If Past is Prologue, then the Future is Bleak: Contracts, Covid–19, and the Changed Circumstances Doctrines

Texas A&M Law Review Texas A&M Law Review

Volume 9 Issue 2

3-11-2022

If Past is Prologue, then the Future is Bleak: Contracts, Covid–19, If Past is Prologue, then the Future is Bleak: Contracts, Covid–19,

and the Changed Circumstances Doctrines and the Changed Circumstances Doctrines

Danielle K. Hart

Southwestern Law School

, dhart@swlaw.edu

Follow this and additional works at: https://scholarship.law.tamu.edu/lawreview

Part of the Contracts Commons, and the Virus Diseases Commons

Recommended Citation Recommended Citation

Danielle K. Hart,

If Past is Prologue, then the Future is Bleak: Contracts, Covid–19, and the Changed

Circumstances Doctrines

, 9 Tex. A&M L. Rev. 347 (2022).

Available at: https://doi.org/10.37419/LR.V9.I2.2

This Article is brought to you for free and open access by Texas A&M Law Scholarship. It has been accepted for

inclusion in Texas A&M Law Review by an authorized editor of Texas A&M Law Scholarship. For more information,

please contact aretteen@law.tamu.edu.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 1 10-AUG-23 12:04

IF PAST IS PROLOGUE, THEN THE FUTURE

IS BLEAK: CONTRACTS, COVID–19, AND THE

CHANGED CIRCUMSTANCES DOCTRINES

by: Danielle Kie Hart*

BSTRACT

At the heart of most of the systemic problems currently confronting individ-

uals and businesses as a result of the COVID–19 pandemic is quite literally a

contract. Housing. Insurance. Food. Health care. Child care. Employment.

Manufacturing. Construction. Supply chains. You name it. Contracts are im-

plicated everywhere. So make no mistake: How contract law addresses these

ostensibly private contracts will have profound social consequences. If the past

really is prologue, then the future is indeed bleak. The empirical study con-

ducted for this Article establishes what the conventional wisdom has claimed

for the last 70 years. More specifically, the empirical study here shows that the

common law’s changed circumstances doctrines (“CCDs”)—namely, impossi-

bility, impracticability of performance, and frustration of purpose—will gen-

erally not excuse a party from performing his obligations under a contract,

regardless of the changed circumstance he alleges. Contrary to all the CCD

literature that addresses this issue, this Article makes the unconventional argu-

ment that the CCDs should be more broadly available, meaning they should

be more successful in excusing contract performance when triggered by cata-

strophic circumstances. And unlike the rest of the field, which focuses on the

CCDs themselves, this Article argues that to effectively address the allocation

of unforeseen risks in general and catastrophic risks like a pandemic in partic-

ular, we must reframe the legal approach to contract formation. From there,

given that the solution to the changed circumstances problem preferred by

courts and commentators is an explicit risk-allocation term in the parties’ con-

tract, the solution proposed in this Article to the risk-allocation problem liter-

ally suggests itself. A risk-and-loss-allocation clause should be mandated in

most contracts as a part of contract formation. The type of risk-and-loss-allo-

cation clause and how the clause would work would depend on whether the

contract is co-drafted or adhesive. Generally, the inclusion of a risk-and-loss-

allocation clause would facilitate transactions and encourage contracting by

ensuring that contracts remain efficient and predictable. The main difference

between the risk-and-loss-allocation clause proposed here and existing con-

tract law, of course, is who ends up bearing all the risk and loss occasioned by

the catastrophic changed circumstance. To be clear, if nothing changes and

our approach to contract formation remains the same as it is right now, then

all of the risk and all of the attendant loss will generally be left to lie where it

falls—namely, on the party trying to get out of the contract because of the

DOI: https://doi.org/10.37419/LR.V9.I2.2

* Professor of Law, Southwestern Law School; LL.M. Harvard Law School; J.D.

William S. Richardson School of Law, University of Hawaii; B.A. Whitman College.

My sincere thanks go to Nancy Kim, Stephen Sepinuck, Jay Feinman, and Hila Keren

for reading and commenting on drafts of this Article. Any errors in the text are mine

alone. Southwestern Law School provided generous research support, for which I am

grateful. I also need to thank my research assistants Kimberly Morosi, Ting Yu Lo,

Willow Karfiol, and Andres De La Cruz for their help. Finally, I would like to thank

Meaganne J. Lewellyn, (the Editor-in-Chief), Spencer Lockwood (the Managing Edi-

tor), and all the other editors at the Texas A&M Law Review for their professionalism

and assistance in editing my article. Any errors remaining are my own.

347

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 2 10-AUG-23 12:04

348 TEXAS A&M LAW REVIEW [Vol. 9

changed circumstances—and this will be the result regardless of the legal the-

ory used to justify (or demonize) the CCDs or any changes made to the doc-

trines themselves. But if we finally acknowledge the public aspects of contracts

and contract law, namely, that they do in fact produce social consequences

that extend beyond the individual contract and contracting parties, then con-

tracts and contract law may well be part of the solutions to some of the most

pressing problems currently confronting American society now and into the

future.

ABLE OF

ONTENTS

I. I

NTRODUCTION

.......................................... 348

II. E

MPIRICAL

TUDY OF THE

ROBLEM

................... 357

A. The Cases ........................................... 361

1. Methodology.................................... 362

2. The Data and Conclusions ...................... 368

B. Some Observations .................................. 373

III. S

EARCHING IN

LL THE

RONG

LACES

............... 380

IV. P

ROPOSAL

: I

NTERVENING

HEN

ATTERS

.......... 392

V. C

ONCLUSION

............................................ 402

I. I

NTRODUCTION

In December 2019, word first started trickling out about a new virus

in China.

By January 20, 2020, the United States reported its first case

of the virus that would later be called COVID–19.

By the end of the

month, the World Health Organization declared a global health emer-

gency.

And by the end of March 2020, more than half the U.S. popu-

lation was under stay-at-home orders issued by state governors.

Not

long after that, reports started pouring in from across the country:

global supply chains were completely upended, leading to disruptions

and shortages;

thousands of suppliers across different industries were

devastated as customers cut production or closed shop;

businesses

1. See Derrick Bryson Taylor, A Timeline of the Coronavirus Pandemic,

N.Y.

IMES

(Mar. 17, 2021), https://www.nytimes.com/article/coronavirus-timeline.html

[https://perma.cc/R6PV-NVHW].

2. Id.

3. Id.

4. See Rosie Perper, Sarah Al-Arshani & Holly Secon, More Than Half of the US

Population Is Now Under Orders to Stay Home—Here’s a List of Coronavirus

Lockdowns in US States and Cities,

. I

NSIDER

(Mar. 31, 2020, 11:57 PM), https://

www.businessinsider.com/states-cities-shutting-down-bars-restaurants-concerts-cur-

few-2020-3 [https://perma.cc/MNX4-GM6L].

5. Jeff Karoub, Ravi Anupindi: COVID-19 Shocks Food Supply Chain, Spurs

Creativity and Search for Resiliency,

U. M

ICH

. N

EWS

(Apr. 29, 2020), https://

news.umich.edu/covid-19-shocks-food-supply-chain-spurs-creativity-and-search-for-

resiliency/ [https://perma.cc/W8B8-V4BH].

6. Tom Linton & Bindiya Vakil, It’s Up to Manufacturers to Keep Their Suppliers

Afloat,

ARV

. B

. R

(Apr. 14, 2020), https://hbr.org/2020/04/its-up-to-manufac-

turers-to-keep-their-suppliers-afloat [https://perma.cc/XNM5-TBZJ].

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 3 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 349

were failing to pay their rent,

closing their stores,

and furloughing

their employees;

homeowners could not pay their mortgages;

rent-

ers could not pay rent, let alone all their other bills;

airlines, cruise

ships, and hotels were refusing to issue refunds;

and credit card com-

panies and other lenders

were contemplating the likelihood of mas-

sive defaults.

As of January 10, 2022, there were 60,240,751 confirmed

COVID–19 cases in the United States, and 835,302 Americans lost

their lives because of a virus that has yet to be controlled.

Notwith-

standing these mind-boggling and heart-breaking numbers, news out-

lets have been reporting for some time now that the official tallies

significantly undercount the actual number of cases and deaths that

COVID–19 has caused in the United States.

7. Jordan Valinsky, Cheesecake Factory Tells Its Landlords It Won’t Be Able to

Pay April Rent,

CNN B

https://www.cnn.com/2020/03/26/business/cheesecake-fac-

tory-april-rent-coronavirus/index.html (Mar. 26, 2020, 1:13 PM) [https://perma.cc/

5F5X-CUCY]; see also Konrad Putzier & Esther Fung, Businesses Can’t Pay Rent.

That’s a Threat to the $3 Trillion Commercial Mortgage Market,

ALL

. J.

(Mar. 24,

2020, 8:00 AM), https://www.wsj.com/articles/businesses-cant-pay-rent-thats-a-threat-

to-the-3-trillion-commercial-mortgage-market-11585051201 [https://perma.cc/D4JY-

5DDD].

8. Jordan Valinsky, Bed Bath & Beyond Is Laying Off 2,800 Employees,

CNN

, https://www.cnn.com/2020/08/26/investing/bed-bath-beyond-layoffs (Aug. 26,

2020, 9:07 AM) [https://perma.cc/Y9PR-7M2V].

9. Abha Bhattarai & Rachel Siegel, Macy’s Is Furloughing Most of Its 125,000

Employees Amid Prolonged Coronavirus Shutdown,

ASH

. P

OST

(

Mar. 30, 2020),

https://www.washingtonpost.com/business/2020/03/30/macys-furloughs-coronavirus/

[https://perma.cc/6RM5-3LQR].

10. Diana Olick, Potential Wave of Mortgage Delinquencies Could Bankrupt the

Payment System

, CNBC

, https://www.cnbc.com/2020/03/23/coronavirus-us-potential-

wave-of-mortgage-delinquencies-could-bankrupt-payment-system.html (Mar. 23,

2020, 5:28 PM) [https://perma.cc/D4KU-34P6].

11. Eric Morath & Rachel Feintzeig, ‘I Have Bills I Have to Pay.’ Low-Wage

Workers Face Brunt of Coronavirus Crisis,

ALL

. J.

(Mar. 20, 2020, 11:58 AM),

https://www.wsj.com/articles/i-have-bills-i-have-to-pay-low-wage-workers-face-brunt-

of-coronavirus-crisis-11584719927 [https://perma.cc/2NFG-LY78].

12. David Lazarus, Column, No Coronavirus Refund but Credit for a Future

Cruise? Are You Kidding?,

L.A. T

IMES

(Mar. 31, 2020, 5:00 AM), https://

www.latimes.com/business/story/2020-03-31/column-coronavirus-cruise-lines [https://

perma.cc/5FCN-WBUX].

13. W. E. Messamore, The Housing Market Crash’s First Victims Won’t Be Home-

owners,

CCN

, https://www.ccn.com/the-housing-market-crashs-first-victims-wont-be-

homeowners (Sept. 23, 2020, 1:46 PM) [https://perma.cc/QkX2-UZRS].

14. Matt Egan, Credit Card CEO Warns of Dark Times When the $600 Unemploy-

ment Benefit Expires,

CNN B

., https://www.cnn.com/2020/07/22/investing/credit-

card-debt-synchrony-unemployment (July 22, 2020, 1:57 PM) [https://perma.cc/M47D-

A656] (Defaults were particularly likely after the forbearance periods granted by the

credit card industry and the $600-a-week unemployment benefits ended.).

15. United States COVID-19 Cases, Deaths, and Laboratory Testing (NAATs) by

State, Territory, and Jurisdiction,

TRS

FOR

ISEASE

ONTROL

& P

REVENTION

https://covid.cdc.gov/covid-data-tracker/#cases_casesper100klast7days (Jan. 1, 2021)

[https://perma.cc/8QH7-VCPC].

16. See, e.g., Berkeley Lovelace, Jr., Official U.S. Coronavirus Death Toll Is ‘A

Substantial Undercount’ of Actual Tally, Yale Study Finds,

CNBC,

https://

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 4 10-AUG-23 12:04

350 TEXAS A&M LAW REVIEW [Vol. 9

In addition to the mounting death toll and long-term health conse-

quences to survivors, the havoc the COVID–19 pandemic is wreaking

on the American economy is staggering. A few numbers illustrate the

extent of the damage: “The U.S. economy contracted at an annualized

pace of 32.9% in the second quarter [of 2020], . . . the sharpest since at

least the late 1940s.”

Economists concluded as early as May 2020

that more than 100,000 small businesses had already closed perma-

nently since the pandemic erupted in March.

According to the same

survey, 2% of small businesses were simply gone.

The pandemic has

produced the highest unemployment rates in the country since the

Great Depression.

More than 50 million Americans were still out of

work at the end of July 2020, and over a million people filed new

unemployment claims every week, except one, since March.

As a

result of being laid off, over 5.4 million people lost their health insur-

ance.

Further, “[a]t least 11 million renters have fallen behind on

www.cnbc.com/2020/07/01/official-us-coronavirus-death-toll-is-a-substantial-un-

dercount-of-actual-tally-new-yale-study-finds.html (July 2, 2020, 9:11 AM) [https://

perma.cc/D7CE-88SJ]; Excess Deaths Associated with COVID-19,

TRS

FOR

ISEASE

ONTROL

& P

REVENTION

, https://www.cdc.gov/nchs/nvss/vsrr/covid19/excess_deaths.

htm (Sept. 1, 2021) [https://perma.cc/8EC5-JQ97]; Angela Betsaida B. Laguipo, Offi-

cial U.S. Tallies Likely Undercount COVID-19 Deaths,

EWS

(July 3, 2020),

https://www.news-medical.net/news/20200703/Official-UStallies-likely-undercount-

COVID-19-deaths.aspx [https://perma.cc/X5PJ-LLW7]; Pien Huang, Fauci Says U.S.

Death Toll Is Likely Higher. Other COVID-19 Stats Need Adjusting, Too,

NPR

(May

13, 2020, 12:05 PM), https://www.npr.org/sections/goatsandsoda/2020/05/13/854873605/

fauci-says-u-s-death-toll-is-likely-higher-other-covid-stats-need-adjusting-too [https://

perma.cc/T5UU-J2CN].

17. William Watts, This ‘Dire’ Economic Situation ‘Deserves To Be Called a De-

pression—A Pandemic Depression’,

. W

ATCH

, https://www.marketwatch.com/

story/coronavirus-collapse-is-nothing-less-than-a-depression-a-pandemic-depression-

warn-top-economists-11596728170 (Aug. 6, 2020, 4:07 PM) [https://perma.cc/GJ58-

7NY5].

18. Heather Long, Small Business Used to Define America’s Economy. The Pan-

demic Could Change That Forever,

ASH

. P

OST

(May 12, 2020), https://

www.washingtonpost.com/business/2020/05/12/small-business-used-define-americas-

economy-pandemic-could-end-that-forever/ [https://perma.cc/UG7A-YFHQ].

19. Id.

20. Steven Brown, The COVID-19 Crisis Continues to Have Uneven Economic

Impact by Race and Ethnicity,

. I

NST

.: U

. W

IRE

(July 1, 2020), https://

www.urban.org/urban-wire/covid-19-crisis-continues-have-uneven-economic-impact-

race-and-ethnicity [https://perma.cc/JE4Z-3T9V].

21. There were more than 1,000,000 unemployment claims for nineteen weeks in a

row. Paul Wiseman, More Than 1 Million Americans File for Unemployment, Again,

SSOCIATED

RESS

(Aug. 27, 2020), https://apnews.com/383eb8856eda415

ed3a3b17894be035f#:~:text=the%20Labor%20Department%20reported%20Thurs-

day,late%20March%2C%20an%20unprecedented%20streak [https://perma.cc/

Y5ZX-A4CS]; Nick Routley, Charts: The Economic Impact of COVID-19 in the U.S.

So Far,

ISUAL

APITALIST

(July 31, 2020), https://www.visualcapitalist.com/economi

c-impact-of-covid-h1-2020/ [https://perma.cc/565Y-BMBX].

22. Annie Nova, 5.4 Million Americans Have Lost Their Health Insurance. What to

Do If You’re One of Them,

CNBC,

https://www.cnbc.com/2020/07/14/one-of-the-mil-

lions-of-newly-uninsured-americans-what-to-do-next.html (July 14, 2020, 1:54 PM)

[https://perma.cc/HZM9-TQ58].

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 5 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 351

rent[,] and some 3.6 million households could face evictions in the

coming months.”

Notwithstanding the widespread and across-the-board devastation

that COVID–19 is inflicting, it is also agonizingly clear that the pan-

demic’s death toll and economic wreckage disproportionately affects

African Americans, Latinos, and Indigenous communities.

People of

color are at increased risk of getting sick and dying from

COVID–19.

According to the CDC, as of July 16, 2021, the death

rate for American Indians and Alaskan Natives is 2.4 times higher

than the death rate for whites; for African Americans the death rate is

2.0 times higher, and for Hispanics/Latinx people the death rate is 2.3

times higher.

Much of the disparity in these healthcare outcomes is

now widely acknowledged as the result of long-standing systemic

health and social inequality.

Moreover, according to the Pew Research Center, 61% of Hispanic

Americans and 44% of Black Americans reported in April 2020 that

either they or someone in their household had lost a job or wages

because of the pandemic, compared to 38% of white adults.

The

Center for Budget and Policy Priorities reported that one in five adult

renters were behind on their rent for the week ending July 5, 2021, but

the rates for Black (24%) and Latino (18%) renters were significantly

higher than for white (11%) renters.

Black and Hispanic adults were

23. Clifford Colby & Dale Smith, The Federal Eviction Moratorium Is Over. What

Renters Need to Know,

CNET

, https://www.cnet.com/personal-finance/eviction-crisis-

renters-still-have-one-protection-left-until-monday-aug-24/ (Aug. 29, 2021, 9:00 AM)

[https://perma.cc/BU4N-6AEL].

24. Tracking the COVID-19 Recession’s Effects on Food, Housing, and Employ-

ment Hardships,

UDGET

& P

’

RIORITIES

, https://www.cbpp.org/re-

search/poverty-and-inequality/tracking-the-covid-19-recessions-effects-on-food-

housing-and (Aug. 9, 2021) [https://perma.cc/RVQ9-N9YP] [hereinafter Tracking the

COVID-19 Recession’s Effects]; Tiffany N. Ford, Sarah Reber & Richard V. Reeves,

Race Gaps in COVID-19 Deaths Are Even Bigger Than They Appear,

ROOKINGS

(June 16, 2020), https://www.brookings.edu/blog/up-front/2020/06/16/race-gaps-in-

covid-19-deaths-are-even-bigger-than-they-appear/ [https://perma.cc/T997-9HYK].

25. See, e.g., Health Equity Considerations and Racial and Ethnic Minority

Groups,

TRS

FOR

ISEASE

ONTROL

& P

REVENTION

, https://www.cdc.gov/

coronavirus/2019-ncov/community/health-equity/race-ethnicity.html (Apr. 19, 2021)

[hereinafter Health Equity Considerations]; Too Many Black Americans Are Dying

from COVID-19,

. A

. (Aug 1, 2020), https://www.scientificamerican.com/article/

too-many-black-americans-are-dying-from-covid-19/ [https://perma.cc/KBT3-V7X2].

26. Risk for COVID-19 Infection, Hospitalization, and Death By Race/Ethnicity,

TRS

FOR

ISEASE

ONTROL

& P

REVENTION

https://www.cdc.gov/coronavirus/2019-

ncov/covid-data/investigations-discovery/hospitalization-death-by-race-ethnicity.html

(July 16, 2021) [https://perma.cc/MC9G-Q9Y8].

27. See, e.g., Health Equity Considerations, supra note 25; Too Many Black Ameri-

cans Are Dying from COVID-19, supra note 25.

28. Mark Hugo Lopez, Lee Rainie & Abby Budiman, Financial and Health Im-

pacts of COVID-19 Vary Widely by Race and Ethnicity,

SCH

. C

(May 5,

2020), https://www.pewresearch.org/fact-tank/2020/05/05/financial-and-health-im-

pacts-of-covid-19-vary-widely-by-race-and-ethnicity/ [https://perma.cc/A2QU-LKRJ].

29. Tracking the COVID-19 Recession’s Effects, supra note 24.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 6 10-AUG-23 12:04

352 TEXAS A&M LAW REVIEW [Vol. 9

also more likely than their white counterparts to say that they could

not pay some of their bills or could only make partial payments in

April.

The Urban Institute’s July 2020 research indicated that more

than twice as many Black (37.4%) and Hispanic adults (39.3%) were

food insecure as white adults (17.6%),

none of which is surprising

given the employment and wage data.

Clearly, the COVID–19 pandemic’s effects in the United States are

systemic—they affect countless individuals and businesses from every

region of the country, every sector of the economy, and every part of

American society. Systemic effects unquestionably require a systemic

response from the State, with the Coronavirus Aid, Relief, and Eco-

nomic Security (“CARES”) Act

being just one example.

But overlooked if not ignored amid this crisis is the role that con-

tracts and contract law play in all this. A contract is quite literally at

the heart of most of the systemic problems currently confronting indi-

viduals and businesses. Housing. Insurance. Food. Health care. Child

care. Employment. Manufacturing. Construction. Supply chains. You

name it. Contracts are implicated everywhere. And given the head-

lines, we all know what is coming down the pike as everyone, individ-

uals and businesses alike, tries to sort through the ruin that

COVID–19 continues to leave in its wake and assess the impact that

the pandemic will ultimately have on their day-to-day existence if not

long-term survival.

Two questions are thus posed by the pandemic for contract law—

both of which this Article addresses. The first question is descriptive:

Does contract law generally provide any relief to people and entities

who find themselves parties to contracts that, when the time set for

performance arrives, look very different from the contracts they origi-

nally entered into? This question specifically triggers an examination

of contract law’s changed circumstances doctrines (“CCDs”)—

namely, impossibility, impracticability of performance, and frustration

of purpose—to predict how contract law will address the particular

“changed circumstance” known as the COVID–19 pandemic. The sec-

ond question is normative: Should contract law make legal relief, like

the CCDs, more broadly available to contracting parties in these kinds

of catastrophic circumstances?

Conventional wisdom and the CCD literature spanning 70 years as-

sume that the CCDs are very limited remedies at best. Practically

speaking, this means that contract law does not provide relief to most

people who want to get out of their contracts because of changed cir-

30. Id.

31. Brown, supra note 20. For 2021 estimates, see Tracking the COVID-19 Reces-

sion’s Effects, supra note 24.

32. CARES Act, Pub. L. No. 116-136, 134 Stat. 281 (2020) (codified at 15 U.S.C.

§ 9001).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 7 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 353

cumstances.

In a nutshell, this is because the CCDs have front-end

and back-end problems: literally, contract formation and remedy. On

the front end, the CCDs usually fail because they are premised on

assumptions about contracting (i.e., about the parties and the con-

tract-formation process) that simply do not hold up in the real world

today, if they ever did. More specifically, the literature and cases

seemingly agree that the one thing a future adversely affected party

can do to ensure that a CCD will work is to include a provision in the

contract, like a force majeure clause, to protect itself against future

performance-related contingencies.

Of course, this solution presup-

poses at a minimum that future adversely affected parties are either

(1) drafting the contracts they are entering into either alone or with

their contracting partners and/or (2) have the wherewithal—knowl-

edge, time, access to information and advice, money, the list goes

on—to not only insist on the inclusion of such a clause in those con-

tracts but also ensure that the clause actually ends up in the written

documents. One or both of these presuppositions does not exist in the

vast majority of consumer or employment contracts, most if not all

online contracts (i.e., like buying music from the Apple store or prod-

ucts from Amazon), or even in a lot of business contracts, particularly

those involving small businesses.

Consequently, the absence of an

explicit risk-allocation clause in most contracts should surprise no one.

Yet its absence can be and is used to both indict the party who suppos-

edly could have but nevertheless failed to protect itself and predeter-

mine the outcome of the dispute.

The back-end problem that the CCDs present is that the usual rem-

edy for the CCDs is to excuse the promisor from any further perform-

ance obligation.

Excuse, in other words, is either granted or denied.

The remedy is, therefore, presented as a zero-sum game in which one

33. See, e.g., Arthur Anderson, Frustration of Contract—A Rejected Doctrine, 3

AUL

L. R

1, 22 (1953); Michael G. Rapsomanikis, Frustration of Contract in

International Trade Law and Comparative Law, 18

UQUESNE

L. R

. 551, 558–59

(1980); Steven W. Hubbard, Comment, Relief from Burdensome Long-Term Con-

tracts: Commercial Impracticability, Frustration of Purpose, Mutual Mistake of Fact,

and Equitable Adjustment,

47 M

. L. R

79, 80 (1982); Leon E. Trakman, Winner

Take Some: Loss Sharing and Commercial Impracticability, 69

INN

. L. R

471, 477

(1985); Andrew Kull, Mistake, Frustration, and the Windfall Principle of Contract

Remedies, 43

ASTINGS

L.J.

1, 1 (1991); Nicholas R. Weiskopf, Frustration of Contrac-

tual Purpose—Doctrine or Myth?, 70

. J

OHN

’

L. R

239, 242 (1996); Thomas

Roberts, Commercial Impossibility and Frustration of Purpose: A Critical Analysis, 16

. J.L. & J

URIS

129, 129 (2003); Willem H. Van Boom, Impossibility, Impractica-

bility and Unforeseen Circumstances 9 (Mar. 25, 2020) (unpublished manuscript)

(available at https://ssrn.com/abstract=3561025).

34. See infra discussion accompanying notes 196–200.

35. See infra notes 200–08 and accompanying discussion.

36. See, e.g.,

ESTATEMENT

ECOND

)

ONTRACTS

§ 261 (

. L. I

NST

1981)

(explaining that the “duty to render . . . performance is discharged” if the elements of

impracticability are met).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 8 10-AUG-23 12:04

354 TEXAS A&M LAW REVIEW [Vol. 9

party is usually allocated all of the risk and accompanying losses.

Not

surprisingly, in situations where only one party drafted the contract,

the non-drafting party is saddled with all of the risk and loss because

the non-drafting party failed to include a provision protecting itself in

the contract. The reasoning thus becomes not only circular but self-

fulfilling.

While this Article grapples with the CCDs, it diverges from the rest

of the CCD literature in several important ways. To begin with, in-

stead of relying on conventional wisdom or anecdotal evidence about

whether the CCDs are “successful”

when raised in practice, this Ar-

ticle is premised on an empirical study. The study reviewed case law

from all federal and state courts in the Seventh and Ninth Circuits.

The findings, detailed below, offer a unique insight. They document

that parties are not generally successful when they raise the CCDs.

That is, courts do not provide any legal relief to the party trying to get

out of the contract because of the changed circumstances in 86% of

the cases in the Seventh Circuit and in 78% of the cases in the Ninth

Circuit.

So unfortunately, if the past is indeed a prologue for the

future, then the future looks rather bleak. This is because contract law

will most likely let the risk and loss engendered by the COVID–19

pandemic lie where it falls and leave the contracting parties exactly

where it finds them: namely, in breach of their supply contracts, com-

mercial or residential rental agreements, credit card contracts, etc.

Make no mistake: How contract law addresses these ostensibly pri-

vate contracts will have profound social consequences. How many

people will be evicted from their apartments or lose their homes to

foreclosure? How many of those displaced people will be able to find

new places to live or will remain homeless? How many small busi-

nesses will be forced to shut down, never to reopen? How many em-

ployees will lose their jobs and remain permanently out of the

workforce? How many people will lose their health insurance either

through lost work or because they simply can no longer afford to pay

for their own private insurance? And what will this increase in the

number of medically uninsured do to the long-term health of all these

affected people and to the already existing health care disparities and

exorbitant healthcare costs in general? How many childcare centers

will close permanently, and what will happen to the employment pros-

37. See, e.g., Rapsomanikis, supra note 33, at 557; Trakman, supra note 33, at

482–83; see also infra Table 3 and accompanying discussion.

38. The only reason a contracting party would raise one of the CCDs in arbitration

or litigation would be to excuse that party from having to perform the contract. With

this understanding of the CCDs’ purpose, a CCD would only be “successful” when a

court finds that the party’s performance is excused. See, e.g.,

ESTATEMENT

ECOND

)

ONTRACTS

§ 261 (

. L. I

NST

1981) (“Where . . . a party’s performance is made

impracticable . . . his duty to render that performance is discharged . . . .”).

39. See infra Table 3 and accompanying discussion.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 9 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 355

pects for many of those parents, particularly women,

who need child-

care to work?

Obviously, contracts and contract law are not the only explanation

for the existential crises confronting so many Americans and Ameri-

can businesses. In other words, it is not just because so many people

and businesses will end up in breach of their contracts that they find

themselves in uncertain and even dire circumstances. But because all

these breaches of contracts will produce profound social conse-

quences, contracts and contract law are, in fact, an integral part of the

systemic problems currently confronting us all. Consequently, and

contrary to all the CCD literature that addresses this issue,

this Arti-

cle makes the unconventional argument that the CCDs should be

more broadly available, meaning they should be more successful in

excusing contract performance when triggered by catastrophic

circumstances.

This Article therefore proposes a novel intervention. Unlike the

rest of the field, which focuses on the CCDs themselves,

this Article

argues that to effectively address the allocation of unforeseen risks in

general, and catastrophic risks like a pandemic in particular, we must

reframe the legal approach to contract formation. This is because for-

mation is the core of the entire contract law system;

it is literally

where power in a contract is not just embedded but also entrenched.

So, if contract formation is reframed to more accurately reflect con-

tracting in the real world, and given that the solution to the changed

circumstances problem preferred by courts and commentators re-

mains an explicit risk-allocation term in the parties’ contract, then the

solution proposed in this Article to the risk-allocation problem liter-

40. According to the Washington Post, the shuttering of childcare centers may set

women’s employment back an entire generation. See Alicia Sasser Modestino,

Coronavirus Child-Care Crisis Will Set Women Back a Generation,

ASH

. P

OST

(July

29, 2020), https://www.washingtonpost.com/us-policy/2020/07/29/childcare-remote-

learning-women-employment/ [https://perma.cc/VZC2-YC8A].

41. Reporting shows that 25% of the 950 preschools and in-home sites surveyed

by the Center for the Study of Child Care Employment were closed and that others

that remained open were going into debt to keep their doors open. Edward

Lempinen, California Child Care System Collapsing Under COVID-19, Berkeley Re-

port Says,

ERKELEY

EWS

(July 22, 2020), https://news.berkeley.edu/2020/07/22/cali-

fornia-child-care-system-collapsing-under-covid-19-berkeley-report-says/ [https://

perma.cc/ZW33-PEZG].

42. See infra discussion accompanying notes 190–95.

43. See, e.g., Hubbard, supra note 33, at 104–05 (urging equitable price adjustment

as the solution); Trakman, supra note 33, at 481–82, 484–85 (arguing that loss sharing

would minimize many of the issues currently plaguing CCDs in theory and in applica-

tion); Kull, supra note 33, at 6 (articulating the windfall principle, which argues that

since the parties have not allocated the risk between them, the losses should be left to

lie where they fall).

44. See generally Danielle Kie Hart, Contract Formation and the Entrenchment of

Power, 41

. U. C

. L.J.

275 (2009) [hereinafter Hart, Formation] (arguing that

the power of contracts comes from their formation, particularly the element of mutual

assent); see also infra Part IV.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 10 10-AUG-23 12:04

356 TEXAS A&M LAW REVIEW [Vol. 9

ally suggests itself: A risk-allocation clause should be included in most

contracts as part of contract formation. More bluntly, the specific so-

lution will depend on the type of contract involved: (1) For co-drafted

contracts, it would require the inclusion of a standard, negotiable, and

variable risk-and-loss-allocation clause and a good-faith-negotiation

provision; and (2) for most adhesion contracts, it would require the

inclusion of a standard, nonnegotiable, and non-variable risk-and-loss

allocation clause and a good faith negotiation provision. Another im-

portant and innovative contribution of this paper, therefore, is that

this Article explicitly recognizes two types of contracts—co-drafted

and adhesive—and proposes a specific solution based on the type of

contract at issue.

In particular, including a risk-and-loss-allocation clause would facil-

itate transactions and encourage contracting in general by ensuring

that contracts remain efficient and predictable. The risk-and-loss-allo-

cation clause would let contracting parties know in advance how risks

and losses would be allocated between them if a catastrophic changed

circumstance occurs in the future, thereby increasing trust between

the parties and enabling the parties to plan their present and future

affairs accordingly. This is because the risk-and-loss-allocation clause

would require courts and other dispute resolution decision-makers to

shift all the risk and all the loss onto the drafting party in contracts

where only one party actually drafted the contract or onto the party

designated in a co-drafted contract scenario. Because risk and loss

would be explicitly and intentionally allocated in the contract, the

CCDs should arguably not even be necessary. The contract itself

would predetermine the outcome. That said, should the contracting

party that is unhappy with the contract’s risk-and-loss-allocations pur-

sue a contract claim in court (or through arbitration), the existence of

a risk-and-loss-allocation clause would predetermine the outcome of

the CCD cases just as the absence of a risk-and-loss-allocation clause

does now. In such cases, the CCDs would and should be more broadly

available to excuse performance under a contract.

The main difference between the risk-and-loss-allocation clause

proposed here and existing contract law, of course, is who bears all the

risk and loss occasioned by the catastrophic changed circumstance. So

to be clear, if nothing changes and our approach to contract formation

remains the same as it is right now, then all the risk and all the attend-

ant loss will generally be left to lie where it falls, namely, on the party

trying to get out of the contract because of the changed circumstances.

This will be result regardless of the legal theory used to justify (or

demonize) the CCDs or any changes made to the doctrines

themselves.

One of this Article’s most important contributions, therefore, is to

expose the social consequences created when the effects of ostensibly

private contracts between private parties, particularly adhesion con-

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 11 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 357

tracts (i.e., where only one party drafts the document), are aggregated.

Of course, even if the solution suggested in this Article gets adopted,

it will come too late to help any of the people and businesses affected

by the COVID–19 pandemic. The risk-and-loss-allocation clause and

good-faith-negotiation provision being proposed here simply do not

exist in any of these affected contracts. For this reason, this Article

also proposes a principled way for judges or arbitrators deciding CCD

cases going forward, particularly cases involving adhesion contracts, to

find that the risk and loss created by a catastrophic changed circum-

stance should fall on the drafting party.

Finally, it is important to acknowledge that any relief provided to a

contracting party under the CCDs via any of the solutions proposed in

this Article would be meted out contract by contract. Because of this

case-by-case approach, contract law is not and never will be a systemic

fix for systemic failures in American society. Systemic relief must

come from the State. That said, the United States is at a critical mo-

ment in its history right now, and as a result, contract law is or will be

forced to confront a critical moment in its evolution. If we finally ac-

knowledge the public aspects of contracts and contract law—namely,

that they do in fact produce social consequences that extend beyond

the individual contract and contracting parties—then contracts and

contract law may well be part of the solutions to some of the most

pressing problems confronting American society now and into the

future.

The Article proceeds as follows: Part II begins with a primer on the

CCDs and then lays out the methodology, findings, and analysis of the

empirical study conducted for the Article. The primary conclusion

from the study is that the CCDs are not generally successful when

raised in practice, even when the contingency causing the contractual

disruption was the September 11th terrorist attacks, the Great Reces-

sion of 2007–2009, or other similarly catastrophic events. Part III then

highlights the distinction between co-drafted contracts and adhesion

contracts and examines in more detail why courts and commentators

are so reluctant to let people out of their contracts under the CCDs.

The focus on contract formation as the source of the problem distin-

guishes this Article from the rest of the CCD literature and introduces

some Legal Realism into both the discussion and the explanation. Fi-

nally, Part IV discusses the solutions proposed by this Article in detail,

specifically how the risk-and-loss-allocation clause and the good-faith-

negotiation provision would work in both a co-drafted contract and an

adhesive contract scenario.

II. E

MPIRICAL

TUDY OF THE

ROBLEM

Before discussing the data, a primer on the CCDs is needed. The

CCDs typically include impossibility of performance, impracticability

of performance (a.k.a. commercial impracticability), and frustration of

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 12 10-AUG-23 12:04

358 TEXAS A&M LAW REVIEW [Vol. 9

purpose (a.k.a. commercial frustration).

All the CCDs are triggered

by changed circumstances, that is, when circumstances change so dra-

matically after contract formation such that performance is (1) literally

impossible, (2) impracticable because of excessive and unreasonable

cost, or (3) almost completely valueless to one party.

While CCDs

have changed circumstances in common, they differ from each other

in specific ways, including how they address different performance-

related problems and receive separate analytical treatment.

The doctrine of impossibility requires objective impossibility. In

other words, the party seeking to get out of the contract must prove

that the performance promised in the contract is physically not possi-

ble, that is, that no one could perform.

The Taylor v. Caldwell case is

the oft-cited example.

In Taylor, the parties contracted for Taylor to use Caldwell’s music

hall for a series of performances that would occur over four days.

Unfortunately, an accidental fire destroyed Caldwell’s music hall

before the first performance was scheduled to take place.

The de-

struction of the music hall made Caldwell’s duty to provide that music

hall objectively impossible.

Taylor then sued Caldwell for breach of

contract.

The Court held that Caldwell’s duty to provide the music

hall under the parties’ contract was excused because it found that the

parties contracted on the basis of the continued existence of the music

hall.

Contract law theoretically shifted from impossibility to impractica-

bility of performance sometime in the 1900s.

Or perhaps it is more

accurate to say that contract law acknowledged something it already

recognized: Literal impossibility was not required to excuse perform-

ance.

Instead, the party seeking relief from a contract could now

45. See Rapsomanikis, supra note 33, at 551.

46. See id.

47. Richard A. Posner & Andrew M. Rosenfield, Impossibility and Related Doc-

trines in Contract Law: An Economic Analysis, 6

J. L

EGAL

TUDS

83, 85 (1977).

48. See id.; Uri Benoliel, The Impossibility Doctrine in Commercial Contracts: An

Empirical Analysis, 85

ROOK

. L. R

393, 395–96 (2020).

49.

E. A

LLAN

ARNSWORTH

, C

ONTRACTS

§ 9.5 (

4th ed

. 2004) (

discussing Taylor v.

Caldwell, (1863) 122 Eng. Rep. 309 (QB), and calling it “the fountainhead of the

modern law of impossibility”).

50. Taylor, 122 Eng. Rep. at 312.

51. Id.

52. Id.

53. Id. at 310.

54. Id. at 314–15.

55. See, e.g., Hubbard, supra note 33, at 84; Liu Chengwei, Remedies for Non-

performance: Perspectives from CISG, UNIDROIT Principles & PECL § 19.3.1

(2003) (unpublished manuscript) (available at https://www.academia.edu/37883872/

Remedies_for_Non_performance_Perspectives_from_CISG_UNIDROIT_Principles_

and_PECL).

56. See, e.g.,

ARNSWORTH

, supra note 49, § 9.6 (“[C]ourts did not insist on strict

impossibility even under the traditional analysis.”). But see

EFF

ERRIELL

, U

NDER-

STANDING

ONTRACTS

572 (3rd ed. 2014).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 13 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 359

show that the performance had become “impracticable,” meaning that

it could be done only with extreme and unanticipated difficulty or

cost.

With impracticability of performance, therefore, the perform-

ance is not literally impossible, it has just become too difficult or costly

to perform.

The modern doctrine of impracticability of performance

originated in the Mineral Park Land Co. v. Howard case.

In Mineral Park, a contractor agreed to remove all the gravel from

the owner’s land that the contractor required for a construction pro-

ject and purchase it at a fixed price.

The contractor ended up taking

only some of the gravel needed for the construction project from the

owner’s land because, as the parties discovered after extraction began,

much of the gravel on the owner’s land was submerged underwater.

The contractor therefore argued that its performance should be ex-

cused because removing the gravel that was submerged required a dif-

ferent method of extraction and would cost 10 to 12 times more to

remove.

The California Supreme Court agreed that the extreme in-

crease in cost justified the contractor’s nonperformance. According to

the court, “[a] thing is impossible in legal contemplation when it is not

practicable; and a thing is impracticable when it can only be done at

an excessive and unreasonable cost.”

Finally, the frustration of purpose doctrine generally deals with

changed circumstances that make the contract almost completely

worthless to one of the parties.

So like impracticability of perform-

ance, performance of the contract is not literally impossible. Rather,

performance is still possible. But frustration of purpose differs from

impracticability of performance because the adversely affected party

must be able to show that its principal purpose in entering into the

contract has been frustrated.

More importantly, that purpose is frus-

trated only where the object is “so completely the basis of the contract

that, as both parties know, without it the contract would have little

meaning.”

In other words, frustration of purpose requires that both

parties have some kind of common understanding about the principal

purpose of the contract. The Krell v. Henry

case is the usual

example.

57. See Hubbard, supra note 33, at 84; Liu, supra note 55, § 19.3.1.

58. Posner & Rosenfield, supra note 47, at 86; Benoliel, supra note 48, at 397.

59.

ERRIELL

, supra note 56, at 572 (discussing Min. Park Land Co. v. Howard,

156 P. 458 (Cal. 1916)).

60. Min. Park, 156 P. at 458.

61. Id. at 458–59.

62. Id. at 459.

63. Id. at 460.

64.

ESTATEMENT

ECOND

)

ONTS

§ 265 cmt. a (

. L. I

NST

1981); Hub-

bard, supra note 33, at 83, 93; Anderson, supra note 33, at 4; Weiskopf, supra note 33,

at 239–40.

65. Weiskopf, supra note 33, at 240.

66. Id. at 248 (quoting

ESTATEMENT

ECOND

)

ONTS

§ 265 cmt. a).

67. Krell v. Henry [1903], 2 KB 740.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 14 10-AUG-23 12:04

360 TEXAS A&M LAW REVIEW [Vol. 9

In Krell, the defendant rented a room from the plaintiff that over-

looked the route of the coronation procession for King Edward VII.

The plaintiff was aware that the defendant’s primary purpose for rent-

ing the room was to view the coronation procession because the plain-

tiff had advertised his room specifically for this purpose.

When the

procession did not take place as originally scheduled, the defendant

no longer had any need of the room and refused to pay the balance

due under the contract.

The court held that the coronation proces-

sion was “the foundation of the contract” and was recognized as such

by both parties.

As a result, and even though the defendant’s prom-

ise to pay was obviously still performable, the court held that the can-

cellation of the coronation procession excused the defendant from his

duty to pay.

As the foregoing discussion shows, the CCDs have been around for

a long time.

Consequently, considerable conventional wisdom has

developed about them. Some of that wisdom includes the following:

(1) impossibility and impracticability of performance are generally

raised by the contracting party with performance obligations, like

building the house, delivering the goods, etc., as opposed to the paying

party;

(2) contract law shifted away from impossibility to impractica-

bility;

(3) frustration of purpose is generally raised by the paying

party;

(4) courts are much more reluctant to excuse performance

based on frustration of purpose;

and (5) the changed circumstance

(i.e., the event) that triggers the CCDs (a) will usually involve “acts of

God” or acts by third parties

and (b) cannot be in the control of the

68. Id. at 740.

69. Id. at 750.

70. Id. at 740.

71. Id. at 754.

72. Id.

73. The dates associated with the aforementioned decisions are illustrative. Taylor

v. Caldwell, (1863) 122 Eng. Rep. 309 (QB) (impossibility); Min. Park Land Co. v.

Howard, 156 P. 458 (Cal. 1916) (impracticability); Krell, 2 KB at 740 (frustration of

purpose); see also Rapsomanikis, supra note 33, at 551.

74. See, e.g.,

ARNSWORTH

, supra note 49, § 9.7.

75. The Restatement (Second) of Contracts, for example, only discusses changed

circumstances in terms of impracticability, not impossibility. See, e.g.,

ESTATEMENT

ECOND

)

ONTS

§§ 261–64 (

. L. I

NST

. 1981); see also,

ERRIELL

, supra note

56, at 569 (“Contract law originally limited this escape to situations in which the

change of circumstances had made performance literally impossible . . . . The law later

expanded to provide relief where performance had not become completely impossi-

ble, but where . . . the burden of performing had changed in a way that was beyond

the risks assumed by the parties when the contract was made[, i.e.,] performance . . .

ha[d] become ‘commercially impracticable.’”);

ARNSWORTH

, supra note 49, § 9.6 (re-

ferring to impracticability as the new synthesis of the law of impossibility).

76. See, e.g.,

ARNSWORTH

, supra note 49, § 9.7.

77. See id.; Weiskopf, supra note 33, at 267; Van Boom, supra note 33, at 9.

78. For example, all the illustrations used in Restatement (Second) of Conts.

§§ 261 and 265 involve acts of God or acts by third parties. See, e.g.,

ESTATEMENT

ECOND

)

ONTS

§ 261 cmt d. (“Events that come within the rule stated in this

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 15 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 361

party seeking to excuse its performance.

But if the changed circum-

stance preventing the party seeking to be excused from performing

was caused by the other party, then this should ordinarily be treated

as a breach of contract by the other party.

This last piece of conven-

tional wisdom therefore suggests that if the other party’s actions that

caused the changed circumstances was not a breach by that party, then

the party seeking to be excused should be able to argue one of the

CCDs to justify its non-performance. It just remains to be seen

whether the conventional wisdom about the CCDs holds true in

practice.

A. The Cases

Once in a contract, it is very difficult to get out.

This generally

accepted proposition has been substantiated with more and more em-

pirical work,

most notably with respect to the doctrine of unconscio-

nability.

But not a lot of empirical work exists that examines the

CCDs. Notably, only a couple of such studies examine the CCDs

under U.S. law.

Thus, by focusing on the CCDs, this Subsection adds

to the growing body of empirical scholarship, confirming that courts

rarely let parties out of a contract once that contract has been formed.

Section [impracticability] are generally due either to “acts of God” or to act of third

parties.”)

79. With respect to the changed circumstance outside the control of the party

seeking to be excused, see, e.g., Restatement (Second) of Conts. § 261 (“Where, after

a contract is made, a party’s performance is made impracticable without his fault

. . . .”); id. § 265 (“Where, after a contract is made, a party’s principal purpose is

substantially frustrated without his fault . . . .”).

80. See, e.g.,

ESTATEMENT

ECOND

)

ONTS

§ 261 cmt d. (“If the event that

prevents the obligor’s performance is caused by the obligee, it will ordinarily amount

to a breach by the latter . . . without regard to this Section.”).

81. See generally, Danielle Kie Hart, In & Out—Contract Doctrines in Action, 66

ASTINGS

L.J.

1661 (2015) [hereinafter, Hart, In & Out]; see also Robert M. Lloyd,

Making Contracts Relevant: Thirteen Lessons for the First-Year Contracts Course, 36

RIZ

. S

. L.J.

257, 267 (2004); Blake D. Morant, The Teachings of Dr. Martin Luther

King, Jr. and Contract Theory: An Intriguing Comparison, 50

. L. R

63, 110

(1998); Robert A. Hillman, Contract Excuse and Bankruptcy Discharge, 43

TAN

. L.

99, 99 (1990) (“Notwithstanding academic writing that reports or urges expan-

sion of the grounds of excuse, courts actually remain extremely reluctant to release

parties from their obligations.”).

82. See, e.g., Hart, In & Out, supra note 81 (evaluating duress, modification, and

impracticability of performance empirically through various cases); Grace M. Giesel,

A Realistic Proposal for the Contract Duress Doctrine, 107

W. V

. L. R

443,

463–65 (2005) (exploring courts’ treatment of duress in contract disputes).

83. See Brian M. McCall, Demystifying Unconscionability: A Historical and Em-

pirical Analysis, 65

ILL

. L. R

. 773 (2020) (performing an empirical study of uncon-

scionability and summarizing other existing empirical studies covering the same

doctrine).

84. See Benoliel, supra note 48; Anderson, supra note 33. There are, however,

empirical studies that examine CCDs in other countries. See, e.g., Smaran Shetty &

Pranav Budihal, Force Majeure, Frustration and Impossibility: A Qualitative Empirical

Analysis (Aug. 6, 2020), https://ssrn.com/abstract=3665213 [https://perma.cc/47AM-

MU9J] (Indian law).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 16 10-AUG-23 12:04

362 TEXAS A&M LAW REVIEW [Vol. 9

I first describe the methodology used to collect the cases for the Arti-

cle. Then, I present the results of the data collected and draw some

conclusions based on that data. To conclude the Subsection, I make

some observations based on the data, including, but not limited to,

some comments about the conventional wisdom discussed in the CCD

primer above.

1. Methodology

The case law empirical study conducted here focused on three com-

mon law doctrines: impossibility of performance, supervening imprac-

ticability of performance, and supervening frustration of purpose.

Excluded were existing and temporary impracticability or frustration.

This study updates earlier impracticability of performance research I

conducted in 2015

by adding five and a half years of additional data

(2014–2019). The study is entirely new with respect to impossibility

and frustration of purpose. All told, the study includes 20 years of

data for impossibility and impracticability of performance

(2000–2019)

and ten years of data for frustration of purpose

(2005–2015). This ten-year window for frustration of purpose was spe-

cifically selected to capture the jurisprudential outcomes surrounding

the Great Recession (2007–2009). A total of 136 cases from the fed-

eral and state courts within the Seventh and Ninth Circuits were col-

lected for the study.

The research was conducted in the following

steps:

I. Selecting the Jurisdictions. The Seventh and Ninth Circuits

were selected, because these circuits were the ones used in my

2015 empirical study.

That said, the reasons these circuits were

selected for the previous study make sense here as well. More

specifically, the Ninth Circuit was selected because, with nine

states,

it is the largest of all thirteen circuits and is likely to

hear a lot of cases. The Ninth Circuit also has a reputation of

85. Hart, In & Out, supra note 81.

86. Even though impossibility is entirely new in this empirical study, I used the

same time period for impossibility that I used for impracticability of performance

(2000–2019). This is because impossibility and impracticability of performance are

similar enough doctrines that using a different time frame would seemingly skew the

data.

87. The cases collected here are from a dataset of cases consisting of court opin-

ions made available on LexisNexis. Consequently, the following are omitted from the

available LexisNexis dataset: (1) all cases where the parties voluntarily agreed to can-

cel the contract (either because no lawsuit was ever brought or the case was settled

before a decision) and (2) an unknowable number of cases litigated in state court that

were not appealed since very few state trial court decisions result in an opinion.

88. Hart, In & Out, supra note 81.

89. The states within the Ninth Circuit are Alaska, Arizona, California, Hawaii,

Idaho, Montana, Nevada, Oregon, and Washington. What Is the Ninth Circuit?, https:/

/www.ca9.uscourts.gov/judicial-council/what-is-the-ninth-circuit/ [https://perma.cc/

CFF9-9U3U].

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 17 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 363

being more consumer friendly, suggesting that courts there

might be more inclined to excuse people from their contractual

obligations than courts in other circuits. The Seventh Circuit, in

contrast, is much smaller, encompassing only three states,

but

it is closely associated with the Law and Economics approach

and therefore has a reputation for being less consumer friendly,

suggesting that courts there might be more likely to require that

people fulfill their contractual promises.

II. The Searches. Each search was conducted on LexisNexis for

Law School. The searches were broken down by doctrine, ap-

plying the timelines, jurisdictional filters, and search terms

specified below:

a. Jurisdictional Filters—All Searches

i. Seventh Circuit—Jurisdiction: Seventh Circuit, Illinois,

Indiana Wisconsin

ii. Ninth Circuit—Jurisdiction: Ninth Circuit, Alaska, Ar-

izona, California, Hawaii, Idaho, Montana, Nevada,

Oregon, Washington

* All the federal and state courts in the Seventh

and Ninth Circuits are included in the jurisdic-

tional filters.

b. Impracticability of Performance: Original Search (from

2015 Study)

i. Timeline: January 1, 2000, through March 1, 2014

ii. Search Terms

1. Impracticability of Performance: (impract! near/25

perform!) and (perform! near /25 contract).

c. Impracticability of Performance: Updated Search (2020)

i. Timeline: March 15, 2014, through December 31, 2019

ii. Search Terms

1. impract! near/25 perform!

2. perform! near /25 contract

3. (impract! near/25 perform!) and (perform! near /25

contract)

4. “impracticability of performance”

5. “Restatement (Second) of Contracts §261”

d. Impossibility of Performance

i. Timeline: January 1, 2000, through December 31, 2019

ii. Search Terms

1. “Impossibility of Performance”

e. Frustration of Purpose

i. Timeline: January 1, 2005, through December 31, 2015

90. The states within the Seventh Circuit are Illinois, Indiana, and Wisconsin.

About the Court, https://www.ca7.uscourts.gov/about-court/about-court.htm [https://

perma.cc/XHK8-Z56V].

91. See Hart, In & Out, supra note 81, at 1668.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 18 10-AUG-23 12:04

364 TEXAS A&M LAW REVIEW [Vol. 9

ii. Search Terms

1. “Frustration of purpose”

2. “Restatement (Second) of Contracts §265”

III. Screening the Cases. The searches conducted for this study

pulled up 176 cases for the Seventh Circuit and 502 cases for

the Ninth Circuit.

Each case was initially screened to ensure

that it addressed the relevant doctrine being examined and

that some part of the case was decided based on that doctrine.

Only cases that satisfied these criteria were selected for sub-

stantive review.

IV. Substantive Review of the Cases. Each of the selected cases

was then read to ensure, first, that it fell within the jurisdiction

of the Seventh and Ninth Circuits and, second, that it did in

fact address and decide the contract law doctrine at issue.

Cases were omitted, for example, when the court deciding it

applied law from a state outside of the two circuits that were

the subject of this study (i.e., an Illinois court applying New

Jersey law).

On occasion, substantive review revealed that

the case decided an issue involving more than one doctrine,

for example, both impossibility and frustration of purpose. In

this situation, the case was selected for both doctrines. It also

happened occasionally that a case being reviewed for one doc-

trine, for example frustration of purpose, actually focused

more on another doctrine, like impracticability of perform-

ance. In these situations, the case was included as a selected

case for the other doctrine even though the case did not ap-

pear in the search conducted for that doctrine.

V. Totals. At the end of the substantive review process, a total of

136 cases were captured—37 cases for the Seventh Circuit and

99 cases for the Ninth Circuit. Table 1 provides a summary of

the captured cases in each circuit by substantive category and

doctrine.

92. The original empirical study I published in 2015 did not separate the number

of cases by doctrine. The study only included the total number of cases found for all

doctrines examined in the earlier project, so the numbers stated in this text only re-

flect the cases discovered in the searches conducted for this empirical study.

93. See, e.g., Days Inn of Am., Inc. v. Patel, 88 F. Supp. 2d 928 (C.D. Ill. 2000)

(applying New Jersey law).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 19 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 365

ABLE

1: S

UMMARY OF

APTURED

ASES BY

UBSTANTIVE

ATEGORY

Claim Category 7

Cir:

Performance

Cir:

FoP

Cir:

Performance

Cir:

FoP

Total

Real Property 7 1 31 20 59

Employment 3 2 5 3 13

Goods 4 3 3 2 12

Misc. Commercial 3 1 4 2 10

Settlement Agreements 2 2 4 1 9

Misc. Services 3 0 5 0 8

Family 0 0 4 2 6

Insurance 1 1 2 2 6

Public Util./Energy 1 0 1 2 4

Construction 1 0 3 0 4

Education 0 0 2 0 2

Leases 2 0 0 0 2

Software 0 0 1 0 1

The vast majority of the contracts in the captured cases appear to be

commercial (as opposed to consumer) contracts between commercial

parties.

I say, “appear to be,” because none of the cases actually

included a copy of the contracts involved in the disputes or provide

many details about the parties. So determining what kind of contracts

were involved in each case is based on who the contracting parties are

(i.e., individuals, government entities, or businesses) and the subject

matter of the contract (i.e., construction, business, etc.). Based on

these loose parameters, only 38 non-business transactions exist out of

the 136 cases collected for the empirical study.

Out of those 38 cases,

94. See Appendix 1 for a list of all captured cases by circuit and doctrine (the

performance doctrine, which combines impossibility and impracticability, and the

doctrine of frustration of purpose (“FoP”)) (on file with Author). Settlement

agreements included commercial settlements, indemnity agreements, and consent

decrees. The “Family” category includes all family-related settlement agreements.

95. A “commercial contract” is defined broadly here as one that involves any kind

of business and/or is economic in nature. Hence, a “commercial party” is a party (in-

dividual or business entity) that enters the contract for profit or economic reasons, as

opposed to a “consumer,” which is specifically defined by the U.C.C. as “an individual

who enters a transaction primarily for personal, family, or household purposes.”

U.C.C. § 1-201(b)(11) (

. L. I

NST

. & U

NIF

. L. C

OMM

’

2020) (consumer).

96. The cases involving non-business transactions, grouped by type, are as follows:

ESIDENTIAL

EAL

ROPERTY

RANSACTIONS

(17):

Prospect Enters. v. Ruff, No. 10-1026, 2011 WL 2683004, at *2–3 (C.D. Ill. July 11,

2011) (sale of townhome); Exec. Prop. Mgmt., Inc. v. Watson, No. 1-10-1890, 2011 WL

10069467, at *1 (Ill. App. Ct. Mar. 29, 2011) (residential lease); Ury v. Di Bari, No. 1-

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 20 10-AUG-23 12:04

366 TEXAS A&M LAW REVIEW [Vol. 9

15-0277, 2016 WL 2610167, at *1 (Ill. App. Ct. May 5, 2016) (sale of condo); Samuels

v. Merrill, No. B190158, 2007 WL 2084093, at *1 (Cal. Ct. App. July 23, 2007) (sale of

condo); Miranda v. Williams, No. F054365, 2008 WL 4636445, at *1 (Cal. Ct. App.

Oct. 21, 2008) (purchase and construction of residential property); Archundia v.

Chase Home Fin. LLC, No. 09-CV-00960 (AJB), 2009 WL 1796295, at *1 (S.D. Cal.

June 23, 2009) (residential property foreclosure); Bean v. BAC Home Loans Servic-

ing, LP, No. 11-CV-553, 2012 WL 10349, at *1 (D. Ariz. Jan. 3, 2012) (residential

property foreclosure); Reader v. BAC Home Loan Servicing LP, No. 11-CV-553, 2012

WL 125977, at *1 (D. Ariz. Jan. 17, 2012) (residential property foreclosure); Gutierrez

v. PNC Mortg., No. 10CV01770, 2012 WL 1033063, at *1 (S.D. Cal. Mar. 26, 2012)

(home loan refinance and modification); Wear v. Sierra Pac. Mortg. Co., No. C13-535,

2013 WL 6008498, at *1 (W.D. Wash. Nov. 12, 2013) (residential home mortgage fore-

closure); Deschaine v. IndyMac Mortg. Servs., No. CIV. 2:13-1991, 2013 WL 6054456,

at *1–2 (E.D. Cal. Nov. 15, 2013) (residential home mortgage); Lane v. Cooper, No.

D062806, 2014 WL 606556, at *1 (Cal. Ct. App. Feb. 18, 2014) (condo CC & Rs); Bob

Spain Real Est. Servs., Inc. v. Cox, No. 32006-5, 2015 WL 422371, at *1 (Jan. 27, 2015)

(real estate listing agreement); Tanner v. Keating, No. F071491, 2017 WL 2376393, at

*1 (Cal. Ct. App. June 1, 2017) (purchase of residence); Balboa Bay Club, Inc. v.

Howard, No. G033413, 2005 WL 827064, at *1 (Cal. Ct. App. Apr. 11, 2005) (residen-

tial lease); Goldberg v. Prickett, No. B203934, 2009 WL 179572, at *1 (Cal. Ct. App.

Jan. 27, 2009) (sale of residential leasehold); Lohman v. Ephraim, No. B207755, 2010

WL 6901, at *1 (Cal. Ct. App. Dec. 30, 2009) (sale of residential property).

MPLOYMENT

-R

ELATED

RANSACTIONS

(8):

Dalkilic v. Titan Corp., 516 F. Supp. 2d 1177, 1181 (S.D. Cal. 2007); Caravette v. Z

Trim Holdings, Inc., No. 2-11-0087, 2011 WL 10457470, at *1 (Ill. App. Ct. Sept. 29,

2011); Downs v. Rosenthal Collins Grp., LLC, 963 N.E.2d 282, 286, 288 (Ill. App. Ct.

2011); Ryan v. Estate of Sheppard (In re Estate of Sheppard), 789 N.W.2d 616, 617

(Wis. Ct. App. 2010); Dauod v. Ameriprise Fin. Servs., No. SACV 10-00302, 2010 WL

11595801, at *1 (C.D. Cal. July 29, 2010); LECG, LLC v. Unni, No. C-13-0639, 2014

WL 2186734, at *1 (N.D. Cal. May 23, 2014); Kische USA LLC v. Simsek, No. C16-

0168, 2017 WL 3895545, at *1–2 (W.D. Wash. Sept. 6, 2017); Mitchell v. Leed HR,

LLC, No. 2:14-CV-00026, 2015 WL 1611447, at *1–2 (D. Idaho Apr. 10, 2015).

AMILY

-R

ELATED

RANSACTIONS

(5):

Archer v. Archer (In re Marriage of Archer), No. 1 CA-CV 08-0543, 2009 WL

1682146, at ¶ 2 (Ariz. Ct. App. June 16, 2009) (marriage settlement agreement); In re

Marriage of Weber, No. 64739-3, 2011 WL 1947728, at *1 (Wash. Ct. App. May 23,

2011) (marital asset agreement); Hibbard v. Hibbard (In re Marriage of Hibbard), 151

Cal. Rptr. 3d 553, 554 (Ct. App. Jan. 15, 2013); Bennett v. Foss, No. A137452, 2014

WL 1679559, at *1 (Cal. Ct. App. Apr. 29, 2014) (settlement memo); Klein v. Klein,

No. B213125, 2009 WL 3807442, at *1 (Cal. Ct. App. Nov. 16, 2009) (marital settle-

ment agreement).

ISCELLANEOUS

RANSACTIONS

(8):

Tahir v. Imp. Acquisition Motors, LLC, No. 09 C 6471, 2014 WL 985351, at *1 (N.D.

Ill. Mar. 13, 2014) (sale of a car); Ploegman v. Burlington N. & Santa Fe Ry., Co., No.

46776, 2002 WL 1161387, at *1 (Wash. Ct. App. June 3, 2002) (personal injury indem-

nity agreement); Carsh v. Chaparral Pines, LLC, No. 2 CA-CV 2002-0175, 2003 Ariz.

App. Unpub. LEXIS 59, at *2–3 (Ct. App. Aug. 4, 2003) (contract involving a golf

membership); Kashmiri v. Regents of the Univ. of Cal., 67 Cal. Rptr. 3d 635, 638–39

(Ct. App. Nov. 2, 2007) (contract regarding cost of education); Babcock v. ING Life

Ins. & Annuity Co., No. 12-CV-5093, 2013 WL 24372, at *1–2 (E.D. Wash. Jan. 2,

2013) (insurance structured settlement); Achziger v. IDS Prop. Cas. Ins., No. C14-

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 21 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 367

only 15 of them appear to involve adhesive contracts,

i.e., contracts

drafted by one party, usually but not always on a standard form, and

presented to the other party on a take it or leave it basis.

Four com-

mercial contracts could also be characterized as adhesive.

To be clear: I do not claim that the empirical study conducted for

this Article captured all the CCD cases in the Seventh and Ninth Cir-

cuits. For example, this study focused exclusively on the common law

CCDs and not the sale of goods under the Uniform Commercial Code

(i.e., § 2-615). Nor does this study make any claim to have captured all

the CCD cases that applied law from the Seventh or Ninth Circuits. In

other words, the study only focused on cases generated from states

within each of the circuits selected; the study, therefore, would not

have captured a New York court applying California law. That said,

5445, 2017 WL 5194914, at *1 (W.D. Wash. Nov. 9, 2017) (insurance settlement);

Koka v. Koka, No. B277116, 2017 WL 5898391, at *1 (Cal. Ct. App. Nov. 29, 2017)

(real property settlement agreement); Hensley for Hensley v. Haney-Turner, LLC,

No. Civ. S-01-2212, 2006 WL 8458651, at *1 (E.D. Cal. Sept. 28, 2006) (ADA

settlement).

97. The cases involving non-business transactions with adhesive contracts,

grouped by type, are as follows:

ESIDENTIAL

EAL

ROPERTY

RANSACTIONS

(10):

Prospect Enters., 2011 WL 2683004, at *1–2 (sale of townhome); Watson, 2011 WL

10069467 at *1–2 (residential lease); Archundia, 2009 WL 1796295, at *1 (residential

property foreclosure); Bean, 2012 WL 10349, at *1 (residential property foreclosure);

Reader, 2012 WL 125977, at *1 (residential property foreclosure); Gutierrez, 2012 WL

1033063, at *1 (home loan refinance and modification); Wear, 2013 WL 6008498, at *1

(residential home mortgage foreclosure); Deschaine, 2013 WL 6054456, at *1–2 (resi-

dential home mortgage); Bob Spain Real Est. Servs., 2015 WL 422371, at *1 (real

estate listing agreement); Balboa, 20115 WL 827064, at *1 (residential lease).

MPLOYMENT

-R

ELATED

RANSACTIONS

(2):

Dalkilic, 516 F. Supp. 2d at 1180–81 (Turkish interpreters during Iraq War); Dauod,

2010 WL 11595801, at *1 (forgivable loans repayable immediate if employee left

before 7 years).

ISCELLANEOUS

RANSACTIONS

(3):

Carsh, 2003 Ariz. App. Unpub. LEXIS 59, at *1 (contract involving a golf member-

ship); Babcock, 2013 WL 24372, at *1–2 (insurance structured settlement); Achziger,

2017 WL 5194914, at *1 (insurance settlement).

98. Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96

ARV

L. R

1173, 1176–77 (1983).

99. See Specialty Foods of Ind., Inc. v. City of S. Bend, No. 71C01-1212-MI-00244,

2013 WL 3812025 (Ind. Cir. Ct. Feb. 20, 2013) (commercial lease); Butterfield Plaza

Benson, LLC v. Johnson, No. 2 CA-CV 2010-0042, 2010 WL 4705181, at *1 (Ariz. Ct.

App. Nov. 19, 2010) (commercial lease); Wells Fargo Bank, N.A. v. Ash Org., No. 09-

CV-188, 2010 WL 2681675, at *1 (D. Or. July 2, 2010) (commercial loan foreclosure—

land under mobile home park); United States v. Sandwich Isles Commc’ns, Inc., 398

F. Supp. 3d 757, 764–65 (D. Haw. 2019) (telecommunication loan agreements with the

federal government).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 22 10-AUG-23 12:04

368 TEXAS A&M LAW REVIEW [Vol. 9

and with respect to the common law CCDs, the study collected a sig-

nificant number of CCD cases spanning 20 years. Collectively, there-

fore, the cases create a clear picture of how the CCDs are being

interpreted and applied in practice and a solid basis upon which to

draw some conclusions.

2. The Data and Conclusions

This empirical study captured a total of 18 cases that cited a cata-

strophic changed circumstance as the event excusing performance: 3

in the Seventh Circuit and 15 in the Ninth Circuit. Parties raised the

Great Recession in 14 of the cases, the September 11th terrorist attack

in one case, and the unprecedented manipulation of California’s en-

ergy market, the collapse of the wine-grape market, and the Califor-

nian fiscal crisis in three cases.

100

As Table 2 shows, even a

catastrophic changed circumstance is generally insufficient to excuse

the party adversely affected by that event from having to perform a

contract. In fact, performance was excused in only one out of the 18

cases (6%), meaning, of course, that performance was not excused in

17 of the cases (i.e., 94% of the time).

ABLE

2: C

ATASTROPHIC

HANGED

IRCUMSTANCES

101

Cir:

Total

# of

Cases

Cir:

Performance

Excused

Cir:

Performance

Not Excused

Cir:

Total

# of

Cases

Cir:

Performance

Excused

Cir:

Performance

Not Excused

Great

Recession

3 0 3 11 0 11

9/11 0 0 0 1 0 1

Other 0 0 0 3 1 2

Total

3 0 3 (100%) 15 1 (7 %) 14 (93%)

Next, Table 3 aggregates the data by doctrine (with the two per-

formance CCDs—impossibility and impracticability—combined). Ta-

ble 3 confirms that the CCDs are not generally successful in excusing

performance in either the Seventh or the Ninth Circuits. More specifi-

cally, courts in the Seventh Circuit excused performance in only 14%

of the cases. Courts in the Ninth Circuit were a little more likely to

excuse performance, namely, in 22% of the cases. Overall, combining

all the data shows that courts did not excuse performance in 80% of

the cases.

100. See Appendix 2 (on file with Author).

101. See Appendix 2 (on file with Author).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 23 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 369

ABLE

3: P

ERFORMANCE

XCUSED

102

Cir:

Total

# of

Cases

Cir:

Performance

Excused

Cir:

Performance

Not Excused

Cir:

Total

# of

Cases

Cir:

Performance

Excused

Cir:

Performance

Not Excused

Imprac/

Imposs

27 4 23 65 16 49

FoP 10 1 9 34 6 28

Total 37 5 (14%) 32 (86%) 99 22 (22%) 78 (78%)

In reviewing the cases, the CCD claims typically failed for four

main reasons. Each of the four main reasons was cited at least 15

times.

103

A summary of the reasons the CCDs failed is provided in

Table 4 below. Table 4 lays out this data by circuit. While it was not

uncommon for a CCD to fail for more than one reason (for example,

the event was both foreseeable and a risk assigned to the adversely

affected party), Table 4 tracks the cases based on each of the catego-

ries discussed above. In other words, if a CCD failed because it was

foreseeable and the risk was assigned, the case would be counted in

both the Foreseeable and Risk categories in Table 4. For this reason,

there will be cases that appear in more than one category in Appendix

4, which lists the cases in Table 4.

The first reason the CCDs failed has to do with the type of event

(i.e., the changed circumstance) identified as triggering the CCD

claim. Courts routinely held that a party’s own financial ability to per-

form its duties under a contract and market conditions are not the

type of event that justifies nonperformance under the CCDs.

104

And

to be clear: Finances and market conditions were not the right kinds

of events even if the party alleged that its finances were adversely

affected because of an economic crisis

105

like the Great Recession,

106

changed market conditions due to the collapse of the wine grape mar-

102. See Appendix 2 for a list of all cases used for this analysis (on file with

Author). Table 3 shows the total number of cases excused and not excused for each

circuit, separated by the performance doctrines (impracticability (“Imprac”) and

impossibility (“Imposs”)) and the doctrine of frustration of purpose (FoP).

103. See infra Table 4.

104. See, e.g., Prospect Enters. v. Ruff, No. 10-1026, 2011 WL 2683004, at *7 (C.D.

Ill. July 11, 2011); Bank of Am., N.A. v. Shelbourne Dev. Grp., No. 09 C 4963, 2011

WL 829390, at *5 (N.D. Ill. Mar. 3, 2011); In re Marriage of Weber, No. 64739–3–1,

2011 WL 1947728, at *2–3 (Wash. Ct. App. May 23, 2011); Bean v. BAC Home Loans

Servicing, L.P., No. 11-CV-553, 2012 WL 10349, at *5 (D. Ariz. Jan. 3, 2012); Reader

v. BAC Home Loan Servicing, L.P., No. 11-CV-553, 2012 WL 125977, at *4 (D. Ariz.

Jan. 17, 2012).

105. See, e.g., Ma ˜nay v. Acad. Exch. of Am., No. C07-5071, 2008 WL 820097, at *5

(W.D. Wash. Mar. 25, 2008); Hellerstein v. Desert Lifestyles, LLC, No. 15-CV-01804,

2015 WL 6962862, at *9 (D. Nev. Nov. 10, 2015).

106. See, e.g., Shelbourne Dev. Grp., 2011 WL 829390, at *4–5 (concerning a com-

mercial property developer alleging the inability to obtain construction loan commit-

ments from banks, because the Great Recession caused the developer to default).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 24 10-AUG-23 12:04

370 TEXAS A&M LAW REVIEW [Vol. 9

ket,

107

or the housing market crash that precipitated the Great

Recession.

108

Indeed, courts often found that the event cited by the adversely af-

fected party was foreseeable or at least not unanticipated. Such events

included things like the Great Recession,

109

class action litigation

against an insurance company,

110

the inability to obtain financing for a

project,

111

changing market conditions,

112

a third party absconding

with money,

113

and changes in state or federal regulation.

114

The fore-

seeability of the event is the second main reason why the CCD claims

failed.

115

The CCD claims also failed in the cases because the courts found

that the adversely affected party either contributed to the event’s oc-

currence or failed to meet the burden of proof that it did not contrib-

ute to the happening of the event.

116

So for example, courts held that

a CCD failed because the adversely affected party: (1) could not show

that it did not contribute to the circumstances giving rise to the class

action litigations against it;

117

(2) shut down one of its reactors as part

of routine maintenance thereby causing the shortage of materials be-

ing complained about;

118

(3) failed to act with due diligence;

119

and (4)

built and opened a store in violation of its agreement with the other

party.

120

107. French Camp Vineyards v. Guenoc Winery, No. CPF-04-504511, 2005 Cal.

Super. LEXIS 1673, at *6–8 (Cal. Super. Ct. Apr. 22, 2005) (terminating a grape and

wine purchasing agreement between a winery and a vineyard due to the wine grape

market collapse).

108. See, e.g., Realty Execs. Int’l Inc. v. RE/EX Cal. Inc., No. 2:09-CV-00562, 2011

WL 13185715, at *5 (D. Ariz. June 1, 2011) (regarding a regional franchise developer

that failed to pay franchise fees because of housing market crash); Bean, 2012 WL

10349, at *5.

109. See, e.g., Ner Tamid Congregation of N. Town v. Krivoruchko, No. 08 C 1261,

2009 WL 10696538, at *11 (N.D. Ill. July 9, 2009) (holding that risk of the Great

Recession may have been uncertain but it was not unforeseeable); Archer v. Archer

(In re Marriage of Archer), No. 1 CA-CV-08-0543, 2009 WL 1682146, at *2–3 (Ariz.

Ct. App. June 16, 2009).

110. Blue Cross Blue Shield v. BCS Ins., 517 F. Supp. 2d 1050, 1058 (N.D. Ill. 2007).

111. YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 933 N.E.2d 860,

865–66 (Ill. App. Ct. 2010); Archer, 2009 WL 1682146, at *2–3.

112. French Camp Vineyards, 2005 Cal. Super. LEXIS 1673, at *7.

113. Cashman Equip. Co. v. W. Edna Assocs., 380 P.3d 844, 846–47, 852–53 (Nev.

2016).

114. United States v. Sandwich Isles Commc’ns, Inc., 398 F. Supp. 3d 757, 772 (D.

Haw. 2019); Pure Wafer Inc. v. City of Prescott, 845 F.3d 943, 957 (9th Cir. 2017).

115. See infra Table 4.

116. See infra Table 4.

117. Blue Cross Blue Shield v. BCS Ins., 517 F. Supp. 2d 1050, 1058 (N.D. Ill. 2007).

118. BRC Rubber & Plastics, Inc. v. Cont’l Carbon Co., 949 F. Supp. 2d 862,

876–77 (N.D. Ind. 2013).

119. Nielsen Bros. v. Solid Trading, Ltd., No. 52535-2-I, 2004 WL 2581556, at *4

(Wash. Ct. App. Nov. 15, 2004).

120. Cabela’s Retail, Inc. v. Hawks Prairie Inv., LLC, No. 11-cv-5973-RBL, 2013

WL 3089516, at *1, 12 (W.D. Wash. June 18, 2013).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 25 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 371

The CCDs also failed when the courts found that the risk of the

event occurring was assigned to the adversely affected party because

(1) the event represented a type of “normal risk” that is assumed by

the adversely affected party;

121

(2) a specific clause in the contract

allocated the risk to the adversely affected party;

122

(3) the absence of

a specific clause in the contract meant that the risk was allocated to

the adversely affected party;

123

or (4) the adversely affected party

failed to show that it did not bear the risk.

124

It was also not uncommon for a single case to cite more than one,

sometimes overlapping or conflated, reason why the CCD failed. For

example, CCDs failed because: the event was a foreseeable business

risk;

125

the event was foreseeable such that the risk was assumed by

the adversely affected party;

126

or the event was foreseeable and the

adversely affected party contributed to it.

127

Finally, there were a host of other reasons why the CCDs failed that

do not fail squarely within any of the categories of reasons just de-

scribed. Some of those reasons are still worth mentioning here be-

cause they were raised in several cases. These other reasons include,

among other things: (1) objective, literal impossibility is required

before performance will be excused;

128

(2) the fact that performance

121. Indeck Energy Servs., Inc. v. NRG Energy, Inc., No. 03 C 2265, 2004 WL

2095554, at *11 (N.D. Ill. Sept. 16, 2004); Prospect Enters. V. Ruff, No. 10-1026, 2011

WL 2683004, at *7 (C.D. Ill. July 11, 2011); PeopleSoft U.S.A., Inc. v. Softeck, Inc.,

227 F. Supp. 2d 1116, 1118–19 (N.D. Cal. 2002); French Camp Vineyards v. Guenoc

Winery, No. CPF-04-504511, 2005 Cal. Super. LEXIS 1673, at *7 (Cal. Super. Ct. Apr.

22, 2005).

122. Prime/Mansur Inv. Partners, LLC v. Phx. Off., LLC, No. 1-10-0928, 2011 WL

10069096, at *7 (Ill. App. Ct. June 30, 2011); Rock & Stone Mfg. Inc. v. Allied Stone

Sys., No. 1 CA-CV 07-0514, 2008 WL 4329922, at *2 (Ariz. Ct. App. Sept. 18, 2008)

(fixed price contract); Aleut Enters. v. Adak Seafood, LLC, No. 10-cv-0017-RRB,

2010 WL 3522348, at *1–2 (D. Alaska Sept. 2, 2010); Butterfield Plaza Benson, LLC

v. Johnson, No. 2 CA–CV 2010–0042, 2010 WL 4705181, at *4–5 (Ariz. Ct. App. Nov.

19, 2010).

123. Ner Tamid Congregation of N. Town v. Krivoruchko, No. 08 C 1261, 2009 WL

10696538, at *11–13 (N.D. Ill. July 9, 2009) (missing a financing contingency); YPI 180

N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 933 N.E.2d 860, 866 (Ill. App. Ct.

2010) (missing a financing contingency); United States v. Sandwich Isles Commc’ns.,

Inc., 398 F. Supp. 3d 757, 772 (D. Haw. 2019); Next Gen Cap., LLC v. Consumer

Lending Assocs., 316 P.3d 598, 601 (Ariz. Ct. App. 2013).

124. Achziger v. IDS Prop. Cas. Ins., No. C14-5445 BHS, 2017 WL 5194914, at *7

(W.D. Wash. Nov. 9, 2017).

125. Indeck Energy, 2004 WL 2095554, at *11; French Camp Vineyards, 2005 Cal.

Super. LEXIS 1673, at *7.

126. YPI, 933 N.E.2d at 865–66; Pure Wafer Inc. v. City of Prescott, 845 F.3d 943,

957 (9th Cir. 2017); Alameda Belt Line v. City of Alameda, No. A118596, 2009 WL

1744543, at *15 (Cal. Ct. App. June 22, 2009); Confederated Tribes of the Warm

Springs Rsrv. v. Ambac Assur. Corp., No. 10-130-KI, 2010 WL 4875657, at *6 (D. Or.

Nov. 17, 2010).

127. Tahir v. Imp. Acquisition Motors, LLC, No. 09 C 6471, 2014 WL 985351, at *6

(N.D. Ill. Mar. 13, 2014).

128. Innovative Modular Sols. v. Hazel Crest Sch. Dist. 152.5, 965 N.E.2d 414,

421–22 (Ill. 2012); Mostardi Platt Env’t., Inc. v. Power Holdings, LLC, No. 2-13-0737,

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 26 10-AUG-23 12:04

372 TEXAS A&M LAW REVIEW [Vol. 9

has become more expensive or difficult is not sufficient to excuse per-

formance;

129

(3) an alternative performance was available;

130

and (4)

making a payment is never objectively impossible.

131

ABLE

4: R

EASONS THE

CCD

AILED

132

Category 7

Circuit 9

Circuit Totals

Event

8 28 36

Foreseeable

14 21 35

Contributed

7 13 20

Risk

4 11 15

Other

12 19 31

The last two tables in this section—Tables 5 and 6—provide a more

granular look at the CCDs to get a better idea of how often parties

raise each doctrine; whether the doctrines were raised in combination

and, if so, how often; and how many times the paying party raised one

of the performance doctrines (i.e., impossibility or impracticability) or

2014 WL 2192965, at *17 (Ill. App. Ct. May 27, 2014); Ury v. Di Bari, No. 1-15-0277,

2016 WL 2610167, at *4 (Ill. App. Ct. May 5, 2016).

129. Prospect Enters. v. Ruff, No. 10-1026, 2011 WL 2683004, at *6–7 (C.D. Ill. July

11, 2011); Wolf v. Auxxi & Assocs., No. 2-11-0727, 2012 WL 6968932, at *5 (Ill. App.

Ct. Aug. 2, 2012); OWBR LLC v. Clear Channel Commc’ns, Inc., 266 F. Supp. 2d

1214, 1222 (D. Haw. 2003); Cal. Bio-Mass v. City of San Bernadino, No. E037065,

2006 WL 2949565, at *8 (Cal. Ct. App. Oct. 17, 2006); Century Sur. Co. v. 350 W.A.,

LLC, No. 05-CV-1548-L(LSP), 2007 WL 2819668, at *10 (S.D. Cal. Sept. 25, 2007);

Ma ˜nay v. Acad. Exch. of Am., No. C07-5071 RBL, 2008 WL 820097, at *5 (W.D.

Wash. Mar. 25, 2008); Rock & Stone Mfg. Inc. v. Allied Stone Sys., Inc., No. 1 CA-CV

07-0514, 2008 WL 4329922, at *2 (Ariz. Ct. App. Sept. 18, 2008); Landon v. Nolen,

No. 2 CA-CV 2004-0193, 2005 Ariz. App. Unpub. LEXIS 268, at *8 (Ariz. Ct. App.

June 20, 2005).

130. Century, 2007 WL 2819668, at *10–11; In re Marriage of Archer, No. 1 CA-CV

08-0543, 2009 WL 1682146, at *2 (Ariz. Ct. App. June 16, 2009); M & I Bank, FSB v.

Coughlin, No. CV 09-02282-PHX-NVW, 2011 WL 5445416, at *7 (D. Ariz. Nov. 10,

2011); Bennett v. Foss, No. A137452, 2014 WL 1679559, at *13 (Cal. Ct. App. Apr. 29,

2014); Kische USA LLC v. Simsek, No. C16-0168JLR, 2017 WL 3895545, at *9 (W.D.

Wash. Sept. 6, 2017).

131. E.g., Seamen v. Valley Health Care Med. Grp., Inc., No. SA CV 13-1709-DOC

(RNBx), 2015 WL 9093593, at *5 (C.D. Cal. Dec. 16, 2015); see also Exec. Prop.

Mgmt., Inc. v. Watson, No. 1-10-1890, 2011 WL 10069467, at *6 (Ill. App. Ct. Mar. 29,

2011); Lutheran Homes, Inc. v. Lock Realty Corp. IX, No. 1:14-CV-102, 2015 WL

880644, at *6 (N.D. Ind. Mar. 2, 2015); PeopleSoft U.S.A., Inc. v. Softeck, Inc., 227 F.

Supp. 2d 1116, 1119 (N.D. Cal. 2002); Landover Corp. v. Bellevue Master, LLC, No.

C04-2407, 2006 WL 47662, at *14 (W.D. Wash. Jan. 6, 2006); Archundia v. Chase

Home Fin. LLC., No. 09–CV–00960, 2009 WL 1796295, at *5 (S.D. Cal. June 23,

2009); Dauod v. Ameriprise Fin. Servs., No. SACV 10-00302, 2010 WL 11595801, at *3

(C.D. Cal. July 29, 2010); Gutierrez v. PNC Mortg., No. 10cv01770, 2012 WL 1033063,

at *11 (S.D. Cal. Mar. 26, 2012); Wear v. Sierra Pac. Mortg. Co., No. C13–535, 2013

WL 6008498, at *4 (W.D. Wash. Nov. 12, 2013); Deschaine v. IndyMac Mortg. Servs.,

No. CIV.2:13–1991, 2013 WL 6054456, at *5 (E.D. Cal. Nov. 15, 2013).

132. See Appendix 4 for the list of cases used in Table 4 (on file with Author).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 27 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 373

the performing party raised frustration of purpose. Table 5 tabulates

the data for impossibility and impracticability of performance; Table 6

does the same for frustration of purpose. For example, Table 5 shows

that impossibility was raised 14 times in the Seventh Circuit, and the

paying party raised it in 6 of those cases.

133

ABLE

5: I

MPOSSIBILITY

& I

MPRACTICABILITY OF

ERFORMANCE

Cir:

Total Cases

Cir:

Paying Party

Cir:

Total Cases

Cir:

Paying Party

Impossibility 14 6 18 10

Impracticability 5 2 20 8

Both Is + Im 1 1 11 5

Is/Im + FoP 7 3 16 11

Total 27 12 (44%) 65 34 (52%)

ABLE

6: F

RUSTRATION OF

URPOSE

Cir:

Tot Cases

Cir:

Perf. Pty

Cir:

Total Cases

Cir:

Perf Pty

FoP 9 2 21 4

FoP + Is/Im 1 0 13 4

Totals 10 2 (20%) 34 8 (24%)

B. Some Observations

Based on the data collected for this Article, several things are worth

noting. For instance, notwithstanding the supposed shift from impossi-

bility to impracticability sometime in the 1900s,

134

impossibility is still

very much alive and well in both the Seventh and Ninth Circuits.

135

fact, impossibility is the performance doctrine raised most frequently

in the Seventh Circuit.

136

Second, only under some states’ law within each circuit was per-

formance excused based on a CCD. In the Seventh Circuit, those

states were Indiana (1)

137

and Wisconsin (3).

138

In the Ninth Circuit,

133. See Table 5.

134. See supra discussion accompanying notes 55–59.

135. See Table 5.

136. See Table 5, Appendix 5 (on file with Author).

137. See Specialty Foods of Ind., Inc. v. City of S. Bend, No. 71C01-1212-MI-00244,

2013 WL 3812025, at *5 (Ind. Cir. Ct. Feb. 20, 2013) (impracticability).

138. See Hugo Bramschreiber Asphalt Co. v. Midwest Amusement Park, LLC, No.

2006AP1205, 2006 WL 2671000, at *1 (Wis. Ct. App. Sept. 19, 2006) (impossibility);

Wis. Elec. Power Co. v. Union Pac. R.R., 557 F.3d 504, 507 (7th Cir. 2009) (impossibil-

ity); Ryan v. Estate of Sheppard (In re Estate of Sheppard), 789 N.W.2d 616, 620

(Wis. Ct. App. 2010) (frustration of purpose).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 28 10-AUG-23 12:04

374 TEXAS A&M LAW REVIEW [Vol. 9

those states were Arizona (1),

139

California (13),

140

Hawaii (2),

141

Montana (2),

142

Oregon (1),

143

and Washington (3).

144

Third, force majeure clauses rarely appeared in the captured cases.

More specifically, there were only a total of two cases in the Seventh

Circuit

145

and four cases in the Ninth Circuit

146

that even mentioned a

force majeure clause.

To put the fourth observation into context, recall that even though

changed circumstances trigger the CCDs, each of the CCDs actually

139. See C.H. Robinson Co. v. Glob. Fresh, Inc., No. CV 08-2002-PHX-SRB, 2010

WL 11515522, at *5 (D. Ariz. Jan. 22, 2010) (frustration of purpose).

140. See Credit Rsch., Inc. v. Experian Info. Sols., Inc., No. H024220, 2003 WL

22133193, at *7 (Cal. Ct. App. Sept. 16, 2003) (impracticability); Praxis Dev. Grp., Inc.

v. Richman, Lawrence, Greene & Chizever, No. A104874, 2005 WL 1607784, at *8–9

(Cal. Ct. App. July 8, 2005) (impossibility); Miranda v. Williams, No. F054365, 2008

WL 4636445, at *4 (Cal. Ct. App. Oct. 21, 2008) (impossibility); Goldberg v. Prickett,

No. B203934, 2009 WL 179572, at *4 (Cal. Ct. App. Jan. 27, 2009) (frustration of

purpose); Pharmicare Co. v. Prosurg, Inc., No. CPF-08-509076, 2009 Cal. Super.

LEXIS 3780, at *10–11 (Cal. Super. Ct. May 5, 2009) (frustration of purpose); Klein v.

Klein, No. B213125, 2009 WL 3807442, at *3 (Cal. Ct. App. Nov. 16, 2009) (frustration

of purpose); Elsinore Hang Gliding Ass’n v. Concordia CKS Invs., LLC, No.

E046936, 2010 WL 3760247, at *9 (Cal. Ct. App. Sept. 28, 2010) (impossibility); Lane

v. Cooper, No. D062806, 2014 WL 606556, at *7 (Cal. Ct. App. Feb. 18, 2014) (imprac-

ticability); Sznyter v. Spun.com, Inc., No. D061832, 2014 WL 1654036, at *3–4 (Cal.

Ct. App. Apr. 25, 2014) (impossibility and impracticability); Maywood Police Officers

Ass’n v. City of Maywood, No. B256417, 2016 WL 399780, at *5–7 (Cal. Ct. App. Feb.

2, 2016) (impossibility, impracticability, and frustration of purpose); Koka v. Koka,

No. B277116, 2017 WL 5898391, at *3–4 (Cal. Ct. App. Nov. 29, 2017) (impracticabil-

ity). One case, Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga, was

counted twice because the court ruled on two different doctrines. 96 Cal. Rptr. 3d 813,

843 (Ct. App. 2009) (impossibility and commercial frustration).

141. See United States v. Pflueger, No. 06-00140 BMK, 2007 WL 1876028, at *4 (D.

Haw. June 27, 2007) (impracticability); One Wailea Dev., LLC v. Warren S. Unemori

Eng’g, Inc., No. CAAP–13–0000418, 2016 WL 2941062, at *12 (Haw. Ct. App. Apr.

20, 2016) (impracticability).

142. See Cape-France Enters. v. Estate of Peed, 29 P.3d 1011, 1016 (Mont. 2001)

(impossibility and impracticability); Cline v. Kralich, No. DA 16-2016, 2017 WL

3263081, ¶ 8 (Mont. Aug. 1, 2017) (impracticability).

143. See Chang v. Pacificorp, 157 P.3d 243, 257–58 (Or. Ct. App. 2007) (frustration

of purpose).

144. See Ploegman v. Burlington N. & Santa Fe Ry. Co., No. 46776–0–I, 2002 WL

1161387, at *2–3 (Wash. Ct. App. June 3, 2002) (impossibility and impracticability);

Evans v. County of Spokane, No. 19862–6–III, 2002 WL 1797485, at *7 (Wash. Ct.

App. Aug. 6, 2002) (impossibility and impracticability); Babcock v. ING Life Ins. &

Annuity Co., No. 12–CV–5093, 2013 WL 24372, at *4 (E.D. Wash. Jan. 2, 2013)

(impracticability).

145. Wis. Elec. Power Co. v. Union Pac. R.R., 557 F.3d 504, 507 (7th Cir. 2009)

(impossibility); Specialty Foods of Ind., Inc. v. City of S. Bend, No. 71C01-1212-MI-

00244, 2013 WL 3812025, at *1 (Ind. Cir. Ct. Feb. 20, 2013) (impracticability).

146. OWBR LLC v. Clear Channel Commc’ns, Inc., 266 F. Supp. 2d 1214, 1216 (D.

Haw. 2003); French Camp Vineyards v. Guenoc Winery, Inc., No. CPF-04-504511,

2005 Cal. Super. LEXIS 1673, at *6 (Cal. Super. Ct. Apr. 22, 2005) (commercial im-

practicability); Pflueger, 2007 WL 1876028, at *2–3; Aleut Enter., LLC v. Adak Sea-

food, LLC, No. 3:10-cv-0017-RRB, 2010 WL 3522348, at *2 (D. Alaska Sept. 2, 2010)

(commercial impracticability).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 29 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 375

addresses a different performance related issue,

147

which, according to

the conventional wisdom, means that impossibility and impracticabil-

ity of performance are generally raised by the contracting party with

performance obligations while frustration of purpose is usually raised

by the paying party.

148

The data suggest, however, that there may be

some substantive confusion by the litigants/attorneys raising the

CCDs and the courts deciding these cases regarding which CCD the

facts actually trigger and, therefore, the “correct” CCD to raise in liti-

gation. This substantive confusion is evidenced both by the number of

cases in which a party raised one or both of the performance CCDs

and the frustration of purpose CCD (8 cases in the Seventh Circuit

and 29 in the Ninth Circuit, respectively),

149

and the number of times

that the paying party raised one of the performance CCDs.

150

With

respect to the latter observation, the paying party raised the perform-

ance CCD(s) in 12 of the 27 cases out of the Seventh Circuit.

151

other words, the paying party raised a performance CCD 44% of the

time.

152

In the Ninth Circuit, the paying party raised a performance

CCD in 34 of the 65 cases.

153

This means that the paying party raised a

performance CCD 52% of the time.

154

Even if the cases raising both

the performance CCDs and the frustration of purpose CCD are elimi-

nated, leaving only the “pure” performance CCDs, the percentages

remain high—45% in the Seventh Circuit and 47% in the Ninth

Circuit.

155

Fifth, a few words must be said about the successful CCD claims

and, more specifically, about the types of changed circumstances on

which they were premised. Recall that the changed circumstance (i.e.,

the event) that triggers the CCDs (a) will generally involve acts of

God or acts by third parties and (b) cannot be in the control of the

party seeking to excuse its performance. But if the other party caused

the event preventing the adversely affected party from performing,

then this should ordinarily be treated as a breach of contract by the

other party.

156

Some takeaways from the successful claims in the Sev-

enth Circuit (i.e., the cases that excused performance based on a

CCD) are as follows: (1) all involved events outside of the control of

147. See supra discussion accompanying notes 45–80 (providing a general overview

of CCDs).

148. See supra discussion accompanying notes 75–80 (discussing CCD conventional

wisdom).

149. See supra Tables 5 and 6.

150. See supra Table 5.

151. See supra Table 5.

152. See supra Table 5.

153. See supra Table 5.

154. See supra Table 5.

155. See supra Table 5.

156. See supra discussion accompanying notes 75–80 (conventional wisdom).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 30 10-AUG-23 12:04

376 TEXAS A&M LAW REVIEW [Vol. 9

either party;

157

and (2) three of the four cases dealt with traditional

types of changed circumstances, namely, a thing necessary for per-

formance failed to come into existence (two cases)

158

or the death or

incapacity of a person necessary for performance (one case).

159

In contrast, the Ninth Circuit cases are much less uniform with re-

spect to the types of changed circumstances on which the 22 successful

claims were based.

160

More specifically, 14 of the successful cases ad-

dressed changed circumstances outside of the control of either con-

tracting party with 8 of these 13 cases based on traditional types of

changed circumstances

161

and 6 on another event.

162

For 7 of the 22

157. Hugo Bramschreiber Asphalt Co. v. Midwest Amusement Park, LLC, No.

2006AP1205, 2006 WL 2671000, at *1 (Wis. Ct. App. Sept. 19, 2006) (holding that a

third party supplier that failed to deliver asphalt to the plaintiff rendered plaintiff’s

performance impracticable); Wis. Elec. Power Co. v. Union Pac. R.R., 557 F.3d 504,

509 (7th Cir. 2009) (ruling that the railroad was not responsible for transporting coal

to a power plant once the mine closed under the doctrine of impossibility); Specialty

Foods of Ind. v. City of S. Bend, 997 N.E.2d 23, 29 (Ind. Ct. of App. 2013) (excusing

performance from a contract due to impracticability when the College Football Hall

of Fame relocated from South Bend, Indiana to Atlanta, Geogia); Ryan v. Estate of

Sheppard (In re Estate of Sheppard), 789 N.W.2d 616, 620 (Wis. Ct. App. 2010) (de-

termining that the death of a paying party amounted to frustration of purpose).

158. Wis. Elec. Power Co., 557 F.3d at 509 (ruling that the railroad was not respon-

sible for transporting coal to a power plant once the mine closed under the doctrine of

impossibility); Specialty Foods of Ind., 997 N.E.2d 23, 29 (Ind. Ct. App. 2013) (excus-

ing performance from a contract due to impracticability when the College Football

Hall of Fame relocated from South Bend, Indiana to Atlanta, Georgia); see also

E-

STATEMENT

ECOND

)

ONTS

§ 263 (

. L. I

NST

. 1981).

159. In re Estate of Sheppard, 789 N.W.2d at 620 (determining that death of a pay-

ing party amounted to frustration of purpose); see also

ESTATEMENT

ECOND

)

ONTS

§ 262.

160. One of the successful claims was counted twice—once for impossibility and

once for frustration of purpose—because both doctrines were decided in the case. See

Habitat Tr. for Wildlife, Inc. v. City of Rancho Cucamonga, 96 Cal. Rptr. 3d 813, 843

(Ct. App. 2009). That said, for purposes of discussing the event that gave rise to the

successful claim, the same case was only counted once. As a result, the discussion of

the 22 successful claims results in a case count of 21 when the specific events are

examined.

161. Praxis Dev. Grp. v. Richman, Lawrence, Greene & Chizever, No. A104874,

2005 WL 1607784, at *7–8 (Cal. Ct. App. July 8, 2005) (determining that the doctrine

of impossibility applied when a City did not approve interchange agreement necessary

for development project); Miranda v. Williams, No. F054365, 2008 WL 4636445, at *4

(Cal. Ct. App. Oct. 21, 2008) (holding that performance was excused under the doc-

trine of impossibility when the City refused to move a sewer line or issue a permit to

build over it); Goldberg v. Prickett, No. B203934, 2009 WL 179572, at *4 (Cal. Ct.

App. Jan. 27, 2009) (finding that when a 1031 exchange fell through on a property, the

contract’s purpose was frustrated); Pharmicare Co. v. Prosurg, Inc., No. CPF-08-

509076, 2009 Cal. Super. LEXIS 3780, at *10–11 (Cal. Super. Ct. May 6, 2009) (ruling

that a contract’s purpose was frustrated when contracted products failed to satisfy

testing standards set by Korean equivalent of FDA and therefore could not be sold in

Korea); Klein v. Klein, No. B213125, 2009 WL 3807442, at *3 (Cal. Ct. App. Nov. 16,

2009) (finding that the doctrine of frustration of purpose applied when the child for

whom child support was owed died); Habitat Tr., 96 Cal. Rptr. 3d at 843 (asserting

that the doctrines of impossibility and frustration of purpose excused performance

after the City determined that Plaintiff was not a qualified conservation entity and did

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 31 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 377

cases, the changed circumstances were within the control of one of the

contracting parties, with 5 of these events in the control of the non-

adversely affected party

163

and 2 in the control of the party seeking to

excuse its own performance.

164

With respect to the five cases with

not qualify to hold the mitigation land); Elsinore Hang Gliding Ass’n v. Concordia

CKS Invs., LLC, No. E044307, 2010 WL 3760247, at *9 (Cal. Ct. App. Sept. 28, 2010)

(affirming the trial court’s finding that performance was impossible when the River-

side County Flood Control District failed to approve a hang-gliding easement); Bab-

cock v. ING Life Ins. & Annuity Co., No. 12-CV-5093-TOR, 2013 WL 24372, at *6

(E.D. Wash. Jan. 2, 2013) (granting summary judgment to defendant insurance com-

pany after defendant failed to make further payments from structured settlement

pending further proceedings in Ohio, which rendered performance impossible); see

also

ESTATEMENT

ECOND

)

ONTS

§ 264.

162. Cape-Frances Enters. v. Estate of Peed, 29 P.3d 1011, 1015–16 (Mont. 2001)

(finding that a discovery of underground pollution caused performance to be impossi-

ble and impracticable); Credit Rsch., Inc. v. Experian Info. Sols., Inc., No. H024220,

2003 WL 22133193, at *5 (Cal. Ct. App. Sept. 16, 2003) (determining that when a third

party cut off database access, it rendered performance impracticable); Chang v.

Pacificorp, 157 P.3d 243, 247–48 (Or. Ct. App. 2007) (ruling that the unprecedented

manipulation of California’s energy market by third parties constituted as frustration

of purpose); Lane v. Cooper, No. D062806, 2014 WL 606556, at *7–8 (Cal. Ct. App.

Feb. 18, 2014) (asserting that performance was impracticable when an architectural

jury referenced in CCRs no longer existed); One Wailea Dev., LLC v. Warren S.

Unemori Eng’g, Inc., No. CAAP-13-0000418, 2016 WL 2941062, at *12, 29–32 (Haw.

Ct. App. Apr. 20, 2016) (holding that the doctrine of impracticability excused defen-

dant’s performance when plaintiff’s breach of contract with a third party caused the

third party to cancel the land sales contract for the property for which defendant’s

services were required); Koka v. Koka, No. B277116, 2017 WL 5898391, at *3–4 (Cal.

Ct. App. Nov. 29, 2017) (finding that the doctrine of impracticability applied to con-

tractual performance when mediator specified in the parties’ agreement retired).

163. Ploegman v. Burlington N. & Santa Fe Ry., Co., No. 46776-0-I, 2002 WL

1161387, at *2–3 (Wash. Ct. App. June 3, 2002) (excusing plaintiff’s performance by

the impossibility and impracticability doctrines when defendant railroad leased prop-

erty to a third party without reserving right for plaintiff to enter and cut vegetation);

Evans v. Cnty. of Spokane, No. 19862-6-III, 2002 WL 1797485, at *6–7 (Wash. Ct.

App. Aug. 6, 2002) (finding that defendant county’s performance was excused due to

impossibility and impracticability when plaintiffs improperly installed a sewer/septic

system, which led to ongoing violations of health regulations); C.H. Robinson Co. v.

Glob. Fresh, Inc., No. CV 08-2002, 2010 WL 11515522, at *5 (D. Ariz. Jan. 22, 2010)

(discharging defendant’s performance because the contract’s purpose was frustrated

when plaintiff issued voluntary recall of melons after FDA issud warnings regarding

melons); Maywood Police Officers Ass’n v. City of Maywood, No. B256417, 2016 WL

399780, at *5–7 (Cal. Ct. App. Feb. 2, 2016) (ruling that the doctrines of impossibility,

impracticability, and frustration of purpose release the defendant from performing

after plaintiff police department’s frequency and severity of liability claims caused the

defendant city to lose its insurance coverage); Cline v. Kralich, No. DA 16-0216, 2017

WL 3263081, at *2 (Mont. Aug. 1, 2017) (finding that by failing to provide defendant

with notice required by the parties’ agreement, plaintiff caused defendant’s perform-

ance to be impracticable and therefore excused).

164. United States v. Pflueger, No. 06-00140, 2007 WL 1876028, at *3–4 (D. Haw.

June 27, 2007) (excusing defendant’s performance due to impracticability when defen-

dant was unable to obtain a surety bond required to remediate under consent decree

after dam partially owned by defendant broke, causing damage and death); Sznyter v.

Spun.com, Inc., No. D061832, 2014 WL 1654036, at *3–4 (Cal. Ct. App. Apr. 25, 2014)

(affirming that the defendant’s performance was excused due to impracticability after

defendant became insolvent and merged with another company, which triggered Del-

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 32 10-AUG-23 12:04

378 TEXAS A&M LAW REVIEW [Vol. 9

events in the control of the non-adversely affected party, three involve

what looks like a breach by the non-adversely affected party.

165

This

data, therefore, also suggests that there is substantive confusion about

the CCDs in practice, particularly in the Ninth Circuit.

Finally, the particular problems presented by the frustration of pur-

pose doctrine need to be noted, particularly because a lot of people

and businesses affected by the Covid-19 pandemic will be the paying

parties. Recall that conventional contract wisdom tells us that frustra-

tion of purpose is generally raised by the paying party and that courts

are much more reluctant to excuse performance based on this

doctrine.

166

While none of the CCDs are generally successful when raised in

litigation, frustration of purpose is still less successful in practice than

impossibility and impracticability of performance.

167

More specifi-

cally, impossibility and impracticability failed 85% of the time and

frustration of purpose failed 90% of the time in the Seventh Circuit.

168

In the Ninth Circuit, impossibility and impracticability failed 75% of

the time and frustration of purpose failed 82% of the time.

169

That

frustration of purpose is generally less successful than either of the

two performance doctrines is particularly significant given that data

for frustration of purpose was only collected over a ten-year period

(2005–2015) while data for impossibility and impracticability of per-

formance spanned a twenty-year period (2000–2019).

170

The cases highlight why frustration of purpose will generally be

more difficult to establish than impossibility or impracticability of per-

formance. To begin with, the CCD cases make clear that making pay-

ments required under a contract is never objectively impossible.

171

impossibility is never going to excuse performance by a paying party.

As for impracticability and frustration of purpose, the CCD cases

aware law resulting in cancelation of all existing stock shares for nominal

consideration).

165. Ploegman v. Burlington N. & Santa Fe Ry., Co., No. 46776-0-I, 2002 WL

1161387, at *2–3 (Wash. Ct. App. June 3, 2002) (defendant railroad leased property to

a third party without reserving right for plaintiff to enter and cut vegetation);

Maywood Police Officers Ass’n v. City of Maywood, No. B256417, 2016 WL 399780,

at *5–7 (Cal. Ct. App. Feb. 2, 2016) (defendant city terminated its memo of under-

standing with plaintiff police department because the frequency and severity of liabil-

ity claims against the police department caused the defendant city to lose its insurance

coverage); Cline v. Kralich, No. DA 16-0216, 2017 WL 3263081, at *2 (Mont. Aug. 1,

2017) (finding that plaintiff breached the contract with defendant by failing to provide

defendant with notice required by the parties’ agreement and that the breach caused

defendant’s performance (providing plaintiff with 30 days to cure) to be

impracticable).

166. See supra discussion accompanying notes 76–79.

167. See supra Table 3.

168. See supra Table 3.

169. See supra Table 3.

170. See supra Subsection II.A.1 (detailing the Article’s methodology).

171. See supra discussion accompanying note 131.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 33 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 379

make clear that (1) a party’s financial ability to perform its own duties

under a contract is never an excuse for nonperformance and (2) an

increase in the expense or difficulty of performance is not sufficient to

excuse performance—even if the event causing the expense or diffi-

culty is a housing and/or market collapse or an economic disaster.

172

This, of course, means that impracticability of performance and frus-

tration of purpose will rarely excuse the paying party’s performance

either.

Another reason frustration of purpose is more difficult to establish

in practice is because of the doctrine’s “common understanding” re-

quirement. Recall that frustration of purpose generally requires the

adversely affected party to show that its principal purpose for the con-

tract has been frustrated and that the parties share some kind of com-

mon understanding of that purpose.

173

Proving that both parties to the

contract shared a common understanding generally is very difficult, if

not outright impossible, to do.

174

Consider two examples: (1) Parties enter a residential housing

agreement (either lease or mortgage); the common understanding of

the parties is probably (and simply) the ability of the paying party to

possess the premises as a place to live in exchange for money. (2) Par-

ties enter a lease agreement involving commercial property; the com-

mon understanding of the parties is probably (and simply) the ability

of the tenant to possess the premises for commercial purposes (i.e., for

a restaurant, a clothing or hardware store, a software developer’s of-

fice, etc.) in exchange for money. Suddenly, the COVID–19 pandemic

strikes and shuts down the economy. People lose jobs; businesses lose

customers.

175

There are three intertwined problems now confronting the paying

parties (i.e., the residential renters/mortgagors and commercial les-

sees). First, the common understanding of the parties remains com-

pletely intact, even when faced with the economic devastation caused

by the COVID–19 pandemic.

176

The paying party still has the right to

possess the residential or commercial premises for its housing or its

172. See supra discussion accompanying notes 156–57.

173. See supra discussion accompanying notes 64–72 (discussing frustration of

purpose).

174. See, e.g., Alameda Belt Line v. City of Alameda, No. A118596, 2009 WL

1744543, at *14–16 (Cal. Ct. App. June 22, 2009); Liberty Dialysis–Haw., LLC v.

Fresenius Med. Care Holdings, Inc., No. 07-00286, 2009 WL 1789332, at *11 (D. Haw.

June 19, 2009); Confederated Tribes of the Warm Springs Rsrv. v. Ambac Assur.

Corp., No. 10-130, 2010 WL 4875657, at *6 (D. Or. Nov. 17, 2010). For an earlier case

outside the parameters of this empirical study, see 7200 Scottsdale Road General Part-

ners v. Kuhn Farm Machinery, Inc., 909 P.2d 408, 418 (Ariz. Ct. App. 1995).

175. See supra discussion accompanying note 17–23.

176. See Hanoch Dagan & Ohad Somech, When Contract’s Basic Assumptions Fail,

. J.L. & J

URIS

. (forthcoming 2021) (manuscript at 30) (available at https://

ssrn.com/abstract=3605411 [https://perma.cc/2G3A-9NTB]).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 34 10-AUG-23 12:04

380 TEXAS A&M LAW REVIEW [Vol. 9

business.

177

But the paying party either (1) can no longer pay for that

right of possession or (2) sees paying as more expensive or difficult.

178

Second, the paying party’s ability to pay (i.e., to perform its own duty

under a contract) is never going to be the common understanding of

the parties going into any contract.

179

And third, inability to pay for

whatever reason (i.e., it’s become more expensive or difficult) is sim-

ply not an excuse for nonperformance—even when the cause of the

paying party’s financial difficulties is a catastrophic event.

180

All this

means, of course, that paying parties cannot excuse themselves from

performance under the frustration of purpose doctrine.

In sum, the primary conclusion from the data collected for this em-

pirical study is that contract law via the CCDs will, with a few excep-

tions, let the loss lie where it falls and leave the contracting parties

exactly where it finds them, namely, in breach of their contracts. And

this is true even when the changed circumstance triggering the invoca-

tion of one of the CCDs is catastrophic, like the housing market crash

that precipitated the Great Recession. Paying parties in particular will

have a harder time excusing their performance using any of the CCDs.

III. S

EARCHING IN

LL THE

RONG

LACES

That the CCDs are not generally successful when raised in practice

is consistent with CCD literature spanning 70 years.

181

That said, the

literature reflects a lack of consensus on what the CCDs actually do

when they are being employed and even on the theoretical justifica-

tions for them. Some contracts scholars, including Melvin Eisenberg,

argue that the CCDs serve a gap-filling function, much like implied

terms.

182

Other scholars, including Richard Posner, Andrew Rosen-

field, and George Triantis, argue that the CCDs are risk-allocation de-

177. Putzier & Fung, supra note 7.

178. See id.

179. Dagan & Somech, supra note 180 (manuscript at 28–29).

180. See supra Table 2.

181. See, e.g., Anderson, supra note 33, at 1, 21–22; Rapsomanikis, supra note 33, at

558; Hubbard, supra note 33, at 80; Trakman, supra note 33, at 477; Kull, supra note

33, at 1; Weiskopf, supra note 33, at 242; Roberts, supra note 33, at 129; Van Boom,

supra note 33, at 4–5.

182. Melvin A. Eisenberg, Impossibility, Impracticability, and Frustration, 1

J. L

E-

GAL

NALYSIS

207, 209 (2009) [hereinafter Eisenberg, Impossibility] (“The method-

ological proposition is that the tacit assumptions of contracting parties, like other

implied contractual terms, are normally best determined by considering what similarly

situated parties would likely have assumed.”); F

ARNSWORTH

, supra note 49, at 623

(“When a court excuses a party on the ground of impossibility, it is supplying a term

to deal with an omitted case, to fill a gap.”); cf. Kull, supra note 33, at 7 (“[T]he

contemporary formulation of the problem sees the frustrated contract as ‘incomplete,’

in that it did not define expressly the obligations of the parties upon the occurrence of

the frustrating event, and thus assigns to the court the task of supplying a ‘gap-filling’

term.”).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 35 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 381

vices.

183

Still other scholars, including Leon Trakman, argue that the

CCDs should address loss allocation.

184

The theoretical justifications

served by the CCDs range from fairness (Perillo, Liu, and Jenkins)

185

and efficiency (Posner and Rosenfield)

186

to autonomy (Dagan and

Somech)

187

and freedom of contract (Roberts, Triantis, and Van

Boom).

188

This confusion surrounding the CCDs has been noted for

decades.

189

In addition to the differing approaches to the CCDs both practically

and theoretically, the literature also takes one of two positions with

respect to how broadly the CCDs should be construed in practice.

More specifically, some contracts scholars argue that the CCDs should

be construed as a very limited exception to the general rule that con-

tracts should be strictly enforced while other scholars argue that the

CCDs should not be recognized at all. Leon Trakman aptly summed

up the limited exception position and the reasoning supporting it as

follows:

[M]any courts tend to view excuse for nonperformance as a very

narrow concept that should not be readily used to terminate con-

tractual obligations. These courts reason that because there are few

disruptions of performance that parties could not foresee in modern

times of political and economic uncertainty, parties engaged in com-

mercial transaction should be bound to fulfill their unqualified

promises without excuse. Moreover, a promisor who assumes an ob-

ligation without obtaining a contingent release clause should not be

permitted to escape liability for breach at the expense of the

promisee.

190

183. See generally Posner & Rosenfield, supra note 47; George G. Triantis, Contrac-

tual Allocations of Unknown Risks: A Critique of the Doctrine of Commercial Imprac-

ticability, 42

U. T

ORONTO

L.J.

450, 451 (1992).

184. Trakman, supra note 33, at 480 (“Past experience in both common- and civil-

law jurisdictions demonstrates that the allocation of losses arising from nonperform-

ance is a logical and equitable alternative to the imposition of the full loss upon one

contracting party.”).

185. Significantly, the “fairness” rationale is articulated mostly by authors doing

comparative law work about the CCDs. See Joseph M. Perillo, Force Majeure and

Hardship Under the UNIDROIT Principles of International Commercial Contracts, 5

. J. I

’

& C

OMPAR

. L

. 5, 12 (1997); Chengwei, supra note 55, § 19.3.2; Sarah

Howard Jenkins, Exemption for Nonperformance: UCC, CISG, UNIDROIT Princi-

ples—A Comparative Assessment, 72

. L. R

2015, 2017–19 (1998).

186. See generally Posner & Rosenfield, supra note 47.

187. See, e.g., Dagan & Somech, supra note 180 (manuscript at 3–5, 16).

188. See, e.g., Roberts, supra note 33, at 136; Triantis, supra note 187, at 480; Van

Boom, supra note 33, at 1.

189. See, e.g., Posner & Rosenfield, supra note 47, at 84–88; Rapsomanikis, supra

note 33, at 558.

190. Trakman, supra note 33, at 479 (emphasis removed) (footnote omitted); see

also Chengwei, supra note 55, at 243;

ESTATEMENT

ECOND

)

ONTS

ch. 11,

intro. note (

. L. I

NST

1981); Roberts, supra note 33, at 143 (“Exceptions to this

principle [i.e., sanctity of contract] should only be made where too strict adherence to

the principle would be detrimental to another important interest.”); cf. Dagan &

Somech, supra note 180 (manuscript at 6, 35) (arguing that though the CCDs are not a

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 36 10-AUG-23 12:04

382 TEXAS A&M LAW REVIEW [Vol. 9

Other scholars, like George Triantis, Andrew Kull, and Thomas

Roberts, argued, however, the CCDs should not be recognized at all

because (1) the parties have already explicitly or implicitly allocated

all the potential risks in their contract;

191

(2) the CCDs are self-defeat-

ing and would “work[ ] against the very advantages which contracts

are intended to secure[,]” namely, risk distribution;

192

(3) the courts

have no standards by which to choose where the losses or gains from a

contract should fall between the parties to a contract;

193

(4) judicial

intervention has little social and economic utility and could operate to

disincentivize the parties from allocating the risks between them-

selves;

194

and (5) exploitation is not necessarily relevant for the law.

195

Despite all these differences, contracts scholars and courts all seem

to agree that one way to ensure CCDs will work in practice is for the

future adversely affected party to include a provision in the contract

to protect itself against changed circumstances that might occur later.

An example Eisenberg used is instructive:

[If] A knows or should know the risk of unexpected subsoil condi-

tions, and B does not[, then], if A wishes either to be excused if such

conditions materialize or to put the risk of such conditions on B, A

should bring the risk to B’s attention and explicitly contract around

it.

196

Dagan and Somech agree. They argue, for example, that contract

law must follow relational justice, meaning that the law should main-

tain the ability of both parties to achieve the goal they set for them-

selves when they co-authored the shared script, that is, when they co-

drafted their contract.

197

The Restatement (Second) of Contracts

probably makes the point the most succinctly:

The obligor is . . . liable in damages for breach of contract even if he

is without fault and even if circumstances have made the contract

more burdensome or less desirable than he had anticipated. . . . The

obligor who does not wish to undertake so extensive an obligation

may contract for a lesser one by using a variety of common

clauses.

198

marginal part of contract law, the CCDs will generally not be successful when raised,

therefore supporting the position that the CCDs are actually limited exceptions to the

general rule of strict liability in contract).

191. Triantis, supra note 187, at 480.

192. Roberts, supra note 33, at 144–45.

193. Kull, supra note 33, at 40.

194. Id. at 52; Weiskopf, supra note 33, at 270–71.

195. Roberts, supra note 33, at 136–37 (“[W]here one party exploits the pressing

need of the other party by inducing agreement on terms highly unsatisfactory for the

latter, this exploitation is not necessarily of any relevance for the law, even though

such action may be morally reprehensible.”).

196. Eisenberg, Impossibility, supra note 186, at 221 (emphasis added).

197. Dagan & Somech, supra note 180 (manuscript at 19, 22, 48-49, 64).

198.

ESTATEMENT

ECOND

)

ONTS

ch. 11, intro. note

. L. I

NST

. 1981)

(emphasis added); see also Anderson, supra note 33, at 22; Rapsomanikis, supra note

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 37 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 383

The courts are in accord. In United States v. Sandwich Isles Commu-

nications, Inc.,

199

for example, the district court said that impractica-

bility of performance is premised on the idea that “‘the parties will

have bargained with respect to any risks that are both within their

contemplation and central to the substance of the contract’. . . . And

‘if the risk was foreseeable there should have been provision for it in

the contract, and the absence of such a provision gives rise to the infer-

ence that the risk was assumed.’”

200

At a minimum, the “insert a clause in the contract” solution as-

sumes that future adversely affected parties are either (1) drafting the

contracts they are entering into with their contracting partners (or

have meaningful input into the drafting process), and/or (2) have the

wherewithal—meaning the knowledge, time, access to information

and advice, money, the list goes on—to not only insist on the inclusion

of such a clause in those contracts but to also see to it that the clause

actually ends up in the written documents.

These assumptions may describe how some contracts are formed,

but they do not describe the way most contracts are formed. Adhesion

contracts—contracts drafted by one party usually but not always on a

standard form and presented to the other party on a take it or leave

basis

201

—are ubiquitous in consumer

202

and employment contracts,

203

online contracts (e.g., buying anything off a website),

204

and even a lot

of business contracts, particularly those involving small businesses.

One need look no further than the pervasive use of mandatory arbi-

tration provisions in contracts between corporations and consum-

33, at 601–02; Chengwei, supra note 55, at § 19.2; Van Boom, supra note 33, at 13;

Eisenberg, Impossibility, supra note 186, at 221; Kull, supra note 33, at 50–51; Rob-

erts, supra note 33, at 145; Jenkins, supra note 189, at 2017.

199. United States v. Sandwich Isles Commc’ns, Inc., 398 F. Supp. 3d 757 (D. Haw.

2019).

200. Id. at 772 (emphasis in original) (citations omitted) (quoting United States v.

Winstar Corp., 518 U.S. 839, 905 (1996)). A specific clause in the contract allocates

risk to the adversely affected party. And the absence of a specific clause in the con-

tract allocates the risk to the adversely affected party.

201. Rakoff, supra note 98, at 1176–77.

202. AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346–47 (2011) (“[T]he

times in which consumer contracts were anything other than adhesive are long past.”);

ONSUMER

. P

ROT

. B

UREAU

, A

RBITRATION

TUDY

§ 1.1 (2015) (“Whenever a

consumer obtains a consumer financial product such as a credit card, a checking ac-

count, or a payday loan, he or she typically receives the company’s standard form,

written legal contract.”).

203. Rachel Arnow-Richman, Modifying At-Will Employment Contracts, 57

B.C. L.

427, 428 (2016) (“[Workers are] often presented with a set of non-negotiable

terms . . . and asked to accept on the implicit or explicit threat of termination.”); see

also Rachel Arnow-Richman, Cubewrap Contracts: The Rise of Delayed Term, Stan-

dard Form Employment Agreements, 49

RIZ

. L. R

. 637, 638 (2007).

204. See generally,

ANCY

S. K

, W

RAP

ONTRACTS

: F

OUNDATIONS AND

AMIFI-

CATIONS

53–54 (2013) (explaining that wrap contracts—a type of online contract—are

similar to adhesion contracts).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 38 10-AUG-23 12:04

384 TEXAS A&M LAW REVIEW [Vol. 9

ers,

205

employees,

206

and small businesses

207

to see the truth of this

conclusion.

208

Given that adhesive contracts are so ubiquitous, it is striking that

adhesive contracts do not appear to be the typical type of contracts

captured in the case law study for this Article, though they are present

in the data.

209

What is equally striking is that most contracts in the

captured cases instead appear to be commercial contracts between

commercial parties.

210

Clearly, the data captured at least two very dif-

ferent types of contracts.

These data points present an obvious question: What accounts for

or explains the abundance of commercial contracts and the dearth of

adhesive contracts in the captured cases?

One reason the data suggests why so many more commercial con-

tracts ended up in court is because so few of the contracts captured in

the study included force majeure clauses. More specifically, a force

majeure clause was mentioned in only 2 (5%) out of the 37 cases from

the Seventh Circuit

211

and in only 4 (4%) of the 99 cases out of the

Ninth Circuit.

212

“Force majeure” literally means “an event or effect

that cannot be reasonably anticipated or controlled.”

213

The primary

purpose of a force majeure clause, therefore, is to allocate between

the contracting parties the risk that future events will prevent contract

performance.

214

Hence, when it comes to the CCDs, the most directly

applicable contract clause is a force majeure provision.

215

So a more specific question presented with respect to these com-

mercial contracts is why did so few of them include a force majeure

clause. The lack of force majeure clauses might suggest that the com-

mercial cases captured in the study conducted for this Article are not

205. See, e.g., AT&T Mobility, 563 U.S. 333.

206. See, e.g., Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612 (2018); Lamps Plus, Inc. v.

Varela, 139 S. Ct. 1407 (2019).

207. See, e.g., Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (2013).

208. Cf. Jeffrey C. Bright, Unilateral Attorney’s Fees Clauses: A Proposal to Shift to

the Golden Rule, 61

RAKE

L. R

85, 88 n.8 (2012) (“In my personal experience

practicing law, it is standard for one-sided attorney’s fees clauses to be included in

mortgages, residential and commercial leases, and occasionally in sales of goods and

services to small businesses.”).

209. See supra discussion accompanying notes 95–99; see also supra Table 1; Ap-

pendix 1 (on file with Author).

210. See supra discussion accompanying notes 95–99; see also supra Table 1.

211. See supra discussion accompanying note 145.

212. See supra discussion accompanying note 146.

213. Force majeure,

ERRIAM

-W

EBSTER

COM

https://www.merriam-webster.com/

dictionary/force%2majeure [https://perma.cc/DZ39-F5VL].

214. Benoliel, supra note 48, at 402.

215. Indeed, one contract scholar went so far as to argue that “the wide-spread use

of force majeure clauses [in contracts] that provide for events with catastrophic conse-

quences” was the reason that courts did not need to fill in any gaps in the parties’

contract and, therefore why the CCDs were not needed at all. Triantis, supra note 187,

at 451–52.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 39 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 385

the typical type of cases in which a party would normally raise a

CCD.

216

Implicit in this argument are the assumptions that a more

standard CCD case would have included a force majeure clause and

that the force majeure clause would have been successful if it had

been invoked.

217

It is not clear how robust this argument and its as-

sumptions are given that (1) this empirical study captured 136 cases,

98 of which appear to be commercial contracts between commercial

parties,

218

suggesting that the cases captured are a representative sam-

ple of the types of commercial cases that are litigated and in which a

CCD is raised;

219

(2) a recent empirical study conducted by Uri Be-

noliel concluded that sophisticated parties

220

are actually not including

force majeure clauses in their commercial contracts (66% of the 1,926

contracts collected for his study);

221

and (3) even if included in the

contract, force majeure clauses may not necessarily resolve the dis-

pute between the parties either before or after litigation is filed.

Anecdotally, in the empirical study conducted here, performance

was only excused in three of the six cases that discuss a force majeure

clause,

222

and even then, the force majeure clause was the reason per-

formance was excused in only one of those cases.

223

Performance was

not excused in the other three cases, notwithstanding the presence of a

force majeure clause in each of those cases, either because the clause

was interpreted very narrowly such that it did not apply to the circum-

stances being alleged or the event was foreseeable.

224

Indeed, force

216. Thanks go to Stephen Sepinuck for raising this point.

217. If a force majeure clause were included in these contracts, the argument is that

these cases would be less likely to be litigated. This is because the contract itself via

the force majeure clause would resolve the dispute.

218. See supra discussion accompanying notes 95–99.

219. See supra discussion accompanying notes 95–99.

220. See Benoliel, supra note 48, at 409–10 (explaining that at least one of the par-

ties in each of the studied contracts was a sophisticated party, which is defined as “a

sophisticated company that is legally required to report to the SEC. These are nor-

mally companies with more than $10 million in assets.”).

221. Id. at 412.

222. Wis. Elec. Power Co. v. Union Pac. R.R., 557 F.3d 504 (7th Cir. 2009) (impos-

sibility); Specialty Foods of Ind., Inc. v. City of S. Bend, 997 N.E.2d 23 (Ind. Ct. App.

2013) (impracticability); United States v. Pflueger, No. 06–00140 BMK, 2007 WL

1876028 (D. Haw. June 27, 2007) (impracticability).

223. Specialty Foods, 997 N.E.2d at 29 (holding that the Football Hall of Fame mov-

ing to another state was a force majeure event within the “any other reason” language

of the contract’s force majeure clause, excusing performance); Wis. Elec., 557 F.3d at

507 (asserting that the force majeure clause did not specify the circumstances that

would make performance impossible or excuse the performing party from performing

the contract); Pflueger, 2007 WL 1876028, at *3–4 (ruling that force majeure clause

did not excuse performance because a procedural aspect of the clause was not com-

plied with).

224. OWBR LLC v. Clear Channel Commc’ns, Inc., 266 F. Supp. 2d 1214, 1224 (D.

Haw. 2003) (interpreting the force majeure clause to not excuse performance based

on poor economic conditions); French Camp Vineyards v. Guenoc Winery, No. CPF-

04-504511, 2005 Cal. Super. LEXIS 1673, at *7 (Cal. Super. Ct. Apr. 22, 2005) (finding

that the force majeure clause did not excuse performance because the cyclical nature

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 40 10-AUG-23 12:04

386 TEXAS A&M LAW REVIEW [Vol. 9

majeure clauses are always subject to interpretation

225

with the con-

sensus being that courts generally construe these clauses narrowly.

226

According to one court, force majeure clauses are now “little more

than a descriptive phrase without much inherent substance.”

227

The absence of force majeure clauses from the commercial con-

tracts captured in this case law study, therefore, could actually suggest

that the commercial parties to these commercial contracts are explic-

itly opting for default rules,

228

which, in the absence of a risk-alloca-

tion clause, would include the CCDs.

229

Another way to state this

particular theory would be to say that these commercial parties are

overtly rejecting the “insert a clause in the contract” solution favored

by pundits and courts. This could very well explain why so many of the

commercial contracts captured here ended up in litigation. Assuming,

therefore, that these are in fact co-drafted contracts between sophisti-

cated commercial parties who are intentionally opting for the CCDs

as default rules by choosing not to include a risk-allocation clause in

their contracts,

230

then it is entirely plausible that the courts are apply-

of the wine grape market in California was foreseeable); Aleut Enter., LLC v. Adak

Seafood, LLC, No. 3:10-cv-0017, 2010 WL 3522348, at *1–2 (D. Alaska Sept. 2, 2010)

(determining that the force majeure clause did not excuse performance because the

adversely affected party’s inability to obtain fuel was foreseeable).

225. See, e.g., Wis. Elec., 557 F.3d at 507 (“[A] force majeure clause must always be

interpreted in accordance with its language and context, like any other provision in a

written contract . . . .”); Specialty Foods, 997 N.E.2d at 26 (“The objective of a court

when it interprets a contract, including a force majeure provision, is to determine the

intent of the parties at the time the contract was made by examining the language

used in the contract.”).

226. See, e.g., Gordon Firemark, A New Look at the Old Standard: “Force Majeure”

Clauses,

L. O

FFS

. G

ORDON

P. F

IREMARK

(Mar. 19, 2020), https://firemark.com/2020/

03/19/a-new-look-at-the-old-standard-force-majeure-clauses/ [https://perma.cc/PT5A-

A5VB]; Janice M. Ryan, Understanding Force Majeure Clauses,

ENABLE

LLP

(Feb.

2011), https://www.venable.com/insights/publications/2011/02/understanding-force-

majeure-clauses [https://perma.cc/N838-BLLN]; Lawrence P. Rochefort & Rachel E.

McRoskey, The Coronavirus and Force Majeure Clauses in Contracts,

AKERMAN

(Apr. 6, 2020), https://www.akerman.com/en/perspectives/the-coronavirus-and-force-

majeure-clauses-in-contracts.html [https://perma.cc/LQ32-KBMZ]; P. Danielle Cortez

& Jason B. Sims, Boilerplate Contract Language Coming to the Forefront: Force

Majeure Clauses and COVID-19,

’

L. R

(Mar. 19, 2020), https://www.natlaw

review.com/article/boilerplate-contract-language-coming-to-forefront-force-majeure-

clauses-and-covid-19 [https://perma.cc/M5CY-C98X].

227. Specialty Foods, 997 N.E.2d at 27 (quoting Sun Operating Ltd. P’ship v. Holt,

984 S.W.2d 277, 283 (Tex. App. 1998)).

228. See Benoliel, supra note 48, at 412 (concluding that “most parties prefer not to

contract around the default allocation of risks provided under the impossibility doc-

trine” after finding that most of the commercial contracts collected for his study did

not include force majeure provisions).

229. See, e.g., Wis. Elec., 557 F.3d at 506 (“Parties can . . . contract around [impossi-

bility], because it is just a gap filler . . . .”).

230. But the entire argument in the text only holds true if the assumptions made

also hold true; however, it is not entirely clear from the data that all of the assump-

tions hold true. The information about the parties in the cases is quite thin, and there

is rarely any information about how or if the contract was negotiated or how it was

drafted. See supra discussion accompanying notes 163–203.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 41 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 387

ing the CCDs correctly in these cases. In other words, that the CCDs

do not excuse performance most of the time and instead impose all

the risk and attendant loss on one of the contracting commercial par-

ties may be the correct result, again depending on whether the as-

sumptions made about these contracts and the contracting parties

hold true.

The same reasons, however, do not explain the absence of adhesion

contracts in the empirical study conducted here. That said, and to cut

right to the chase, the dearth of adhesive contracts is not surprising

given the host of barriers that make it extremely difficult to litigate a

contract claim in court. To begin with, Eric Zacks has shown that con-

tracts are specifically drafted to take advantage of non-drafting par-

ties’ cognitive biases and to discourage non-drafting parties from

challenging even unconscionable or illegal contracts.

231

Contracts are

drafted, in other words, to encourage non-drafting parties to not file a

claim. And if the claim is small, the non-drafting party would most

likely not want to file a lawsuit

232

because a lawsuit would cost signifi-

cantly more than the claim at stake.

233

But even if a non-drafting party

wants to pursue a contract claim in court, that party will probably have

to find an attorney willing to represent it. Private attorneys, however,

are most likely not going to be willing (or able) to litigate small, indi-

vidual claims (either for a plaintiff or a defendant) because it would

simply not be worth the attorney’s time to do so.

234

While aggregating

these claims would make pursuing contract claims more attractive, ag-

gregating claims is not viable in many cases and is rarely an easy op-

231. Eric Zacks, Shame, Regret, and Contract Design, 97

ARQ

. L. R

695,

741–46 (2014).

232. See Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1633 (2018) (Ginsburg, J., dis-

senting) (noting that claims against employers were “small, scarcely of a size warrant-

ing the expense of seeking redress alone” for individual employees alleging

underpayment in violation of the Fair Labor Standards Act); Michael Heller & Rick

Hills, Land Assembly Districts, 121

ARV

. L. R

. 1465, 1524 (2008) (“[P]laintiffs

with small stakes might . . . have insufficient reason to hire a lawyer to vindicate their

claims.”).

233.

AW S

FOR

. J

UST

., C

. J

UST

. R

EFORM

. & U.S. C

HAMBER

NST

FOR

EGAL

EFORM

, L

ITIGATION

OST

URVEY OF

AJOR

OMPANIES

USCOURTS

GOV

(May 2010), https://www.uscourts.gov/sites/default/files/litigation_cost_survey_of_ma

jor_companies_0.pdf [https://perma.cc/5H6L-7D6K] (“[H]igh transaction costs of liti-

gation, and in particular the costs of discovery, threaten to exceed the amount at issue

in all but the largest cases.”).

234. See, e.g., AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 365 (2011)

(Breyer, J., dissenting) (“What rational lawyer would have signed on to represent the

Concepcions in litigation for the possibility of fees stemming from a $30.22 claim?”);

Carnegie v. Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004) (“The realistic

alternative to a class action is not 17 million individual suits, but zero individual suits,

as only a lunatic or a fanatic sues for $30.”) (emphasis omitted); cf. Allapattah Servs.,

Inc. v. Exxon Corp., 454 F. Supp. 2d 1185, 1217 (S.D. Fla. 2006) (“[F]ew firms, no

matter how large or well financed, will have any incentive to represent the small stake

holders in class actions against corporate America, no matter how worthy the cause or

wrongful the defendant’s conduct.”).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 42 10-AUG-23 12:04

388 TEXAS A&M LAW REVIEW [Vol. 9

tion given that (1) federal statutes

235

and recent United States

Supreme Court decisions

236

make class actions harder to litigate and

(2) class action waivers are routinely found in boilerplate sections of

adhesion contracts.

237

Finally, even if a non-drafting party in an adhesive contract is will-

ing to bring a contract claim and is able to find an attorney willing to

file that claim in court, the non-drafting party will be confronted with

another clause in the boilerplate of the contract, namely, a mandatory

arbitration provision.

238

The only purpose of a mandatory arbitration

clause is to require disputes between the parties to be resolved in an

arbitration proceeding.

239

Given that courts routinely enforce

mandatory arbitration clauses,

240

the vast majority of all contracts

with such a clause will most likely not be litigated.

241

Hence, and for

all of the reasons discussed, it is not surprising that the empirical study

conducted here did not capture many adhesion contracts.

235. E.g., Class Action Fairness Act of 2005, Pub. L. No. 109-2, 119 Stat. 4 (2005)

(to be codified in scattered sections of 28 U.S.C.) (reducing the number of multistate

class actions, the number of national class actions, and the number of state court ac-

tions); see also Edward F. Sherman, Class Actions After the Class Action Fairness Act

of 2005, 80

. L. R

1593, 1606 (2006).

236. E.g., Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (interpreting Rule 23

of the Federal Rules of Civil Procedure that consequentially increased the difficulty in

filing class action claims).

237. See, e.g., AT&T Mobility, 563 U.S. at 333 (consumer wireless service con-

tracts); Am. Express Co. v. Italian Colors Rest., 570 U.S. 228 (2013) (business credit

card agreements); Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1612 (2018) (employment

contracts); Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019) (employment contracts).

238. See Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration,

CON

’

NST

. (April 6, 2018), https://www.epi.org/publication/the-growing-use-of-

mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-

american-workers/ [https://perma.cc/JPK3-ME2M] (finding that more than 60 million

American workers are subject to mandatory arbitration);

ONSUMER

. P

ROT

. B

U-

REAU

, supra note 206, § 1.4.1 (“Tens of millions of consumers use financial products

or services that are subject to pre-dispute arbitration clauses.”).

239.

ONSUMER

. P

ROT

. B

UREAU

, supra note 206, § 1.1 (“[I]f one side sues the

other in court, the party that has been sued in court can invoke the arbitration clause

to require that the dispute proceed, if at all, in arbitration instead.”).

240. See supra notes 205–07 (listing United States Supreme Court arbitration

cases).

241. To get a sense of the sheer number of contracts subject to a mandatory arbitra-

tion clause, see, e.g.,

ONSUMER

. P

ROT

. B

UREAU

, supra note 206, § 2.3 (finding

that 53% of outstanding credit card loans, 44% of insured deposits at financial institu-

tions, 92% of prepaid credit card agreements, and 83.7% of payday lenders all in-

cluded mandatory arbitration provisions in their contracts); Colvin, supra note 242. A

2012 report by Public Citizen documented the problems litigants were facing in court

in light of the U.S. Supreme Court’s Concepcion decision and identified 76 cases in

which courts cited Concepcion to hold that class action waivers in mandatory arbitra-

tion provisions were enforceable; the litigants were therefore required to assert their

claims individually in front of an arbitrator. Christine Hines, Negah Mouzoon & Tay-

lor Lincoln, Cong. Watch, Justice Denied: One Year Later: The Harms to Consumers

from the Supreme Court’s Concepcion Decision Are Plainly Evident,

. C

ITIZEN

(Apr. 2012), http://www.citizen.org/documents/concepcion-anniversary-justice-de-

nied-report.pdf [https://perma.cc/VX2L-HTJ8].

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 43 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 389

But could the “insert a clause in the contract” solution favored by

contracts scholars and courts nevertheless be a workable solution in

the context of adhesion contracts? The short answer is no. Recall that

the “insert a clause in the contract” solution assumes either that both

parties are drafting the contract together or the future adversely af-

fected party can actually ensure that such a clause makes its way into

the parties’ written contract. Neither of these presuppositions are cor-

rect in the context of adhesive contracts. The crazy thing is that every-

one who writes about or deals with contracts and contract law on any

kind of a regular basis already knows this and has known it for a long

time.

For starters, adhesion contracts by definition are not drafted by

both parties.

242

Instead, adhesion contracts are generally drafted by

only one of the contracting parties and presented to the non-drafter

on a take-it-or-leave-it basis.

243

Further, the future adversely affected party has the ability to insist

on the inclusion of a clause in the contract protecting against future

contingencies only if that party already has salient information about

the relevant clause or that party can obtain such information at a tol-

erable cost (in terms of time, money, and effort).

244

But most parties

either do not want to expend the resources they would need to ac-

quire and process the information or recognize from the outset that

obtaining the necessary information would be prohibitively expen-

sive.

245

Moreover, basic microeconomics tells us that information

asymmetries exist and are fairly common, obtaining information im-

poses costs, and, at the end of the day, contracting parties just do not

have equal access to information.

246

But even if all the salient information about the relevant contract

clause or the contract in general was readily available, the “insert a

clause into the contract” solution also assumes a level of rational deci-

sion-making on the part of future adversely affected parties that sim-

ply does not exist. Behavioral psychology and behavioral law and

economics have told us for years now that contracting parties are not

rational actors when they decide to enter a contract.

247

On the con-

trary, there is

242. See Rakoff, supra note 98, at 1177.

243. Id. at 1176–77.

244. Melvin Aron Eisenberg, The Limits of Cognition and the Limits of Contract,

TAN

. L. R

. 211, 214 (1995) [hereinafter Eisenberg, Limits].

245. Id.

246. See Danielle Kie Hart, Contract Law Now—Reality Meets Legal Fictions, 41

U. B

ALT

. L. R

1, 50 (2011) [hereinafter Hart, Reality].

247. See generally Eisenberg, Limits, supra note 248, at 214–25. A thin version of

the rational actor is one in which the actor processes information about all available

options and then ranks those options in the order of subjective expected utility, where

expected utility is usually defined in terms of the actor’s own self-interest. See Hart,

Reality, supra note 246, at 48–49.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 44 10-AUG-23 12:04

390 TEXAS A&M LAW REVIEW [Vol. 9

a mass of experimental evidence[,] [which] shows the existence of

systematic cognitive problems affecting decision-making, such as

bounded rationality, which limits the future scenarios that actors

can be realistically expected to envision; overoptimism; and defects

in capability, including systematic underweighting of future benefits

and costs compared to present benefits and costs and systematic un-

derestimation of low-probability risks.

248

Compounding the problem with adhesive contracts is the widely

known fact that adhesive contracts already favor the drafting party

and sometimes unreasonably so. For example, Florencia Marotta-

Wurgler’s research finds that standard terms in software license agree-

ments were biased in favor of sellers (the party that drafted the

forms).

249

Regarding online contracts, Nancy Kim argues that drafters

already make aggressive use of one-sided terms, such as mandatory

arbitration clauses with class action waivers (“sword” terms)

250

and

perpetual licenses to user-generated content (“crook” terms),

251

that

enabled the drafters of these contracts to obtain benefits that were

ancillary or unrelated to the main purpose of the contracts.

252

Finally, even if all the salient information and requisite decision-

making capacity were present, the future adversely affected party

would still have to be able to not only insist on the clause’s inclusion

in the contract but also ensure that the clause actually ends up in the

written document. This brings us full circle. Since most contracts are

adhesive, there is little likelihood that the future adversely affected

party could actually change anything about the contract to which it is

entering. This would obviously include the inability to insist on the

inclusion of a provision in the contract to protect itself against

changed circumstances that might occur later.

If everyone already knows all this, then I need to ask: Why do

courts and commentators all seem to agree that if an adversely af-

fected party wants to excuse its future performance, then it needs to

include a provision in the contract to protect against future contingen-

cies even though courts and commentators know that including such a

provision is pretty much impossible (pun intended) for the vast major-

ity of contracting parties? What is really going on in the debate about

whether the CCDs should or should not excuse a party’s perform-

ance? The answer has to do with what a contract symbolizes in Ameri-

can society and the role it plays as a result.

248. Eisenberg, Impossibility, supra note 186, at 247; see also Russell Korobkin,

Bounded Rationality, Standard Form Contracts, and Unconscionability, 70

U. C

. L.

1203, 1206, 1208–16 (2003).

249. Florencia Marotta-Wurgler, Competition and the Quality of Standard Form

Contracts: The Case of Software License Agreements, 5

J. E

MPIRICAL

EGAL

TUD

447, 459–63 (2008).

250.

supra note 208, at 48–50.

251. Id. at 50–52.

252. Id. at 4, 48–52, 58, 65–69, 70, 81.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 45 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 391

Contracts in the United States are synonymous with freedom and

individual responsibility, and they have embodied these values since at

least emancipation of the slaves in 1863.

253

According to historian

Amy Dru Stanley:

In principle, contract reconciled human autonomy and obligation,

imposing social order through personal volition rather than external

force. To contract was to incur a duty purely by choice and establish

its terms without the constraints of status or legal prescription.

254

The role of a contract, therefore, was to impose social discipline (i.e.,

to take complete responsibility for oneself) not just on the newly freed

slaves but also on everyone already in the country and those who

would later flock to our shores.

255

Contracts became the legal space

within which individual autonomy was given full expression and the

commitment to private ordering was enshrined. This ethos of individ-

ual autonomy and responsibility and private ordering remains the

foundation of contract law today. As Dagan and Somech explain:

A genuinely liberal contract law conceptualizes contract as a plan

co-authored by the parties in the service of their respective goals.

Law’s justification for enforcing the parties’ agreement is grounded

in its commitment to enhance their self-determination, and both its

animating principles and its operative doctrines are guided by this

autonomy-enhancing telos.

256

Thus, to ensure that contracts fulfill their role in American society,

pacta sunt servanda (contracts must be kept) becomes one of the im-

portant, if not the most important, cornerstones of contract law. Oth-

erwise, if parties could just get out of their contracts, what would be

the value of a promise, particularly in a market economy

257

where

everything and anything of value is transferred via a contract?

258

Pre-

dictability and stability, the synergistic by-products of pacta sunt ser-

vanda, are then called upon to serve twin functions: first, to manage

the expectations of the parties and enable them to structure their af-

fairs and facilitate planning for the future and, second, to continue to

inculcate the norms of autonomy and personal responsibility.

253.

TANLEY

, F

ROM

ONDAGE TO

ONTRACT

: W

AGE

ABOR

, M

AR-

RIAGE

AND THE

ARKET IN THE

GE OF

LAVE

MANCIPATION

35–37 (1998); see

also Priya Kandaswamy, The Obligations of Freedom and the Limits of Legal Equal-

ity,

41 S

. L. R

265, 266 (2012) ( “[R]ecognition as citizens [of the emancipated

slaves] worked to constrain and curtail . . . more expansive possibilities of freedom by

locking freedom for black people into an idiom defined by obligation, indebtedness,

and responsibility.”).

254.

TANLEY

, supra note 257, at 2.

255. Id. at 36–37; Kandaswamy, supra note 257, at 267–68;

P.S. A

TIYAH

, T

ISE

AND

ALL OF

REEDOM OF

ONTRACT

654–55 (1979).

256. Dagan & Somech, supra note 180 (manuscript at 16).

257. Van Boom, supra note 33, at 1.

258. Eisenberg, Limits, supra note 248, at 212.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 46 10-AUG-23 12:04

392 TEXAS A&M LAW REVIEW [Vol. 9

In this light, judicial allocation of the risks from changed circum-

stances through the CCDs is seen as interference with the parties’

freedom of contract, i.e., their autonomy to decide for themselves and

without any interference from the State whether to enter a contract

and on what terms. If one of the parties did not take the steps neces-

sary to protect their interests in the contract, then the fault is theirs,

and all the risks associated with that party’s performance should be

allocated to that party, and any losses accruing as a result of a realized

risk should fall on that party who failed to adequately protect itself.

259

Andrew Kull called this the “windfall principle.”

260

Under this approach, therefore, contracts should be drafted without

the expectation of judicial intervention.

261

This is because the only

role of the courts as agents of the State is to interpret and then enforce

the agreement of the parties as made.

262

In other words, this approach

to contract law in general and the CCDs in particular draws a bright

line between what the State can do—enforce contracts as written—

and what it should not do—step in to excuse performance. Under this

view, to assign a different role to the State would not just impinge on

the parties’ autonomy it would also impermissibly interject the State

into the private ordering that contracts are supposed to guarantee.

263

This stark distinction between what is the proper role of the State

(public) and what is not (private) is the bedrock upon which the entire

contract law system was constructed in this country.

264

For that rea-

son, it is also the crux of the CCD problem or question—depending

on your perspective.

265

But more importantly, because a contract is

usually understood as a private transaction between two (or more)

private parties,

266

the fact that contracts actually produce profound

social (i.e., public) consequences can and is ignored.

IV. P

ROPOSAL

: I

NTERVENING

HEN

ATTERS

The contract law system’s allegiance to the public/private distinction

demands that we pretend that the public aspect(s) of contracts and

contract law simply do not exist. But this is a legal fallacy because

259. Triantis, supra note 187, at 480.

260. Kull, supra note 33, at 6.

261. Jenkins, supra note 189, at 2020.

262. See Hart, Reality, supra note 246, at 29.

263. See generally Hart, Formation, supra note 44, at 184–89.

264. Id.

265. See, e.g., Rapsomanikis, supra note 33, at 551 (“This problem [of changed cir-

cumstances] can be better viewed as a conflict between the principle of private auton-

omy, well expressed in the medieval maxim reservanda sunt pacta, and the modern

need of attributing a social function to private contracts . . . such as good faith, reason-

ableness and practicality.”); id. at 560 (“[C]ommon law views the contract as an in-

strument of liberalism and private autonomy, whereas civil law has ascribed a social

function to private agreements, which are thereby affected by extra-contractual

considerations.”).

266. Hart, Formation, supra note 44, at 184–89.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 47 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 393

reality shows us something else entirely. Notwithstanding the artificial

distinction between the public and the private that contract law clings

to, contracts and how contract law deals with contracts produce

profound social consequences. This is a fact. One need only look at a

newspaper (on paper or online), watch the news, or surf the Internet

to see the truth of the matter.

267

Consequently, and specifically be-

cause contracts and contract law produce social, that is, public conse-

quences, the State must step in. This is because the State is and always

has been free to act in public matters.

What if we were to reimagine contracts based on reality and what

we know about contracts and contracting in the real world instead of

on legal fictions like the notion that most contracts are drafted by

both parties? And what must we do or change to get there?

This Part attempts to sketch out some brief answers—not necessa-

rily the answers or completely worked out answers—to these ques-

tions. Much more work needs to be done. But this is a starting point

. . . .

The first thing that needs to happen is to actually acknowledge that

contracts and contract law produce social (i.e., public) consequences.

In essence, this step is a call to shift the frame from within which con-

tract law is currently understood and analyzed. This may seem like a

trivial step to take but it is not. This is because “frames” are what

enable people to make sense of the world around them. Indeed, the

purpose of a “frame” and the process of “framing” is to create com-

mon meaning and shared understandings of the world and how it

works, which then legitimizes those meanings and the responses to

them.

268

In short, by explicitly trying to influence what people think

and how they think about them, frames help shape reality.

269

So, the

first step requires that we recognize that contracts and contract law at

a minimum implicate public law because of the social consequences

they produce. This first step will then legitimize both the State’s pres-

ence within the field and the State’s actions in response to the social

consequences that contracts and contract law produce.

The second step requires that we premise our understanding of how

contracts are created on the ways in which contracts are actually

formed in today’s world. And the ways in which a contract is actually

formed are critical because contract formation itself is the core of the

contract law system; this is where power in a contract is embedded

and becomes entrenched. This is so because (1) contract formation is

where the norms of autonomy, personal responsibility, and freedom

are given full effect—two private parties voluntarily come together in

their own self-interest to decide whether to enter into a contract and,

267. See supra Part I; see infra Part V.

268. Danielle Kie Hart, In a Word, 41

. L. R

215, 217 (2012).

269. See generally id. at 217–20.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 48 10-AUG-23 12:04

394 TEXAS A&M LAW REVIEW [Vol. 9

if so, on what terms; (2) contract law starts with the formation of a

contract—the rest of contract law (i.e., interpretation, defenses, reme-

dies) are only triggered if a contract exists in the first instance; and,

most importantly, (3) at the moment of contract formation: a pre-

sumption of contract validity is created; and because this presumption

of contract validity is extremely difficult to rebut, the practical result is

that most contracts will be enforceable.

270

Indeed, the empirical study

conducted for this Article validates this conclusion.

Thus, whatever happens or does not happen during contract forma-

tion, i.e., whether a term or clause is included in the contract or not,

will in effect determine the outcome of contract disputes later. Ac-

cording to Eisenberg, Triantis said as much when he wrote, “[I]f a

promisor agrees to render a certain performance, all risks affecting the

promisor’s ability to render that performance that are not specified in

the contract are contractually allocated to her.”

271

Turning now to how contracts are formed in the real world, we

know, for example, that most contracts are adhesive, meaning that

only one party is drafting them.

272

There is also no debate anymore

about whether people read the fine print in their contracts—they do

not. Tess Wilkinson-Ryan puts it this way, “one of the truisms of em-

pirical contracts research is that ‘nobody reads.’”

273

We also know

that even if people did read their contracts, they probably would not

understand what they read. This is because common-form contract

language is generally understandable by people with college de-

grees,

274

which excludes a large number of contracting parties given

that “over 40 million adults are functionally illiterate [while] ‘another

50 million have marginal literacy skills.’”

275

The extent of illiteracy is

worse when it comes to understanding numbers.

276

But even assuming

people read their contracts and understand what they are reading,

there is little likelihood that they can change anything about the con-

tracts they are entering into because most people entering into con-

270. Hart, Formation, supra note 44, at 199.

271. Eisenberg, Impossibility, supra note 186, at 247 (emphasis added).

272. See supra discussion accompanying notes 202–10.

273. Tess Wilkinson-Ryan, A Psychological Account of Consent to Fine Print, 99

OWA

L. R

1745, 1751–53 (2014); see generally Omri Ben-Shahar, The Myth of the

‘Opportunity to Read’ in Contract Law, 5

. R

. C

ONT

. L.

1 (2009).

274. Omri Ben-Shahar & Carl. E. Schneider, The Failure of Mandated Disclosure,

159

U. P

. L. R

647, 712 (2011).

275. Id. at 711 (quoting Ad Hoc Comm. on Health Literacy for the Council on Sci.

Affs., Am. Med. Ass’n, Health Literacy: Report of the Council on Scientific Affairs,

281 JAMA 552, 552 (1999)).

276. Id. at 712 (“Rates of innumeracy are even worse than rates of illiteracy.”); see

also Lauren E. Willis, The Financial Education Fallacy, 101

. E

CON

. R

. 429

(2011).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 49 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 395

tracts are not rational actors,

277

and again, most of the contracts they

enter into are adhesive.

278

If we acknowledged that contracts and contract law produce social

consequences, and if contract formation was premised on the ways in

which contracts are actually formed, then any number of different so-

lutions could be considered. Two solutions are proposed here. The

first solution is roughly a rule of “interpretation” that would apply to

the types of adhesion contracts described in more detail below

279

and

permit a judge or arbitrator to impose the risk and loss caused by a

catastrophic changed circumstance on the drafting party. If there is no

risk-allocation clause in the adhesion contract at issue, then the court

should interpret its absence against the drafting party and hold that

the drafting party should bear both the risk and loss because this is

exactly the contracting party that contract law presumes can and

should take care of itself. The drafting party, therefore, should be

forced to absorb all the costs associated with its failure to protect it-

self. That said, even if the adhesion contract at issue includes a risk-

allocation clause, the judge or arbitrator could and should still inter-

pret the contract as imposing the risk and loss on the drafting party.

Given what we know about how contracts are formed in the real

world, a judge or arbitrator could, if she so chose, reasonably and le-

gitimately conclude that the risk-allocation clause in the adhesion con-

tract should not be given effect.

The second solution is one that focuses specifically on the CCDs

and is one already suggested by commentators and the courts, namely,

including clauses in the contract.

280

The specific clauses suggested

here are a risk-and-loss-allocation clause (“RLAC”) and a good-faith-

negotiation provision (“GFP”). Because it is not likely that the com-

mon law would adopt either of the proposed clauses,

281

the RLAC

and GFP proposed here must be created under a federal statute. More

specifically, the proposed federal statute would require the following:

(1) the inclusion of a standard, negotiable, and variable RLAC to-

gether with a GFP in co-drafted contracts; and (2) the inclusion of a

standard, nonnegotiable, and non-variable RLAC (that includes the

risk of non-payment) together with a GFP in most adhesive contracts.

Because the world of contracting appears split into at least two types

of contracts—co-drafted and adhesive—the RLAC in particular

277. See supra discussion accompanying notes 247–48.

278. See supra discussion accompanying notes 202–10.

279. See infra discussion Part IV.

280. See supra discussion accompanying notes 201–09.

281. The common law is unlikely to adopt either of the proposed clauses given: (1)

its assumptions about contract formation, see supra discussion accompanying notes

225–34; (2) the fact that the implied obligation of good faith only applies to the per-

formance and enforcement of contracts under American law, see, e.g.,

ESTATEMENT

ECOND

)

ONTS

§ 205 (

. L. I

NST

1981); and (3) the jurisprudence established

around the CCDs, see supra discussion accompanying pp. 9–11.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 50 10-AUG-23 12:04

396 TEXAS A&M LAW REVIEW [Vol. 9

would look and work differently depending on the type of contract at

issue. However, the RLAC in each of these contracting scenarios

would be triggered by catastrophic changed circumstances, like the

Great Recession or the COVID–19 pandemic.

282

To state the obvious, a contract is “co-drafted” if each party to that

contract actually helped negotiate and draft it. But “co-drafting” can-

not simply be presumed even in a commercial contract between com-

mercial parties. This is because “co-drafting” presupposes that each

contracting party possesses a certain amount of bargaining power,

specifically, enough bargaining power to enable each party to know,

understand, and protect their interests during contract formation. So a

co-drafted contract would include, at a minimum, the following three

criteria.

First, both parties to the contract must either be represented by or

have actual access to third-party advisers during the negotiation and

drafting phase(s) of contract formation. This is because every con-

tracting party has theoretical access to third-party advisers in that

every contracting party can theoretically hire a third-party adviser. An

attorney for anyone who wants one is a worthy aspiration. But it is not

at all clear (i.e., through any kind of evidence), that most people or

even a lot of businesses have the money to actually hire a third-party

adviser to help negotiate and draft their contracts. So “actual access to

third-party adviser(s)” means that the contracting parties have actually

hired a third-party adviser(s)

283

or have the financial ability to hire a

third-party adviser(s) but have explicitly chosen not to do so. If the

latter option is taken, certified financial statements documenting that

the party who opted not to use a third-party adviser had the finances

available are sufficient to satisfy this criterion.

The second and most important criterion is that each contracting

party must have meaningful input into the terms that are included in

and excluded from the contract. While “meaningful input” and “actual

access to third-party advisers” seem similar and perhaps redundant,

they are not. “Meaningful input” recognizes that even if a contracting

party is represented by a third-party adviser, the contract at issue

could still be presented on a take it or leave it basis, depending on the

disparity in bargaining power between the contracting parties. Imag-

ine, for example, a small parts supplier “negotiating” with Ford Motor

282. One could definitely argue that more circumstances short of catastrophic

should excuse performance under a risk-allocation clause or the CCDs. But what con-

stitutes “normal risk”—risk that is reasonable for a contracting party to assume or be

made to assume—is beyond the scope of this Article. Cf. Indeck Energy Servs., Inc. v.

NRG Energy, Inc., No. 03-C-2265, 2004 WL 2095554, at *11 (N.D. Ill. Sept. 16, 2004).

That said, there are certain kinds of risk, namely, risk created by unforeseen cata-

strophic circumstances, that make it simply unreasonable to think—let alone con-

clude—that a party somehow agreed to assume such risk when it entered the contract.

283. Hiring would include using personnel from within a contracting party’s own

company (i.e., from the legal, financing, or accounting departments).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 51 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 397

Company the terms of a supply contract or a restaurant owner “nego-

tiating” with Wells Fargo for a commercial loan. The parts supplier

and restaurant owner could very well be represented by an attorney or

adviser in the negotiations. But it is certainly well within the realm of

possibility to also imagine that the parts supplier and restaurant owner

would have to accept whatever terms Ford or Wells Fargo insisted on

if the parts supplier or the restaurant owner really wanted the con-

tract. To establish “meaningful input,” therefore, both parties would

have to submit declarations or affidavits attesting that they did in fact

have meaningful input into the drafting of the contract.

284

The last criterion for a co-drafted contract is that the contract pro-

duced cannot be a standard form.

285

In other words, the contract pro-

duced cannot be one that could be re-used in other transactions with

different parties with little to no modifications. Instead, the contract

produced must be specific and tailored to the transaction and parties

at issue.

At the end of the day, any contract between any contracting parties

could be a co-drafted contract provided that all three criteria are met.

In a co-drafted contract scenario, the contracting parties would be

subject to the mandatory, but variable, RLAC as well as the GFP. In

this situation, the RLAC would be automatically included in the par-

ties’ contract unless they explicitly contract around it. The role of the

GFP would be to ensure that the negotiations about whether to keep

or remove the RLAC would be conducted in good faith. In other

words, the parties could decide for themselves whether to keep or

eliminate the RLAC and for what consideration. If the RLAC is left in

the contract, then the RLAC would determine the risk and loss alloca-

tion between the parties if catastrophic changed circumstances affect

future performance. But if the parties decide to eliminate the RLAC

from their contract, then this means that the parties have explicitly

adopted the CCDs as the default rules to sort out their future risk and

loss allocations. Here, courts, commentators, and the contracting pub-

lic could safely assume that this co-drafted contract is the product of

voluntary agreement between parties who knew what they were do-

ing. Thus, if the CCDs were later invoked in litigation, a court could

and should enforce the contract as written and allocate all the risk and

284. If one party is Ford Motor and the other is the small parts supplier, one can

plausibly argue that the parts supplier would attest to having meaningful input into

the drafting of the contract (even if it did not) to preserve its relationship or potential

relationship with Ford. While this practical consideration is true, whether the small

parts supplier will attest to meaningful input will really depend on the circumstances.

The existence of catastrophic circumstances, like the COVID–19 pandemic, could po-

tentially cause the small parts supplier to go out of business because it cannot satisfy

its supply contract with Ford. That parts supplier might very well opt not to claim

meaningful input if meaningful input did not in fact occur.

285. This criterion should be obvious given that a standard form is one of the

hallmarks of an adhesion contract.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 52 10-AUG-23 12:04

398 TEXAS A&M LAW REVIEW [Vol. 9

loss onto the party that decided it did not need the protection of the

RLAC. In short, allocating risk and loss in this fashion (i.e., pursuant

to existing CCD case law) and under these circumstances (i.e., where

the parties to a co-drafted contract eliminated the RLAC from their

contract) would be the correct result.

Adhesion contracts are a different story. All adhesion contracts are

problematic because they call into question the voluntariness of each

of the transactions in which they are used.

286

For this reason, it is very

tempting to argue that all adhesion contracts should include the

RLAC and GFP proposed here. But such a blanket approach is too

broad. Instead, the type of adhesion contracts that would include the

proposed contract provisions are mass contracts.

Mass contracts are adhesive contracts that when aggregated can po-

tentially affect a significant part of an industry or sector of the econ-

omy.

287

Consequently, the RLAC and GFP would be included in

contracts (1) drafted by (or primarily by) one party, where (2) the

drafting party is a repeat player, specifically, a party that enters into at

least 15 similar transactions a year, and (3) the contract is presented to

the non-drafting party on a take it or leave it basis (usually but not

necessarily on a standard form). Mass contracts therefore combine the

traditional indicia of an adhesion contract (one drafter + take it or

leave it basis) and an emphasis on a particular class of contract draft-

ers (larger, repeat players).

So contracts with Ford Motor Company, for example, where Ford is

the paying party (i.e., supply contracts with parts suppliers) and the

performing party (i.e., manufacturing cars for sale to dealerships)

could qualify as mass contracts. The same would be true for contracts

with banks and financial institutions, large employers, and literally any

individual or business, provided that all three mass contract criteria

are satisfied.

This is how the proposed contract provisions would work in a mass

contract scenario. The RLAC in a mass contract would be mandatory

and non-variable, and it would explicitly and intentionally shift all the

risks and all the losses occasioned by the catastrophic changed circum-

stance to the drafting party. Consider the following example: A home-

owner has a mortgage with Wells Fargo. The housing market crashes

sending the economy into a tailspin, causing the homeowner to lose

her job. Consequently, the homeowner can no longer make her mort-

gage payments, and she defaults on her mortgage. The non-variable

RLAC in the mortgage contract should excuse the homeowner’s duty

to pay the mortgage balance and instead shift the risk that the housing

286. Andrew A. Schwartz, Consumer Contract Exchanges and the Problem of Ad-

hesion, 28

ALE

313, 346-48 (2011).

287. Friedrich Kessler, Contracts of Adhesion—Some Thoughts About Freedom of

Contract, 43

OLUM

. L. R

628, 631-32 (1943) (defining “mass standardized con-

tracts” as “used in every bargain dealing with the same product or service”).

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 53 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 399

market crashed and the loss in the form of the unpaid mortgage bal-

ance onto Wells Fargo.

The problem, of course, is that the homeowner could still lose her

home because she can’t keep the house without paying for it. This is

where the GFP would kick in to require the parties to negotiate in

good faith to modify their contract. The incentives for each party to

agree on a modification would be that the homeowner would get to

keep her house and Wells Fargo would not have to absorb all the un-

paid mortgage balance and decreased market value of the house; in-

stead, these losses would be shared. It is important to note here that

absent the RLAC, there would be no incentive for Wells Fargo to

modify the mortgage let alone negotiate in good faith for one; this is

because under existing contract law (i.e., no RLAC), all the risk and

loss engendered by the housing market crash would be shifted to the

homeowner.

288

Granted, if the parties cannot reach an agreement to

modify the mortgage contract, the homeowner would still lose her

house. But she would not be liable for the unpaid mortgage balance as

she would be under current contract law. Instead, the loss would be

imposed on Wells Fargo.

289

Since the RLAC would be non-variable, the mortgage contract it-

self should resolve the dispute between the homeowner and Wells

Fargo without the need for litigation. But if for some reason Wells

Fargo decided to sue the homeowner for defaulting on the mortgage,

then the RLAC in the parties’ contract would predetermine the out-

come of the case. The court (or more likely the arbitrator) deciding

the case would be required to give effect to the RLAC, which would

mean excusing the non-drafting party’s performance per the CCD and

imposing the risk and loss on Wells Fargo, the drafter of the mass

contract. The CCDs would thus operate in this proposed mass con-

tracting scenario exactly as they would under existing contract law,

namely, as doctrines that help the court determine and give effect to

the intentions of the parties as expressed in their contract. The main

difference, of course, is that under the proposed approach, all the risk

and loss would be imposed on the drafting party.

To be clear: Just as the shifting of risk and loss to non-drafting par-

ties under existing contract law is deliberate, this shifting of the risk

and loss to the drafters of mass contracts is also an intentional policy

choice. There are two main reasons for this shift. First, the drafters of

288. See supra discussion accompanying notes 129, 131, 166–80 (discussing the diffi-

culty paying parties have in excusing their performance under the CCDs). So under

existing contract law, the homeowner not only would lose her house to the bank but

also would be pursued by the bank for her unpaid mortgage debt until it was paid off.

289. Because the bank would get the house, the bank’s losses could be mitigated by

the value of the house the market dictates. If the market rebounds, the bank’s loss

from the unpaid mortgage balance would obviously be reduced. If the market does

not rebound and the value of the house remains low, the bank’s losses would be

compounded.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 54 10-AUG-23 12:04

400 TEXAS A&M LAW REVIEW [Vol. 9

mass contracts are the contracting parties that are likely better able to

absorb the risk and loss internally (because of their size) or through

insurance and/or to spread the risk by pooling it and pricing it uni-

formly into all similar contracts across their business(es).

290

Second,

and assuming catastrophic changed circumstances have occurred, the

aggregated effects from these mass contracts will adversely affect the

economy (i.e., they will produce profound social consequences).

291

Because the economy will be adversely affected by these aggregated

mass contracts, there is a much greater likelihood that the State would

step in to shore up the economy via Federal Reserve policy,

292

bailout for the affected industry,

293

a government insurance pro-

gram,

294

or some other measure(s). Some of, if not all, these measures

will usually redound to the benefit of the drafters of mass contracts.

290. Just as existing contract law assumes that all contracting parties could, if they

really wanted to, insist on the inclusion of clauses in the contract to protect them-

selves from future performance contingencies, see supra discussion accompanying

notes 201–09, the contracting model suggested here assumes that the drafters of adhe-

sion contracts can—and do—take care of themselves in the market.

291. See supra discussion accompanying notes 17–23 (discussing the COVID–19

pandemic’s effects on the U.S. economy).

292. The Federal Reserve acted quickly and took several quick actions to shore up

the U.S. economy during the COVID–19 pandemic including, but not limited to: mak-

ing $2.3 trillion in lending to support different sectors of the economy (state and local

governments, households, businesses); slashing interest rates to almost zero; and mak-

ing a slew of asset purchases. Jeffrey Cheng et al., What’s the Fed Doing in Response

to the COVID–19 Crisis? What More Could It Do?,

ROOKINGS

(Mar. 30, 2021),

https://www.brookings.edu/research/fed-response-to-covid19/ [https://perma.cc/BTB4-

GMXP].

293. The federal government bailed out banks and the automotive industry during

the Great Recession by spending $426 billion “to stabilize the financial system and

prevent even more job losses” and $80 billion to bail out Chrysler and General Mo-

tors. Mitchell Hartman, What Did America Buy with the Auto Bailout, and Was It

Worth It?,

ARKETPLACE

(Nov. 13, 2018), https://www.marketplace.org/2018/11/13/

what-did-america-buy-auto-bailout-and-was-it-worth-it/ [https://perma.cc/GCJ6-

VCJA]. The federal government spent $426 billion “to stabilize the financial system

and prevent even more job losses” with $80 million to bail out Chrysler and General

Motors. Id.

294. Because most homeowners’ insurance does not cover flood damage, the Fed-

eral Emergency Management Administration (“FEMA”) manages the National

Flood Insurance Program (“NFIP”). Flood Insurance/National Flood Insurance Pro-

gram (NFIP),

’

. C

OMM

’

, https://content.naic.org/cipr_topics/topic_

flood_insurancenational_flood_insurance_program_nfip.htm#:~:text=back

ground%3A%20The%20NFIP%20was%20created,Flood%20Insurance%20

Act%20of%201968.&text=this%20insurance%20is%20intended%20to,their%20con-

tents%20caused%20by%20flood (Oct. 1, 2020) [https://perma.cc/UQQ9-V84G]. Spe-

cifically, NFIP was a direct response by Congress “to the lack of availability of private

insurance and continued increases in federal disaster assistance due to floods.” Id.

According to FEMA, “[t]he NFIP provides flood insurance to property owners, rent-

ers and businesses, . . . . The NFIP works with communities required to adopt and

enforce floodplain management regulations that help mitigate flooding effects.”

Flood Insurance, FEMA, https://www.fema.gov/flood-insurance (May 26, 2021)

[https://perma.cc/L5TF-M5EE].

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 55 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 401

In short, focusing on mass contracts and forcing the drafters of

these contracts to absorb all the risks and all the losses associated with

catastrophic changed circumstances is a specific attempt to trigger

when necessary the State’s systemic responses to the adverse social

consequences those catastrophic circumstances create.

295

And if this

result became reality, the State would effectively protect both con-

tracting parties. That is, as a specific result of its systemic actions, the

State would end up protecting the drafters of mass contracts; and as a

specific result of the State action in the form of the proposed federal

statute, the RLACs and GFPs would protect the non-drafting parties.

Significantly, and from the more granular perspective of contract

and contract law, contracts—both mass and co-drafted—would re-

main predictable, stable, and efficient. This is because contracting par-

ties would know in advance exactly how the risks and losses

engendered by future catastrophic changed circumstances would be

allocated between them under the contract and, if initiated, in litiga-

tion. This knowledge should increase trust between contracting parties

in general, which would not only encourage further contracting but

would also permit contracting parties to structure their present and

future transactions accordingly. In terms of contract law itself, the

presence of the RLAC and GFP in these contracts would paradoxi-

cally either make the CCDs unnecessary, because the contract would

resolve the dispute before litigation, or more successful if litigation is

filed, because the RLAC would predetermine the outcome of the

cases in which a CCD is raised.

Of course, the devil is always in the details. Where would the fed-

eral statute needed to make the RLAC and GFP a reality even come

from? How would it be worded? Could the RLAC in particular be

drafted to eliminate foreseeability issues that come up in CCD litiga-

tion?

296

How much would and could non-drafting parties charge for

the non-variable RLAC and GFP in mass contracts? Would that fee

be capped and, regardless, would there be a subsidy for qualified non-

drafting parties to pay that fee? Should restitution be available and, if

so, when?

None of these questions are simple or easily answered, nor do they

exhaust the field. Clearly a lot of work would need to get done to

295. Systemic responses would be triggered when necessary because unless the

losses from the aggregated mass contracts end up adversely affecting the economy,

the drafters of the mass contracts would have to absorb all of those losses them-

selves—unless, of course, the drafters can negotiate loss-sharing modifications with

the non-drafting parties.

296. In Aleut Enterprise, LLC v. Adak Seafood, LLC, for example, there was a

force majeure clause in the contract. No. 3:10–cv–0017–RRB, 2010 WL 3522348, at *2

(D. Alaska Sept. 2, 2010). According to the court, the force majeure clause made the

event at issue in the case foreseeable because it specifically mentioned the event. The

court held on that basis that the adversely affected party’s performance was not ex-

cused. Id.

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 56 10-AUG-23 12:04

402 TEXAS A&M LAW REVIEW [Vol. 9

create the RLAC and GFP proposed in this Article. With that in

mind, a healthy dose of legal realism is required here. The reality is

that the RLAC, GFP, and other solutions like it won’t ever be

adopted unless and until the public aspects of contracts and contract

law are acknowledged. That first step—shifting the frame—is the

hardest one. That said, given the extent of the inequality and injustice

that the COVID–19 pandemic has exposed across American society,

there may be a chance to take this first step.

V. C

ONCLUSION

As of January 10, 2022, there were 60,240,751 confirmed

COVID–19 cases and 835,302 COVID–19-related deaths in the

United States.

297

Heartbreaking evictions are taking place all over the

country.

298

Experts predicted for months that without more stimulus

money from Congress, “millions of Americans could be evicted, in the

dead of winter, in the middle of a raging pandemic.”

299

An August

report by the Federal Reserve Bank of New York found that “the

number of active Black small-business owners fell 41% from February

through April (nearly twice the rate of non-Black-owned businesses),

as many struggled to access programs like the Paycheck Protection

Program.”

300

Yet another news story reports that more Americans fell

into poverty after the federal stimulus programs ended, “particularly

Black Americans, children[,] and those with a high school education

or less.”

301

297. Sergio Hernandez et al., Tracking COVID-19 Cases in the US,

CNN,

https://

www.cnn.com/interactive/2020/health/coronavirus-us-maps-and-cases/ (Aug. 21, 2021,

5:45 PM) [https://perma.cc/W7PJ-7ERJ].

298. See, e.g., Randy Mac, Man Left Homeless in Pandemic After Eviction from

Apartment He Lived in for 20 Years, NBC, https://www.nbclosangeles.com/news/co-

ronavirus/coronavirus-pandemic-homeless-eviction-los-angeles/2415612/ (Aug. 20,

2020, 6:38 AM) [https://perma.cc/73U9-32GR] (Los Angeles); Matt Levin et al., Ex-

clusive: More than 1,600 Californians Have Been Evicted During Pandemic,

AT-

TERS

https://calmatters.org/housing/2020/08/californians-evicted-coronavirus-

pandemic/ (Sept. 16, 2020) [https://perma.cc/JFL7-WLUH] (examining COVID–19

evictions in California); Teresa Wiltz, As COVID-19 Tanks the Economy, Eviction

Moratoriums Expire

HARITABLE

(Aug. 6, 2020), https://

www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2020/08/06/as-covid-19-

tanks-the-economy-eviction-moratoriums-expire [https://perma.cc/P5KV-3ECQ] (dis-

cussing the response to eviction moratoriums expiring throughout the United States).

299. Chris Arnold, COVID-19 Relief Bill Could Stave Off Historic Wave of Evic-

tions,

NPR

(Dec. 24, 2020, 6:15 AM), https://www.npr.org/2020/12/24/949668850/

covid-19-relief-bill-could-stave-off-historic-wave-of-evictions [https://perma.cc/7X38-

8KRK].

300. Anne Sraders & Lance Lambert, Nearly 100,000 Establishments that Tempora-

rily Shut Down Due to the Pandemic Are Now Out of Business,

ORTUNE

(Sept. 28,

2020, 9:25 AM), https://fortune.com/2020/09/28/covid-buisnesses-shut-down-closed/

[https://perma.cc/F9U3-4UCT].

301. Tami Luhby, More Americans Fall into Poverty After Federal Stimulus Pro-

grams End

, CNN, https://www.cnn.com/2020/10/15/politics/poverty-congress-

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 57 10-AUG-23 12:04

2022] IF PAST IS PROLOGUE 403

Clearly, we are no longer talking about what’s “coming down the

pike” because all the misery created by the COVID–19 pandemic is

already here. And contracts are in the thick of it. Unfortunately, con-

tracts and contract law will never alone solve any of the systemic is-

sues plaguing our country. Systemic relief must come from the State.

That said, we ignore contracts and contract law at our peril because

they both play an integral role in the creation and perpetuation of

inequality in American society. The economic devastation caused by

the COVID–19 pandemic exposes this. Thus, the real question, the

only question that probably matters at this moment, is whether this

exposure will finally force us to acknowledge the public aspects of

contracts and contract law. If so, then contracts and contract law can

serve as an important part of the solution to some of the most pressing

problems confronting us today. If not, then so many of these

COVID–19 spawned losses will simply be left to lie where they fall.

coronavirus-stimulus/index.html (Oct. 15, 2020, 4:41 PM) [https://perma.cc/5JSU-

2M8T].

\\jciprod01\productn\T\TWL\9-2\TWL203.txt unknown Seq: 58 10-AUG-23 12:04