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Banking, Business and Contracts Click here for the full text of this decision The doctrine of commercial impracticability as defined in the Restatement (Second) of Contracts does exist in Texas. FACTS:Tractebel Power Inc. (TPI) directed its affiliate, Tractebel Energy Marketing Inc. (TEMI), to purchase emission reduction credits it would need to build a power plant in New England. TEMI used a broker to contract with DuPont to buy credits DuPont had banked during its operation of a New Jersey power plant. Shortly after the contract, the New Jersey Department of Environmental Protection revoked DuPont’s store of credit, at which point DuPont refused to perform under the contract with TEMI. TEMI and TPI sued DuPont, and the jury found TPI suffered $1.2 million in damages for DuPont’s repudiation of the contract. The jury rejected DuPont’s defenses that performance was excused by mutual mistake, unilateral mistake or impossibility, but agreed with its defense that performance was excused due to commercial impracticability. The trial court rendered judgment for DuPont. TPI appeals, and DuPont cross-appeals. HOLDING:Reversed and remanded for entry of judgment on the remainder of the jury verdict. The doctrine of excuse due to commercial impracticability , as defined by the Restatement (Second) of Contracts �261, does exist in Texas, though it is usually called by a different name (impossibility). The defense is used when: 1. the death or incapacity of a person necessary for performance; 2. the destruction or deterioration of a thing necessary for performance; and 3. prevention by governmental regulation. Further, as a defense to a breach of contract case, it was proper to submit the issue to the jury, the court begins. The contract did not specify the source or ownership of the credits being sold, and while there is evidence DuPont knew its own credits were being sold, there is evidence TEMI did not know who it was buying credits from, thus a basic assumption of the contract was lacking. According to the Restatement, the defense of impracticability does not apply when both parties know of the intended source of the credits if it is not also a basic assumption that there will be no contract if that source fails. “In this case, credits from another source would have fulfilled the terms of the contract, and would have served TPI’s purposes just as well. There is no evidence TPI contracted on the assumption that DuPont’s credits and only those credits were the subject of the contract.” The jury instruction left out the basic-assumption requirement, despite both parties’ objection to its omission. Also omitted was the element that the party claiming the defense must have used reasonable efforts to surmount the obstacles to performance. Evidence related to the missing elements was lacking. The rest of the jury’s findings were supported by the evidence, the court concluded. OPINION:Brister, C.J.; Brister, C.J., Fowler and Frosty, JJ.

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