The United States contracted with Transatlantic Financing, the operator of a cargo ship, to transport wheat from Texas to Iran in 1956. The parties never agreed on the route the ship would take. Six days after the ship left Texas, the government of Egypt was at war with Israel and blockaded the Suez Canal. As a result, the ship had to sail around the Cape of Good Hope on the southern tip of Africa, extending the voyage several thousand miles and adding an additional 14 percent to Transatlantic's costs. Transatlantic sued for the added expense, claiming that it had agreed only to travel the "usual and customary" route to Iran through Suez, and that its performance became legally impossible. The lower court ruled in favor of the United States, and Transatlantic appealed.
1. Did the parties agree on what would happen if the Suez Canal had closed? In other words, did they allocate the risk of closure? Would that have changed the result?
2. What is Transatlantic's argument? If admiralty law implies that a ship's journey will be by the "usual and customary" route, why did the court not hold that the contract had become impossible to perform? How does the court define "impossible?"
3. Did Transatlantic's performance become impracticable? How difficult was it for Transatlantic to take the alternate route around Africa?
4. Suppose it had been bad weather instead of a blocked canal? Would the case outcome have been different? How about a tsunami? What if a government order had prohibited the ship from departing Texas?