Midstates Utility Corporation contracts with North American Energy Company to buy 50,000 gallons of heating oil. North American agrees to deliver the oil in five equal installments between October 1 and the following March 15. The winter is the warmest on record, however, and after the last agreed delivery, Midstates has accepted only 30,000 gallons of the oil. When North American tenders the rest of the oil, Midstates refuses to take it, citing the weather and claiming to be acting in good faith. Will North American succeed in a suit against Midstates for breach of contract?
What will be an ideal response?
Yes, North American will succeed in a suit against Midstates, based on breach of contract, because the change in the weather that caused a change in Midstates' needs could reasonably have been taken into consideration when the parties entered the contract for the oil. An occurrence unforeseen by either party when a contract is made can make performance commercially impracticable. A possibility that a buyer might require less than a contracted-for amount, however, can be a risk that is foreseeable at the time of contracting. An unusually warm winter and other weather changes are generally not impossible to contemplate in a business situation. This is the kind of risk normally assumed by parties when they do business. In other words, Midstates' performance in this problem was not made commercially impracticable by the occurrence of a contingency (unusually warm weather) the nonoccurrence of which was a basic assumption on which the contract was made. Midstates' breach is not excusable on that basis. Whether Midstates acted in good faith is not an excuse for its failure to perform.
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