Document Type

Working Paper

Publication Date

2009

Center/Program

Center for Contract and Economic Organization

Center/Program

Center for Law and Economic Studies

Abstract

Professor Mel Eisenberg argued in a recent paper for an expansion of the excuse doctrines. He argues that performance should be excused in those instances when parties tacitly assume that a given kind of circumstance will not occur during the contract time (the shared-assumption test). In addition, he argues that there should be a partial excuse when a change in prices would be sufficiently large to leave the promisor with a loss significantly greater than would have reasonably been expected (the bounded-risk test). This paper questions his first proposition by re-examining the Coronation cases and Taylor v Caldwell. His bounded-risk analysis is badly flawed, resting on a dubious proposition, inconsistent with the cases he relies on, and, most importantly, recognizing the wrong set of circumstances in which parties would choose to limit their exposure to large cost changes.

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