Reference no: EM132223820

Paraphrasing this paragraph:

A party is liable for breach of contract even if the breach is not the party’s fault. Still, the common law doctrine of impossibility allows a party to avoid a contractual obligation if performance would be impossible or impractical. The Restatement (Second) of Contracts indicates that a party’s failure to perform is not a breach if it was due to an event “the non-occurrence of which was a basic assumption on which the contract was made.” Parties may avoid the doctrine by stating that the doctrine of impossibility does not apply or specifying exactly what will excuse performance in a force majeure provision. A force majeure clause must be interpreted according to ordinary principles of contract construction without reference to the impossibility doctrine. In this case, confusion might have been avoided if the “force majeure” clause had been called something else. After the mill closed, Union Pacific could no longer backhaul iron ore and was entitled to raise the price. It was not “impossible” for Union Pacific to charge the lower rate, but the language of the contract allowed a higher rate if it is prevented from reloading the empty cars. WEPCO argued that it was not given notice required, but the “no waiver” provision preserved Union Pacific’s right even though it was not asserted. The duty to take reasonable steps to abate the force majeure did not create an open-ended duty to find anything else to haul after the mill closed. If Union Pacific could have prevented the mill closing, that may have been required by the contract. WEPCO’s expectations of Union Pacific as a matter of good faith are unreasonable. Union Pacific’s duty to act in good faith did not require it to act to its own detriment or the detriment of its other customers. The trial court’s grant of summary judgment is affirmed.