American Trading & Prod. Corp. v. Shell Int’l Marine, Ltd.
United States Court of Appeals, Second Circuit, 1972.
453 F.2d 939.
American Trading agreed to let Shell use their vessel to transport cargo from Texas to India. The rates were based on a voyage that would travel through the Suez Canal.
- During the voyage, American notified Shell of trouble in the Canal and suggested they delay in entering.
- The Canal ended up being closed due to war, and Shell decided against waiting and continued on an alternate route.
- This decision led to an extra 30 days and about 9,000 miles of travel.
- American sued to recover $132,000 in extra compensation:
- They argued the Suez Canal was the specific means of performance, and the supervening destruction of it rendered the contract impossible to perform. Therefore, they were operating without a K – hence, unjust enrichment.
- Prof: It was a way to get rid of the now-terrible K.
- Shell refused to pay.
The lower court dismissed American’s claim for additional compensation.
Was American excused from performance on the theory of impracticability?
- The court held that although the Canal route was the contemplated and probable route, it was not the exclusive method of performance (the contract made no reference to a fixed route).
- Further, the doctrine of impracticability didn’t apply, since there wasn’t any extreme or unreasonable expense here:
- Mere increase in cost alone is not a sufficient excuse for nonperformance.
- Finally, it’s reasonable to expect owner-operators to insure against things like this:
- They are in the best position to calculate the cost of performance by alternative routes and are sensitive to international troubles affecting the demand and cost of their services.