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32 S. C. L. Rev. 241 (1980-1981)
Excusable Nonperformance in Sales Contracts: Some Thoughts abour Risk Management

handle is hein.journals/sclr32 and id is 269 raw text is: SOUTH CAROLINA LAW REVIEW VOLUME 32 1980 NUMBER 2 EXCUSABLE NONPERFORMANCE IN SALES CONTRACTS: SOME THOUGHTS ABOUT RISK MANAGEMENT RICHARD E. SPEIDEL* I. BACKGROUND When will a promisor be excused from performance because of events which occur after the contract is formed and which are not within the control of either party?1 One answer is when the event is dealt with explicitly in the agreement and the risks are allocated to the promisee or others. The usual issues are whether the allocation clause was part of the agreement, whether its in- clusion was the product of a bargaining process where the par- * Professor of Law, Northwestern University School of Law. A.B., Denison Univer- sity, 1954; LL.B., University of Cincinnati, 1957; LL.M., Northwestern, 1959. 1. Traditional analysis of excusable nonperformance has produced three event categories: those existing at the time of contracting, those supervening contract forma- tion and impairing the capacity of one party to perform, and those frustrating an impor- tant purpose of one party, usually the payor. See RESTATEMENT (FRST) OF CONTRACTS §§ 288, 456, 457 (1933); J. MURRAY, MURRAY ON CONTRACTS §§ 197-204 (2d ed. 1974). The Restatement (Second) of Contracts retains these three categories, but links them through a common test for excuse. This test is whether the promisor's performance was made impracticable, or the party's principal purpose was substantially frustrated, by the occurrence of an event the nonoccurrence of which was a basic assumption of the contract. RESTATEMENT (SEcoND) OF CONTRACTS §§ 281, 285, 286 (Tent. Draft No. 10, 1975). See also U.C.C. § 2-615(a); Posner & Rosenfield, Impossibility and Related Doc- trines in Contract Law: An Economic Analysis, 6 J. LEGAL STUD. 83, 86 (1977)(in every discharge case, the problem is to decide who should bear the loss resulting from an event that has rendered performance by one party uneconomical). In deciding who assumed what risk, however, whether the event existed at the time of contracting is relevant to the relative capacities of the parties to learn of it. In short, it may be easier to identify and protect against existing rather than supervening risk events. See Kronman, Mistake, Disclosure, Information, and the Law of Contracts, 7 J. LEGAL STun. 1, 2-9 (1978)(infor- mation is the antidote to mistake).