BUS311_chapter_06

But sometimes the costs and difficulty are extreme

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Unformatted text preview: The answer is no. Changes in market price are usually foreseeable, and the reason a company such as Alpha wants to make a two-year contract is to lock in their costs for that period of time. But sometimes the costs and difficulty are extreme, and the unforeseen event is something more drastic. Consider the following: Jeff Roberson/Associated Press rog80328_06_c06_111-133.indd 121 10/26/12 5:37 PM Section 6.2 Performance and Discharge of Contracts CHAPTER 6 Example 6.13. Albert contracts with Natasha to excavate a foundation for a new home on his land for $1,000. Both Natasha and Albert assume that his land consists of sandy soil, as is common in his area. In fact, Albert’s land contains only two feet of sandy topsoil over several hundred feet of solid rock. In order to excavate the foundation to the agreed-upon depth of ten feet, Natasha would have to blast through solid rock at an expense to her of tens of thousands of dollars. Since the cost involved in completing this contract is much greater than anticipated by both parties, and since the unusual geology in the land was not foreseeable at the time that the contract was entered into, this contract would be discharged as commercially impracticable by many courts. The elements of unforeseeability of the special circumstances and unreasonable expense are crucial to a case in which one of the parties is seeking to have the contract discharged for commercial impracticability. Merely that the contract will be more costly than anticipated is not enough; nor will extreme cost be the basis for discharging a contract where the parties could have found out the special circumstances through a reasonable inspection. Frustration of Purpose There are instances in which an unforeseeable event takes place after parties enter into a valid contract but before performance is rendered (e.g., while the contract is still executory) that destroys the purpose of the contract. Under such circumstances, the parties are able to perform, but performance would be pointless and wasteful. Under such circumstances,...
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