Taylor v Caldwell, 1863: A textbook case

1. Taylor hired Caldwell’s hall for concerts at $100.
   

1. After contract making but before first concert, a fire occurred at no fault of either party.
   

1. The fire destroyed the hall.
   

1. The court relieved Caldwell from performing contract.
   

1. The court based its decision on the doctrine of impossibility.

AD v GIS: A hypothetical case in the context of ARGUGRID

1. To monitor a coming tropical storm, an agricultural department (AD) contracted a GIS company to deliver a large volume of realtime weather data.
   

1. After contract making but before the storm hit AD’s agricultural fields, an optical cable providing all the internet traffic between two parties was broken.
   

1. GIS failed to deliver its collected data timely.
   

1. Suffering damages from allocating its resources improperly, AD sued GIS.

In common laws, a party could rescind contract on grounds of the doctrine of impossibility because both parties acted on a mistake concerning future event. Party seeking relief must show

1. 1.an unexpected event occurred after contract making 2
   

2. 2.non-occurrence of the event was a basic assumption, i.e. occurrence of event renders the performance of contract impossible 3
   

3. 3.the event is not the fault of party seeking relief 4
   

4. 4.party seeking relief does not bear the risk of that occurrence of the event

Taylor v Caldwell, 1863:

Caldwell's rescission is granted because: 1) the fire is unexpected and occurred after the contract making; 2) the non-occurrence of fire is a basic assumption since fire destroyed the hall, an essential mean without which the contract is impossible to perform; 3) the fire is not caused by Caldwell; and 4) no explicit clauses of the contract assigns risk of fire to Caldwell.

It is important that in 2) the destroyed means must be specifically referred to in the contract, or at least understood by both parties to be the property that would be used. Thus the court decision would be different if Caldwell has several halls and Taylor contracts to rent "a" hall for performance without referring to any specific hall.

AD v GIS

Condition 1) holds if neither parties were warned that the cable could be broken any time. Whether the other conditions hold depends on many factors. If two parties mentioned in the contract that data is to be transferred by the internet or if the internet is the only means to transfer data in this kind of transactions, then: condition 2) holds since the availability of the internet is a basic assumption of which the contract was made. Condition 3) holds since GIS obviously did not break the cable, and condition 4) holds since no explicit clauses of the contract assigns risk of the event to him.

In the absence of explicit clauses in 4) under the language of the contract, the court often has to complete the contract with implied risk allocation clauses representing what parties would have agreed on had they negotiated over the unexpected situations. For the purpose of providing an efficient way to allocate the combined loss, many modern courts and law schools advocate that risk is allocated to a party who is able to foresee it but did not guard against it. Thus if Taylor v Caldwell happened in our time the ruling could be in favor of Taylor for the reason that the risk of fire should be allocated to Caldwell because fire not only is reasonably foreseeable but also can be prevented at reasonable cost by installing sprinkler and alarm systems. Similarly, if two parties  in FDA v GIS did not mention the internet while there are alternative ways to transfer the data (e.g. setting up temporary microwave stations at a cost that is reasonable with respect to the contract price), the ruling will favor DA because GIS can set up such stations to mitigate the consequences of the cable being broken.

Doctrine of Impossibility<1,2,3,4>