Answer both questions thoroughly using legal business law concepts about contracts. There are clearly 2 questions answer them separately.
For decades, Epsilon Airlines has had a series of contracts with Texas Oil Corp. (TexOil) for TexOil to supply all of the jet fuel required by Epsilon’s airplanes. The contract specifies that the price Epsilon is to pay for jet fuel each day be determined by a formula (specified in the contract) that takes into account the market price of oil. The intent of this formula, and its effect up to now, has been that Epsilon pays more for jet fuel when oil prices are high and pays less when oil prices are low.
On April 20, 2020, a combination of increased oil output by Saudi Arabia and Russia and a steep decline in oil demand due to the coronavirus pandemic, caused oil prices to briefly go negative [this really happened, although the rest of this question is hypothetical].
The negative oil prices created a situation, for several days in late April 2020, where application of the formula in the Epsilon-TexOil contract would have caused TexOil to be obligated to pay Epsilon to put jet fuel in its planes. Epsilon quickly recognized the situation and tried to fill all of its fuel tanks to capacity and “top off” all of its airplanes with jet fuel – even those that were grounded by the pandemic.TexOil, concerned about being driven into bankruptcy, refused to deliver the fuel to Epsilon when the contract price became negative. Epsilon has brought a lawsuit against TexOil claiming breach of contract.
a. TexOil has responded to Epsilon’s lawsuit by claiming it is commercially impracticable for it to pay Epsilon to take jet fuel. You are the judge in the case. Should TexOil be excused from supplying Epsilon’s fuel due to commercial impracticability? Briefly explain.
b. Suppose that Epsilon, instead of trying to take as much of TexOil’s jet fuel as possible, approached TexOil and said, “We will agree not to pump fuel while the price is negative, but in exchange you must agree to rework the fuel price formula so that Epsilon will get a 10% discount on fuel for the remainder of the two-year contract.” TexOil, in order to avoid potential insolvency, agreed. Discuss whether TexOil has a valid claim for unconscionability or duress.
