Nissho-Iwai Co., Ltd. v. Occidental Crude Sales, Inc.
729 F.2d 1530 · Court of Appeals for the Fifth Circuit · 1984
Facts
Occidental contracted to supply crude oil from Libya to Nissho, a Japanese distributor. Due to Libyan government actions and pipeline breakdowns, Occidental failed to supply oil, leading to Nissho losing a major customer and incurring shipping penalties. Nissho sued for breach of contract and fraud, winning a jury verdict in a second trial after the first was declared a mistrial due to jury confusion.
Issue
Did the trial court err in instructing the jury that Occidental's force majeure defense required the excusing events to be beyond its reasonable control, and was the fraud verdict valid when the alleged injuries were not distinct from the contract breach?
Holding
The court affirmed Occidental's liability for breach of contract, finding the force majeure instruction proper and the waiver finding supported. However, it reversed the fraud verdict and the damage award, remanding for a new trial solely on contract damages, excluding profits from a period of contract suspension.
Rule
A force majeure clause, even with enumerated events, implies a 'reasonable control' limitation, meaning the excusing event must be beyond the party's control and not preventable by reasonable steps. Fraud claims arising from contract performance require injuries distinct from those caused by the contract breach to support a separate cause of action and punitive damages.
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