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Copyright (c) 1985 Minnesota Law Review
Minnesota Law Review

ARTICLE: Winner Take Some: Loss Sharing and Commercial Impracticability.

February, 1985

69 Minn. L. Rev. 471


Leon E. Trakman *


The increasing invocation of the doctrine of commercial impracticability as an excuse for contract breach raises varied and complex problems of loss allocation. Trained in the formal application of legal doctrine, common law judges historically have refused to spread the burden of a contract discharged because its performance has been rendered commercially impracticable. Notwithstanding the theoretical availability of a broad array of loss-sharing remedies incorporated in the Restatement (Second) of Contracts 1 and the Uniform Commercial Code, 2 judicial adjustment of losses, until very recently, has been the exception, not the rule. Courts are increasingly recognizing, however, that in a commercial environment in which absolute liability for losses is both uneconomical and the source of individual hardships, loss allocation provides a plausible means of commercially wise and equitable accommodation. 3 Yet, despite the historical application of loss splitting by admiralty courts, no consistent methodology has developed to allocate losses in cases of commercial impracticability.

This Article traces the evolution of the doctrine of commercial impracticability from its beginnings as a rare all-or-nothing remedy to its present status as an embryonic loss-sharing doctrine. It then proposes a methodology for the incorporation of loss-sharing concepts into the doctrine of commercial impracticability. The proposed methodology presents two distinct means of effectuating adjustment of losses in cases of commercial impracticability. The first alternative places primary responsibility for loss allocation on the parties themselves, recognizing the advantages to be gained by judicial facilitation of out-of-court settlement. In those cases in which ...
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