Legal Question in Business Law in Illinois

Re: Ethical Oblications leagal rights

As to the question of ethical obligations in the situation you described, I don't see how anyone can say where the line should be drawn. You have a contract that says that you are entitled to buy at a set price. Presumably you have given consideration for the contract and have made decisions in reliance on the contract, and higher prices will clearly injure you. I see no reason, from an ethical standpoint, of saying that you have suffered damages and that based on how the two parties have allocated the risk (you agreed to pay a set price and he agreed to sell at a set price), the loss should be the seller's.

As to your legal rights, that is another question. First, was there anything in the contract dealing with force majeure? If so, you have to see if the contract covers this situation. If not, there are two somewhat related concepts in the common law in Illinois that may supply a defense to the seller's breach of contract: the doctrine of commercial frustration and the doctrine of impossibility of performance.

The following quote is from a recent Illinois appellate court case in the 4th District:

"The doctrine of commercial frustration will render a contract unenforceable if a party's performance under the contract is rendered meaningless due to an unforeseen change in circumstances. Smith v. Roberts, 54 Ill. App. 3d 910, 370 N.E.2d 271 (1977). In order to apply the doctrine of commercial frustration, there must be a frustrating event not reasonably foreseeable and the value of the parties' performance must be totally or almost totally destroyed by the frustrating cause. Smith, 54 Ill. App. 3d at 913, 370 N.E.2d at 273. Similarly, the doctrine of impossibility of performance will be applied if there is an unanticipated circumstance that has made the performance of the promise vitally different from what should reasonably have been within the contemplation of the parties when the contract was entered. Fisher v. United States Fidelity & Guaranty Co., 313 Ill. App. 66, 39 N.E.2d 67 (1942). The doctrine of impossibility of performance requires that the circumstances creating the impossibility were not and could not have been anticipated by the parties, that the party asserting the doctrine did not contribute to the circumstances, and that the party demonstrate that it has tried all practical alternatives available to permit performance. Farm Credit Bank of St. Louis v. Dorr, 250 Ill. App. 3d 1, 620 N.E.2d 549 (1993)."

Was a strike foreseeable? Normally, I would think the risk of an increase in a supplier's cost due to a strike would be foreseeable by the seller (unlike perhaps a spike in price due to a war or natural disaster). Someone would have to carefully analyze contract and all the facts to determine whether the seller likely has a sustainable defense.

David Staub

Illinois Business Attorney