Finger 4: Defense to NonPerformance/Breach
Excuse by Failure of
Presupposed Conditions
------------Excuse by
Impossibility/Impracticability/
Frustration of Purpose
UCC 2-615 Excuse by Failure of Presupposed
Conditions
[A party has a defense to non-performance]
if performance as agreed has been made
impracticable by the occurrence of a
contingency the non-occurrence of which
was a basic assumption on which the
contract was made or by compliance in
good faith with any applicable foreign or
domestic governmental regulation or order
whether or not it later proves to be invalid.
Elements of
Excuse by Failure of Presupposed Conditions
[A party has a defense to non-performance]
if performance as agreed has been made
impracticable by the occurrence of a
contingency the non-occurrence of which
was a basic assumption on which the
contract was made or by compliance in
good faith with any applicable foreign or
domestic governmental regulation or order
whether or not it later proves to be invalid.
Excuse by Failure of Presupposed Conditions
[A party has a defense to non-performance]
if performance as agreed has been made
impracticable by the occurrence of a
contingency the non-occurrence of which
was a basic assumption on which the
contract was made or by compliance in
good faith with any applicable foreign or
domestic governmental regulation or order
whether or not it later proves to be invalid.
Excuse by Failure of Presupposed Conditions
[A party has a defense to non-performance]
if performance as agreed has been made
impracticable by the occurrence of a
contingency the non-occurrence of which
was a basic assumption on which the
contract was made or by compliance in
good faith with any applicable foreign or
domestic governmental regulation or order
whether or not it later proves to be invalid.
Excuse by Failure of Presupposed Conditions
[A party has a defense to non-performance]
if performance as agreed has been made
impracticable by the occurrence of a
contingency the non-occurrence of which
was a basic assumption on which the
contract was made or by compliance in
good faith with any applicable foreign or
domestic governmental regulation or order
whether or not it later proves to be invalid.
UCC Element 1 [A party has a defense to
non-performance] if performance as agreed
has been made impracticable
UCC 2-615 comment 3: The
test of commercial impracticability
(as contrasted with “impossibility”
or “frustration”) has been adopted
in order to call attention to the
commercial character of the
criterion chosen by this Article.
UCC Element 2 [A party has a defense to
non-performance] by the occurrence of a
contingency
Contingency is beyond seller’s
control
Seller acted in good faith in
response to the contingency
UCC Element 3
[A party has a defense to non-performance] by the
occurrence of a contingency the non-occurrence of which
was a basic assumption on which the contract was made
UCC 2-615 cmt. 4. A contingency which reflects a
risk the business contract was intended to cover
is not a contingency within this article. Risk must
not have been “sufficiently foreshadowed at the
time of contracting, unless not fairly regarded as
part of the risks allocated by the contract.
It must be a contingency “which alters the
essential nature of the performance”; Cmt. 8
UCC 2-615 cmt. 4: Increased cost alone, a rise or
a collapse in the market is not itself a
justification.
UCC Element 4
governmental regulation
2-615 cmt. 10: A seller’s good faith
belief in the validity of the
regulation is the test
Restatement
• A party has a defense to non-performance
where an event makes the party’s purpose
frustrated (265) or performance
impracticable (261 ) or performance
impossible (262, 263) or in noncompliance with governmental regulation
(264) and the event occurs without his
fault and the non-occurrence of the event
was a basic assumption on which the
contract was made.
Restatement
• A party has a defense to non-performance
where an event makes the party’s purpose
frustrated (265) or performance
impracticable (261 ) or performance
impossible (262, 263) or in noncompliance with governmental regulation
(264) and the event occurs without his
fault and the non-occurrence of the event
was a basic assumption on which the
contract was made.
Restatement
• A party has a defense to non-performance
where an event makes the party’s purpose
frustrated (265) or performance
impracticable (261 ) or performance
impossible (262, 263) or in noncompliance with governmental regulation
(264) and the event occurs without his
fault and the non-occurrence of the event
was a basic assumption on which the
contract was made.
Restatement
• A party has a defense to non-performance
where an event makes the party’s purpose
frustrated (265) or performance
impracticable (261 ) or performance
impossible (262, 263) or in noncompliance with governmental regulation
(264) and the event occurs without his
fault and the non-occurrence of the event
was a basic assumption on which the
contract was made.
Restatement Element 1
• (a) an event makes the party’s purpose
frustrated (265) and both parties understand that
as the principal purpose
• (b) performance impracticable (261 )
• (c) performance impossible (262, 263)
• (d) in non-compliance with governmental
regulation (264)
cf. UCC Elements 1& 4 ;
p.614 “mere” economic impracticality is no
defense; contra UCC
Restatement Element 2
• A party has a defense to non-performance
where an event occurs without his fault
»cf. UCC Element 2
Restatement Element 3
• A party has a defense to non-performance where the
non-occurrence of the event was a basic assumption on
which the contract was made.
» Cf. UCC Element 3
» See 265 cmt. a, ”not to be regarded as
within the risks assumed . . . under the
contract”; and occurrence is not to be
allocated by the court to the party seeking
relief.
7200 Scottsdale
Kuhn entered into a contract for bed and meeting
rooms with Resort. The contract had penalties
for cancelation. (COL/SOF/Party chosen
remedy)
The Gulf War made European convention
delegates frightened to travel. These events
were outside control of Kuhn.
Without Europeans, Kuhn decides to cancel after
failing to negotiate alternative with Resort.
Resort sues for damages. Kuhn claims excuse t
non-performance: Frustration & Impracticability.
7200 Scottsdale – Element 1
Our purpose which was linking Europeans
more closely to the company was
frustrated when they could not travel and
without the Europeans, the convention
was no longer commercially practicable to
hold.
7200 Scottsdale – Element 2
The Europeans were prevented from
attending by events outside our control
and for which we had no responsibility –
the government’s initiation of the Gulf War.
7200 Scottsdale – Element 3
The ability of Europeans to fly to Arizona
was a basic assumption of the contract
because it is what made the convention
desirable to hold in Arizona.
7200 Scottsdale
• Q 1: What was the event? (we begin here (Element 3)
because we need to choose a contingency which can
satisfy Element 2 and has consequences that satisfies
Element 1
• According to the court, Element 3 was the “perceived
risk of terrorism” (It was not our fault ( 2), and resulted in
Europeans not coming yielding impracticability (1).
• Court: Not a good faith (“objectively reasonable”)
response to the event (Element 2) and lack of European
attendance doesn’t rise to level sufficient to satisfy
Element 1 (1a because both parties didn’t agree on
European attendance as purpose and 1b/1c because
they could have had convention, albeit less profitable,
without the Europeans).
7200 Scottsdale
• Today, the court might have differently
weighed Element 2 (i.e., taken threat of
terrorism more seriously), but court might
not have changed its mind about Element
1 (They can live without the Europeans).
• Can you re-describe the facts (and
assumptions and consequences) in
another way? For example, does the
Resort market its closeness to the airport?
7200 Scottsdale and Good Faith
• The Resort admits that Kuhn’s decision to
cancel was in good faith (p. 613).
• Why then didn’t the resort have a duty to
accommodate Kuhn?