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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, December 29, 2008

Contracts Limerick of the Week: Transatlantic Financing

You may think that the one-week drought in Limericks was a product of the winter holidays, and you might be right.  Or it might be an attempt to build up the tension before the following: my last Contracts Limerick!!!  Well, it my not be my last, but it's my last for now.  I'm not going to do the whole Brett Favre thing ('though 'tis the season).  I'm just saying I've run out.  Not to worry (or rejoice), I still have enough Business Associations Limericks to last another few months.

Skelly_wrightJudge Skelly Wright (pictured) has been featured in previous Contracts Limericks.  He is known as a friend of the underdog, so when one of the parties is the United States, you might expect Skelly Wright to find for the other party.  Not so in Transatlantic Financing Corporation v. United States, a case that plumbed the depths, sounding out the limits of the impracticability doctrine.  Transatlantic might have hoped for a safe harbor in Skelly Wright's court, but its progress was impeded; in fact, blockaded by a hostile force:  common law precedent. 

In October 1956, the U.S. contracted with Transatlantic for a shipment of wheat to be carried by the SS Christos from Galveston to Iran.  The parties assumed that the ship would take the most direct route, through the Suez Canal, but by the end of October, the Canal was in a war zone and Egypt blocked it off.  The SS Christos would have to circumnavigate Africa in order to get to Iran, which entailed an additional expense of nearly $45,000.  Transatlantic asked the U.S. to modify the contract, but the U.S. refused.  The SS Christos completed its journey and then Transatlantic sought recovery based on the doctrines of impracticability and quantum meruit

Skelly Wright noted that since Transatlantic had already been paid under the contract, it could not rely on impracticability, which would have permitted avoidance of the contract if it applied.  However, other courts faced with similar facts had already found that the closing of the Suez Canal does not render a shipping contract commercially impracticable.  Because the contract had been completed and paid for, Skelly Wright also viewed recovery in quantum meruit as inappropriate.

Transatlantic Financing Corp. v. United States

His passage through Suez foreclosed,
Plaintiff sailed 'round the Horn and supposed
He'd find some utility
In impracticability
But Skelly Wright found he gets hosed.

An inelegant finale, but there it is.

[Jeremy Telman]

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