Rockland Industries is a Maryland corporation that manufactu

Rockland Industries is a Maryland corporation that manufactures drapery lining fabrics. Rockland uses approximately 500,000 pounds per year of antimony oxide, a fire retardant, on its fabrics. Manley-Regan is a Pennsylvania chemical distribution company. Rockland usually purchased its antimony from HoltraChem on an “as-needed basis, where HoltraChem had quoted a price based on the understanding that Rockland required approximately 500,000 pounds per year of antimony oxide. HoltraChem charged about $0 per pound during its last year as Rockland’s supplier.

Due to a serious worldwide crisis of this chemical in the spring of 1994, HoltraChem could no longer maintain its existing supply relationship with Rockland. Rockland, in exploring other suppliers, found that the antimony oxide market was extremely tight, with rising prices and no known recovery period.

Rockland contracted with Manley-Regan for delivery of antimony oxide (114,000 pound total) at 1.80 per pound. That supply fell through because of the nature of the market and Rockville contracted with another supplier for 44,092 pounds of antimony oxide at $2.65 per pound and with still another supplier for 88,184 pounds at $2.54 per pound.

Rockland filed suit seeking as damages the difference between the price of $1.80 per pound and the various other prices it had paid. Manley-Regan used UCC § 2-615 as its defense claiming commercial impracticability. Does Manley-Regan have a good case using this defense?

Solution

Manley-Regan definitely has a good cause using this defense. UCC-2615 deals with the situations under which the performance of a party can be excused in an agreement (which also includes force majeure clause).

The section also excuses a party from the performance under the contract due to commercial impracticable. The case clearly highlights and has enough evidences that the market situations had gone awry and had made the availability restricted of the material and the prices have gone through the roof owing to contingent situations.

USS 2-615 Comment 2 elucidates that Increased cost alone doesn\'t excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of performance.

Manley - Regan needs to develop a strong case to evidence that such alterations in the market was unforesee and non predictable making the performance under the agreement commercially non-viable.