Contract Law 64 IV US v Wegematic Corp

TL;DR

The case of US vs. Wedge Ematic Corporation explores the concept of impracticability in contracts and the application of UCC section 2 615.

Transcript

today we're going to introduce the notion of impracticability in contracting we've earlier discussed a host of formation defenses that are judged at the time of contract formation but impracticability is a post formation defense that can discharge contractual duties for events occurring after a contract is formed to learn about impracticability doc... Read More

Key Insights

• 💁 Impracticability is a post-formation defense that can discharge contractual duties for events occurring after a contract is formed.
• 💼 The UCC section 2 615 governs the excuse of failure of presupposed conditions, but the court in this case ruled that the engineering difficulties did not constitute impracticability.
• 🍂 The court emphasized that the risk of a technological revolution falls on the manufacturer, and the contract terms placed the burden of achieving the breakthrough on Wedge Ematic.
• 🎭 Impracticability and mutual mistake doctrines are both default conditions in contracts, but they differ in the timing of the circumstances and the duty to perform that arises.

Questions & Answers

Q: What was the contract between the Federal Reserve Bank and Wedge Ematic?

The contract involved Wedge Ematic delivering a revolutionary computer system, the AL WAC 800, by June 30th, 1957, for a payment of $231,000.

Q: How did Wedge Ematic propose to address the delays in delivering the computer system?

Wedge Ematic initially suggested postponing the delivery, then later informed the Federal Reserve Bank that delivery might be delayed until 1959 and offered the use of its AL WAC 3e equipment as an alternative.

Q: What damages did the Federal Reserve Bank seek from Wedge Ematic?

The Federal Reserve Bank sought damages of $46,300 for delay under the liquidated damages clause, $179,000 for the excess cost of securing an alternative computing system from IBM, and $10,000 for preparatory expenses, totaling over $235,000.

Q: What defense did Wedge Ematic rely on?

Wedge Ematic claimed impracticability, arguing that basic engineering difficulties made delivery impossible and that the correction would have taken 1 to 2 years at a cost of $1-1.5 million, with uncertain success.

Summary & Key Takeaways

• In 1956, Wedge Ematic won a contract to deliver a revolutionary computer system to the Federal Reserve Bank by June 1957.

• Wedge Ematic faced engineering difficulties and delays in delivery, leading to the Federal Reserve Bank securing an alternative manufacturer and seeking damages.

• Wedge Ematic claimed impracticability as a defense, citing basic engineering difficulties, but the court ruled against them, emphasizing the risk placed on the manufacturer.