363 F.2d 312 (D.C. Cir. 1966)
Transatlantic Financing Corp. v.
Does the closure of the Suez Canal, which makes performance more expensive by requiring a longer route, render the contract commercially impracticable so as to excuse performance or entitle the performing party to additional compensation beyond the contract price?
A party's duty to perform may be discharged (or adjusted) for impracticability when, after the contract is made, an unforeseen contingency occurs, the nonoccurrence of which was a basic assumption of the contract, and the contingency makes performance commercially impracticable. Mere increases in expense, even if substantial, do not suffice unless they are extreme and beyond the risks allocated by the contract or the surrounding circumstances. Courts consider: (1) the occurrence of an unexpected contingency; (2) whether the risk of that contingency was allocated by the contract or the circumstances; and (3) whether the contingency renders performance commercially impracticable as opposed to simply more costly. See principles reflected in Restatement and U.C.C. § 2-615 (impracticability).
No. The Suez Canal closure did not render the contract commercially impracticable, and the increased costs incurred by traveling around the Cape of Good Hope did not entitle Transatlantic to additional compensation. Judgment for the United States was affirmed.
Transatlantic is a cornerstone case for the modern impracticability doctrine. It supplies a widely cited three-part framework and underscores the high threshold for commercial impracticability: a mere increase in cost—even if significant—is usually insufficient. The case also teaches parties to allocate risks expressly (for example, via a Suez clause or force majeure provision). For law students, it clarifies how foreseeability, risk allocation, and the availability of alternative means of performance interact, and it sets the stage for later Suez Canal cases that likewise deny impracticability when performance remains feasible, albeit more expensive.