American Trading & Production Corp. v. Shell International
Marine, Ltd., 453 F.2d 939 (2d Cir. 1972).
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.
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?
Is mere increase in cost sufficient to excuse performance
under a theory of commercial impracticability?
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.
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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