Canadian Industrial Alcohol Co. v. Dunbar Molasses Co.
Volume Reporter Page (1928)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A seller's contractual duty to deliver goods from a specified source is not discharged when the source fails to produce a sufficient quantity due to its own discretionary business decisions. The seller assumes the risk of the source's voluntary reduction in output unless the contract explicitly conditions performance on the source's production.
Facts:
- On December 27, 1927, a buyer and a seller entered into a contract for the sale of approximately 1,500,000 gallons of molasses.
- The contract specified that the molasses would be of the 'usual run from the National Sugar Refinery, Yonkers, N. Y.'
- Shipments were to begin after April 1, 1928, and be spread out during the warm weather.
- During the contract period, the National Sugar Refinery's total output was only 485,848 gallons, significantly less than its capacity.
- Of this amount, the seller was allotted and delivered 344,083 gallons to the buyer.
- The seller failed to deliver the remainder of the molasses specified in the contract.
- The seller presented no evidence that it had secured a contract with the refinery to guarantee the supply or that the reduced output was due to an unforeseen catastrophe rather than a business decision.
Procedural Posture:
- The buyer (plaintiff) initiated an action against the seller (defendant) in a New York trial court for breach of contract.
- Following a trial, a judgment was entered in favor of the plaintiff buyer.
- The defendant seller appealed the judgment, bringing the case before the New York Court of Appeals.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a contract for the sale of goods from a specified refinery implicitly condition the seller's duty to deliver on that refinery producing a sufficient quantity, thereby excusing the seller's non-performance when the refinery voluntarily reduces its output?
Opinions:
Majority - Cardozo, Ch. J.
No. A contract for the sale of goods from a specified source does not implicitly condition the seller's duty to deliver on that source's sufficient production, and the duty is not discharged if the source voluntarily reduces its output. The court reasoned that the seller, as a middleman, bears the risk of a supplier's discretionary failure to produce. The duty might be discharged by a true supervening event like the destruction of the refinery, war, or crop failure, but not by a voluntary reduction in output for economic reasons. The seller failed to show it took any steps to secure the supply with a firm contract from the refinery or that the buyer was aware of this contingency. To imply such a condition would undermine the security and smoothness of business transactions, as the seller essentially gambled on the refinery's continued output and lost.
Analysis:
This case significantly clarifies the doctrine of impossibility in contracts by distinguishing between a true unforeseen event that makes performance impossible and a foreseeable business risk. It establishes the principle that a middleman who contracts to supply goods from a specific source implicitly warrants their ability to procure those goods. The decision places the burden on the middleman to either secure a firm supply contract or explicitly shift the risk of non-production to the buyer in the contract's terms. This strengthens the position of buyers and adds stability to supply contracts by preventing sellers from easily excusing non-performance due to their own supplier's voluntary actions.
Unlock the full brief for Canadian Industrial Alcohol Co. v. Dunbar Molasses Co.