frustration in the inverse : LUSENET : Lessig's Contracts : One Thread

Could the Filley v. Pope case be decided differently under a theory of inverse frustration or impracticability?

The intuition here is this: impracticability covers cases where, after a contract is made, a partys performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made.

I would try the following approach to come out in the opposite way in the case of Filley.

Turn the impracticability clause above around: non-compliance with a clause may be excused where, after performance has taken place, the event against the happening of which a clause was inserted in the contract is impossibilitated from happening, and thus the contract should be enforced because the clause has been frustrated, that is, even if it had not been there, there is no advantage to the party who claimed for it to be put into the contract.

(this is a parallel from the coronation frustration: whether the other performs or not, i.e. gives the room, by now it makes little difference)

Three problems with this approach, but I think that generally the approach has some value:

1. The party who asked for it has arguably paid a premium for the clause over the price of the contract without, so she should be the one who gets to decide what to do of itshe "owns" the clause.

2. It is not up to the other party to risk non-compliance, banking on the non-happening of the event taken care by the clause.

3. Following from (2), of course there is a problem here of ex ante incentives: the seller would have a reason to risk it and not comply, in the hope that the clause would be frustrated by the non-happening of an event, the happening of which had induced the other party to put it in the contract.

There may be further problems with this. Obvious advantages, on the other hand, seem to be that this frames in coherent terms an implication of Cardozos decision in Jacobs:

parties should not get too hung up and try to rescind based on something that makes no material difference, such as the brand of pipes [subjectively makes no material difference] or an event which could have happened but has not [objectively cannot possibly make a material difference now].

Another advantage comes from giving the due weight to the clauses of the contract, including a mitigation, rather than creation, of the damage intended as social economic cost: if the iron is there, its what you wanted, you should mitigate, in the sense of accepting it regardless of a now-irrelevant clause, rather than wasting (from societys perspective) a ships trip to New Orleans, another trip to wherever someone else is buying it

This reasoning applies to Filley, bien sur, assuming that the reason why they wanted the clause was to insure themselves against possible accidents on the insured Glasgow-New Orleans route. Put the burden on them in this way: either you show cause why this was relevant to you, or if the only reason was the insurance of the sail, look, nothing happened to it, so go home happy. Note that this is not an extra requirement beyond Cardozos: he also says that you should show cause why the term mattered so much, otherwise if it seems ridiculous compared to the whole of the contract, or ridiculous post hoc because it cannot happen, suck it up.

I hope this makes sense. If it does not, feel free to ask me for further clarification, and Ill try to come up with a more coherent theory of twisted frustration.



-- Anonymous, December 09, 1998

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