May I have an explanation through the case analysis please?

INTERNATIONAL BUSINESS TRANSACTIONS Bernina Distributors, Inc. v. Bernina Sewing Mach. 646 F.2d 434 (10th Cir. 1981) Distributor of sewing machines brought action against alone do not render a contract impracticably. The loss importer of sewing machines for breach of contract. would have to be especially severe and unreasonable. Defendant Bernina Sewing Machine Co. (Importer), a Importer was aware of the possibility of a reduction in Utah corporation, imports and supplies Bernina sewing profits due to exchange rate fluctuations and could have machines to plaintiff Bernina Distributors (Distributor). guarded against this contingency. For example, a cost-plus The problems that have arisen relate mostly to pricing and formula for determining the price could have been utilized. are caused by the fluctuations of exchange rates and Furthermore, Importer was represented by counsel decreases in the value of the U.S. dollar versus the Swiss throughout and should have known that the contract pro- franc. The case involves a long-term supply contract to run vided for price increases only to the extent of actual cost for seven years. The contract contained an open price term increases in which "prices are automatically subject to change when To grant relief on this issue would be to disturb an factory costs are increased." The importer is required to pay agreed-upon allocation of risk between commercial in Swiss francs. The open price term allowed Importer to equals. The district court did not err in prohibiting increase price as follows: "(a) To the extent of any increase Importer from charging Distributor under the contract's of factory invoice costs to Importer. (b) To the extent of any 'open price term" a margin of ten percent on increased increase in duty charges. (c) To the extent of increases in cost due to exchange rate fluctuations. Furthermore, the insurance, freight, handling, broker and port fees, or other contract was not rendered impracticably due to the similar charges. Increases to duty or factory invoice costs increase in costs to the Importer related to the currency shall be adjusted as they occur. Increases to all other fluctuation. charges shall be adjusted at the commencement of each calendar year." But with the precipitous decline of the Case Highlights dollar in relation to the Swiss franc, Importer's costs nearly doubled and thus halved its rate of return per dollar common practice of entering into long-term supply invested. contracts Logan, Circuit Judge. Importer maintains that the risk use of open price or price escalation clauses to adjust of currency fluctuations had not been considered or the contract price over the term of the contract allocated in the contract and that under the Uniform a determination that a risk has been allocated to one Commercial Code, this "open price term" should be deter- of the parties defeats a demand for a contract mined according to what the court finds to be reasonable. adjustment We believe that the contract provisions are quite compre- Contract law allows for an excuse from not fulfilling a hensive and hence, the statutory provision is inapplicable to contract. In the sale of goods the Uniform this case. Thus, we believe the contract places the risk of a Commercial Code $ 2-615 grants an excuse for diminishing profit margin on the Importer and that the commercial impracticability. The law also allows Importer bears the risk of currency fluctuations. The the parties to write an express excuse or force Importer also asserts that the court's interpretation makes majeure clause. the contract impracticably under $ 2-615 of the Uniform An excuse for commercial impracticability will not Commercial Code. The U.C.C. excuses performance under be granted if the risk was foreseeable or where the a contract when performance "has been made impracticably burden on a party is not unduly severe. by the occurrence of a contingency the nonoccurrence of Since currency fluctuations are foreseeable, courts which was a basic assumption on which the contract was are likely to view them as allocated risks and are made." In our view the instant contract is not one made unlikely to grant an excuse. impracticable by the contingency of the devalued dollar. It is important to write clear and detailed clauses, Comment 8 to $ 2-615 states that this excuse does "not especially in long-term contracts. The Court apply when the contingency in question is sufficiently fore- suggested the use of a "cost-plus" formula in the shadowed at the time of contracting." Also, cost increases open price term