more like a mistake as to a basic assumption? 115

116. When is a mistake a mistake  What was the “mistake”? Did the court get it right, in any event? 116

117. Mistake vs. Impracticability and Frustration 117

118. The traditional understanding 118 Time Formation of Contract Mistake Impossibility, Impracticability Frustration Cf. Restatement § 152, comment b

119. The evolution  From strict liability to impossibility and frustration  From impossibility to impracticability  Blurring the timing question 119

120. Blurring the timing question  After the contract is made Restatement § 261 Restatement § 262: death Restatement § 263: destruction Restatement § 264: Govt reg. Restatement § 265: Frustration 120

121. Blurring the timing question  Before the contract is made Restatement § 266(1): Impracticability Restatement § 266(2): Frustration Restatement § 152-53: Mistake 121

122. The Restatement understanding 122 Time Formation of Contract Mistake Impracticability Frustration Impracticability Frustration Cf. Restatement § 152, comment b

123. So what is the difference?  Mistake 152-53: Basic Assumption, material effect on exchange  Impracticability 261, 266: Impracticable, Basic assumption  Frustration 265, 266: Principal purpose substantially frustrated, basic assumption 123

124. From Strict Liability to Impossibility 124

125. From Strict Liability to Impossibility  Just what is impossibility?  Paradine  Stees 125

126. An Impossibility Defense Succeeds Taylor v. Caldwell p. 84 126 Surrey Gardens Music Hall

127. Taylor v. Caldwell  On the program: On the program: 35-40 piece military band fireworks a wizard tight rope performances Parisian games (?!?) 127

128. Taylor v. Caldwell  In what sense was performance impossible (as compared to Paradine?) 128

129. Taylor v. Caldwell  The birth of the frustration doctrine 129

130. Taylor v. Caldwell  Of the fire: Blackburn: men would say, if it were brought to their minds, that there should be such a condition And why is that? 130 Lord Blackburn

131. Taylor v. Caldwell  What contractual gains were lost because of the fire? 131

132. Taylor v. Caldwell  What contractual gains were lost because of the fire? Licensor loses license fee of £400 Licensee loses gross profits less rent 132

133. Taylor v. Caldwell  What possible allocation of risks can you imagine? 133

134. Taylor v. Caldwell  What possible allocation of risks can you imagine? Licensee takes risk and owes Licensor £400 for the license fee: Paradine 134

135. Taylor v. Caldwell  What possible allocation of risks can you imagine? Licensee takes risk and owes Licensor £400 for the license fee: Paradine Licensor takes risk and owes lessee damages for foregone net profits 135

136. Taylor v. Caldwell  What possible allocation of risks can you imagine? Licensee takes risk and owes Licensor £400 for the license fee: Paradine Licensor takes risk and owes lessee damages for foregone net profits Frustration: neither recovers anything 136

137. Taylor v. Caldwell  What possible allocation of risks can you imagine? Frustration: neither recovers anything  Why might this be the efficient result? 137

138. Taylor v. Caldwell  What possible allocation of risks can you imagine? Frustration: neither recovers anything  Why might this be the efficient result?  Who is in the best position to value the cost of the lost rental? 138

139. Taylor v. Caldwell  What possible allocation of risks can you imagine? Frustration: neither recovers anything  Why might this be the efficient result?  Who is in the best position to value the lost profits from the performance? P*L 139

140. Taylor v. Caldwell  What possible allocation of risks can you imagine? Frustration: neither recovers anything  Why might this be the efficient result? Licensor is the best person to measure risk of fire and licensee is the best person to determine lost profits 140

141. 141 1.Where one party is better able to reduce the risk or the harm 2.Where one party is better able to value the loss 3.Assuming risk aversion, where one party is wealthier than the other 4.Assuming risk aversion, where one party is a better insurer because he can diversify the risk Four kinds of Least-Cost Risk Avoiders

142. The expansion of excuses  A person who promises to do something which turns out to be impossible can always be held liable in damages, if he takes the risk  But not if the contract is frustrated 142

143. The expansion of excuses  And the modern rule is based on a more generous standard of impracticability, not impossibility 143

144. Carroll v. Bowerstock p. 756  Is this consistent with either Stees or Taylor? 144

145. Carroll v. Bowerstock p. 756  Is this consistent with either Stees or Taylor? Cf. the “work before pay” rule of Stewart v. Newbury at 626 and Restatement § 234(2) 145

146. Carroll v. Bowerstock p. 756  Is this consistent with either Stees or Taylor? Is the test on 757 consistent with the doctrine of unjust enrichment? 146

147. Carroll v. Bowerstock p. 756  Is this consistent with either Stees or Taylor? If liability lay in unjust enrichment, where was the enrichment? 147

148. RNJ Interstate p. 88  Why a different result? 148

149. RNJ Interstate p. 88  Why a different result? The contractor shall be responsible … until completion and acceptance of the entire work… 149

150. RNJ Interstate p. 88  Why a different result? The contractor shall be responsible … until completion and acceptance of the entire work… Who should insure against fire? 150

151. RNJ Interstate p. 88  Why a different result? The contractor shall be responsible … until completion and acceptance of the entire work… Who should insure against fire? But what about the Contractor’s loss? 151

152. 152 George Mason School of Law Contracts II Mistake This file may be downloaded only by registered students in my class, and may not be shared by them F.H. Buckley fbuckley@gmu.edu

153. Next week (after the break)  Frustration  Breach (Anticipatory Breach) 153

154. The evolution  From strict liability to impossibility and frustration Taylor v. Caldwell  From impossibility to impracticability Restatement  Blurring the timing question 154

155. The Restatement understanding 155 Time Formation of Contract Mistake Impracticability Frustration Impracticability Frustration Cf. Restatement § 152, comment b

156. How does one keep them apart?  Mistake’s origin is in differences in the nature of the bargain (“cowness”)  But need it be restricted to that? Alcoa 156

157. Mistake in the Restatement  Mistake 152-53: Basic Assumption, material effect on exchange 157

158. So what is the difference?  Mistake 152-53: Basic Assumption, material effect on exchange  Impracticability 261, 266: Impracticable, Basic assumption 158

159. So what is the difference?  Mistake 152-53: Basic Assumption, material effect on exchange  Impracticability 261, 266: Impracticable, Basic assumption  Frustration 265, 266: Principal purpose substantially frustrated, basic assumption 159

160. The casebook doesn’t help  Taylor and Howell as frustration cases 160

161. Howell v. Coupland 750  What was the contract? 161 Lord Coleridge, C.J.

162. Howell v. Coupland  What was the frustrating event? 162

163. Howell v. Coupland  Could the seller have substituted other potatoes? 163

164. Howell v. Coupland  Could the seller have substituted other potatoes? And why do you think he didn’t? 164

165. Howell v. Coupland  Was this a sale of goods? 165

166. Howell v. Coupland  Was this a sale of goods? UCC § 2-105(1), 2-107(2) 166

167. Howell v. Coupland  How would UCC § 2-615 handle this? 167

168. Howell v. Coupland  What about UCC § 2-613? 168

169. Howell v. Coupland  What about UCC § 2-613? When are goods “identified”? 169

170. Howell v. Coupland  What about UCC § 2-613? When are goods “identified”?  UCC § 2-501(1)(c) 170

171. Howell v. Coupland  The Jack Sherman hypothetical on p. 756 Are the are goods “identified” under UCC §§ 2-613 and 2-501(1)(c) 171

172. Seitz v. Mark-O-Lite 752 172

173. Seitz v. Mark-O-Lite 752  Why didn’t the force majeur clause apply? What about the inclusio unius canon? 173

174. Seitz v. Mark-O-Lite  Why not Restatement § 262? What gloss is added? 174

175. Seitz v. Mark-O-Lite  Why not Restatement § 262? What gloss is added? If the existence of a particular person is understood to necessary by both parties 175

176. Seitz v. Mark-O-Lite  Why not Restatement § 262? What gloss is added? See comment b and § 318 176

177. Canadian Industrial Alcohol 758 177  Why did an industrial alcohol company need molasses?

178. Canadian Industrial Alcohol 178  Why did an industrial alcohol company need molasses? + =

179. Canadian Industrial Alcohol 179  Suppose that Dunbar had supplied the molasses from another refiner. Would that have been a breach?

180. Canadian Industrial Alcohol 180  Why did Cardozo hold as he did?

181. Canadian Industrial Alcohol 181  Why might this be an efficient allocation of risk?

182. The Modern Doctrine 182  Transatlantic  Eastern  Alcoa

183. Transatlantic 760  What happened in 1956 183

184. Transatlantic 760  July 26: Egypt nationalizes Suez canal  July 30: PM Eden informs Nasser that Britain will prevent the takeover 184

185. Transatlantic  July 26: Egypt nationalizes Sues canal  July 30: PM Eden informs Nasser that Britain will prevent the takeover  Aug. 2: Britain mobilizes  Sept 12: US, Britain, France announce intention to impose a solution 185

186. Transatlantic  July 26: Egypt nationalizes Sues canal  July 30: PM Eden informs Nasser that Britain will prevent the takeover  Aug. 2: Britain mobilizes  Sept 12: US, Britain, France announce intention to impose a solution  Oct. 2: Charterparty executed 186

187. Transatlantic  July 26: Egypt nationalizes Sues canal  July 30: PM Eden informs Nasser that Britain will prevent the takeover  Aug. 2: Britain mobilizes  Sept 12: US, Britain, France announce intention to impose a solution  Oct. 2: Charterparty executed  Oct 29: Israel invades Egypt, Anglo-French forces land, Nasser blocks canal 187

188. The blocked canal 188

189. Transatlantic  What is the “doctrine of deviation” 189

190. Transatlantic  What is the “doctrine of deviation”  What was the added burden on the carrier? 190

191. Transatlantic  What is the standard for commercial impracticability? 191

192. Transatlantic  What is the standard for commercial impracticabilty? Unexpected regret contingency Risk not allocated Commercial impracticability 192

193. Transatlantic  Did it make sense to assume that the carrier assumed the risk? 193

194. Transatlantic  Why did it make sense to assume that the carrier assumed the risk? “They are in the best position to calculate the cost of performance by alternate routes” 194

195. Transatlantic  Why did it make sense to assume that the carrier assumed the risk? “They are in the best position to calculate the cost of performance by alternate routes” Risk of closure a matter of public notice 195

196. Transatlantic  Why did it make sense to assume that the carrier assumed the risk? “They are in the best position to calculate the cost of performance by alternate routes” Risk of closure a matter of public notice In which case the risk might have been factored into the price 196

197. Transatlantic  How would the case have been decided under UCC 2-614? 197

198. Transatlantic  Was the carrier put to its election on damages vs quantum meruit? 198

199. Aluminum v. Essex 770  Cf. p. 730: The choice of Greenspan’s non-labor production cost factor constituted a mistake 199

200. Aluminum v. Essex 770  Cf. p. 730: The choice of Greenspan’s non-labor production cost factor constituted a mistake  Now we’re looking at the same issues under the rubric of impracticability and frustration. 200

201. Aluminum v. Essex 770  Cf. p. 730: The choice of Greenspan’s non-labor production cost factor constituted a mistake  Now we’re looking at the same issues under the rubric of impracticability and frustration.  Can it be all three at the same time? Cf. Restatement 266 201

202. Aluminum v. Essex 770  What’s the difference between them? 202

203. Impracticability and Frustration  Impracticability: “focus on greatly increased costs” Restatement § 261  Death or Incapacity of a person: 262  Res extincta etc.: 263  Govt reg: 264 203

204. Impracticability and Frustration  Frustration: “focuses on a party’s severe disappointment caused by circumstances that frustrate his purpose in entering into the contract” Restatement § 265 204

205. Impracticability and Frustration  Frustration: “focuses on a party’s severe disappointment caused by circumstances that frustrate his purpose in entering into the contract” Restatement § 265  Illustration 3: Hotel destroyed Qu. 263?  Illustration 4: Govt reg Qu. 264? 205

206. When does a party assume the risk of the event?  Williamette 765 206

207. When does a party assume the risk of the event?  Wegematic 766 207

208. When does a party assume the risk of the event?  Wegematic 766 “We see no basis for thinking that when an electronics system is promoted by its manufacturer as a revolutionary breakthrough, the risk of the revolution's occurrence falls on the purchaser” per Friendly J. 208

209. When does a party assume the risk of the event?  Mishara 766 209

210. When does a party assume the risk of the event?  Mishara 766 “A picket line might constitute a mere inconvenience and hardly make performance "impracticable." Likewise, in certain industries with a long record of labor difficulties, the nonoccurrence of strikes and picket lines could not fairly be said to be a basic assumption of the agreement.” 210

211. 211 1.Where one party is better able to reduce the risk or the harm 2.Where one party is better able to value the loss 3.Assuming risk aversion, where one party is wealthier than the other 4.Assuming risk aversion, where one party is a better insurer because he can diversify the risk Four kinds of Least-Cost Risk Avoiders

212. Eastern Air Lines 767 Requirements contract upheld at 314 212

213. Eastern Air Lines  Now: Impracticability under UCC 2- 615 213

214. Eastern Air Lines  How had Gulf protected itself against price increases (and why didn’t this work?) 214

215. Eastern Air Lines  Now: Impracticability under UCC 2- 615? 215

216. Eastern Air Lines  Now: Impracticability under UCC 2- 615? The Suez cases “offer little encouragement…” 216

217. Eastern Air Lines  Now: Impracticability under UCC 2- 615? “Those cases offer little encouragement…” “We will not allow a party to escape a bad bargain because it is burdensome” 217

218. Eastern Air Lines  Now: Impracticability under UCC 2- 615? “Those cases offer little encouragement…” “We will not allow a party to escape a bad bargain because it is burdensome” Even great hardship not enough since the events were foreseeable 218

219. Eastern Air Lines  Now: Impracticability under UCC 2- 615? Is this case inconsistent with Alcoa? 219

220. Beaver Creek p. 775  Did the parties seek to bargain for a broader doctrine of impracticability in their “gross inequity clause”? Is this what the parties in Alcoa wanted? 220

221. Beaver Creek p. 775  Did the parties seek to bargain out of the conservative trend in their “inequity clause”? What about the price adjustment clause? 221