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American Trading & Production Corp. v. Shell International Marine, Ltd., 453 F.2d 939 (2d Cir. 1972).

 Facts. Shell (D) chartered American Trading's (P's) tank vessel to transport lube oil from Texas to Bombay, India. The rate was estab­lished at the prevailing rate of $14.25 per long ton, plus 75%, and an additional $.85 per long ton for passage through the Suez Canal. Although P was informed before crossing the Mediterranean that diversion was possible, P continued to travel toward the Suez Ca­nal. The canal was closed due to a state of war in the Middle East, and P was forced to travel around the Cape of Good Hope, adding some 9,000 miles to the voyage and additional expense of $131,978.44. P sued to recover the additional expense, claiming that closure of the canal made performance of the contract by the route suggested by the contract terms impossible, and therefore dis­charged performance under the contract. The trial court disagreed and dismissed P's claim. P appeals.


a)         Was the route suggested by the terms of the contract a condi­tion of performance that would relieve a party of his duty to perform if the route could not be followed?

b)          Is mere increase in cost sufficient to excuse performance un­der a theory of commercial impracticability?

Held. a) No. b) No. Judgment affirmed

a)         The suggested route would be a condition of performance only if the parties contemplated or agreed that the canal was the exclusive method of performance. Although P argued that the rate structure (which included a price for passage through the Suez Canal) suggested an exclusive method of performance, the court did not agree. Contemplation of a probable route is not the same as agreeing to a fixed route, and the cape route was a generally accepted alternative. Also, the rate was esca­lated 75% to reflect existing market conditions.

b)         In order to excuse performance on a theory of commercial im­practicability, performance must cause extreme and unrea­sonable difficulty. The increased expense to P is neither extreme nor unreasonable, and mere increase in cost is insufficient to excuse performance. The increased expense represents an in­crease of less than one-third over the agreed-on price.


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