Westinghouse Electric Corporation entered into uranium supply contracts with 22 electric utilities during the late 1960s. The contract prices ranged from $7 to $10 per pound. The Arab oil embargo and other changes in energy resources caused the price of uranium to climb to between $45 and $75 per pound. Supply tightened because of increased demand.
In 1973, Westinghouse wrote to the utilities and explained that it was unable to perform on its uranium sales contracts. The utilities needed uranium. Westinghouse did not have sufficient funds to buy the uranium it had agreed to supply, assuming that it could find a supply. One utility executive commented, after totaling up all 22 supply contracts, that Westinghouse could not have supplied the uranium even under the original contract terms. He said, “Westinghouse oversubscribed itself on these contracts. They hoped that not all the utilities would take the full contract amount.”
Westinghouse says it is impossible for it to perform. The utilities say they are owed damages because they must still find uranium somewhere. What damages would the law allow? What ethical issues do you see in the original contracts and in Westinghouse’s refusal to deliver? Should we excuse parties from contracts because it is so expensive for them to perform? [In re Westinghouse Uranium Litigation, 436 F Supp 990 (ED Va)]