Specialty Tires of America, Inc. v. CIT Group/Equipment Financing, Inc.
82 F. Supp. 2d 434, 2000 WL 133435 (2000)
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Rule of Law:
A seller's duty to deliver specific, identified goods is discharged under the doctrine of commercial impracticability when a third party's unforeseeable and wrongful refusal to release the goods makes performance impracticable. This unforeseen interference is a contingency, the non-occurrence of which was a basic assumption upon which the contract was made.
Facts:
- In 1993, The CIT Group/Equipment Financing, Inc. (CIT) purchased eleven tire presses from Condere Corporation and leased them back to Condere; the presses remained at Condere's plant.
- In May 1997, Condere defaulted on its lease payments and filed for Chapter 11 bankruptcy.
- A bankruptcy court lifted the automatic stay, granting CIT the right to possess the presses after Condere rejected the lease.
- Condere's representatives encouraged CIT to find a buyer and, in early December 1997, conducted an on-site inspection for CIT and a potential buyer, Specialty Tires, Inc. (Specialty).
- During the inspection, Condere's representative assured both CIT and Specialty that CIT had the immediate right to possess and sell the tire presses.
- In late December 1997, relying on the availability of the presses, CIT entered into a contract to sell the specific eleven presses to Specialty.
- When CIT attempted to remove the presses for delivery, Condere unexpectedly and wrongfully refused to allow CIT access to the equipment.
Procedural Posture:
- Specialty Tires, Inc. sued The CIT Group/Equipment Financing, Inc. in the U.S. District Court for the Western District of Pennsylvania for breach of contract.
- CIT filed a third-party complaint against Condere Corporation.
- Specialty moved for partial summary judgment, arguing CIT's defenses were invalid.
- CIT moved for full summary judgment against Specialty, asserting that its performance was excused under the doctrine of impossibility or commercial impracticability.
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Issue:
Does a third party's unforeseeable and wrongful refusal to release specific, identified goods from its possession render the seller's duty to deliver those goods impracticable, thereby excusing the seller's non-performance under the contract?
Opinions:
Majority - D. Brooks Smith
Yes, a third party's unforeseeable and wrongful refusal to release specific, identified goods renders the seller's duty to deliver impracticable. The court held that the non-occurrence of Condere's interference was a basic assumption upon which the contract was made. The contract was for specific, identified goods (the eleven presses at Condere's plant), not fungible goods that could be sourced elsewhere. Condere's sudden refusal to allow removal was an unforeseeable event, especially given its prior assurances and cooperation. The court reasoned that this situation was not a case of subjective impossibility (e.g., CIT's own financial inability to perform), but an objective obstacle created by a third party's wrongful acts, which is a risk CIT did not assume. This contingency, described as a 'bolt out of the blue,' made performance impracticable under UCC § 2-615 and the Restatement (Second) of Contracts § 261, thus excusing CIT from liability for damages for non-delivery.
Analysis:
This case clarifies the application of the commercial impracticability doctrine under UCC § 2-615, particularly in scenarios involving interference by third parties. The decision emphasizes that 'foreseeability' is not a simple, absolute bar to the defense; rather, the key inquiry is whether the risk of the event occurring was so remote that a reasonable party would not have guarded against it in the contract. By excusing performance due to a third party's wrongful and unforeseen detention of specific goods, the court protects sellers from risks that are entirely outside their control. This precedent helps define the boundaries of assumed risk in contracts for the sale of identified goods that are not in the seller's physical possession.
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