by Richard E. Speidel. Durham, NC: Carolina Academic Press, 2007. 326pp. Paper. $45.00. ISBN: 9781594602696.
Reviewed by Amanda Harmon Cooley, Department of Management, North Carolina A&T State University. Email: abcooley [at] ncat.edu.
America is in a financial crisis. To confirm this proposition, one need look only to the collapse of the subprime mortgage industry, the around-the-clock media commentary on the grim, short-term prospects of the stock market, and the calls for multi-billion dollar government bailouts and increased governmental regulation to alleviate these losses. While these events provide ample fodder for political and economic pundits, they also provide an opportunity to look towards legal scholarship on what happens in related crises. Richard E. Speidel’s CONTRACTS IN CRISES: EXCUSE DOCTRINE AND RETROSPECTIVE GOVERNMENT ACTS is a prescient and relevant text, which provides a unique legal perspective on contractual defenses and which has particular applicability to the contractual fallout that will inevitably occur after the proposed governmental “resolution” of the Wall Street debacle.
Given the state of the country and the economic crisis of September 2008, it is rather appropriate that Speidel’s book begins with a discussion of some of the legal analyses that took place in the wake of the terrorist disasters of September of 2001. Specifically, Speidel uses the events of and after September 11 to present the “central inquiry of this book [which] is the extent to which contract law (private law) provides relief to a promisor put in the zone of coercion by the enactment by government of retrospective public law” (p.7). The first chapter of the book then proceeds to an in-depth discussion of the excuse doctrine of contracts, examining the impracticability defense, the effect of “retrospective acts” in the creation of “zones of coercion,” and the question of relief after discharge of a contract based on justifiable excuse. Speidel utilizes his first chapter to introduce a specific terminology for the explication of his thesis; the definitions of “zone of coercion” (“that zone where because continued performance as agreed is either illegal or inconsistent with a governmental statute, regulation or order, there is a risk of sanctions against the promisor” (pp.6-7)) and “retrospective acts” (“any law that changes the legal consequences of past events” (p.8)) are especially helpful for an understanding of the remaining sections of the book.
Speidel acknowledges throughout this first chapter that he is taking a nuanced approach to “the intersection of American public law and private contract law” (p.11), which is supplemented by a brief introduction to contract theory and to the constitutional constraints on retrospective legislation (authority to act, due process, and takings clause considerations). The conclusion of the introductory chapter restates the essence of the volume as an [*917] examination of “the impracticability defense when the supervening event is a retrospective government act that is otherwise constitutional” (p.24).
Before moving to a discussion of the remainder of Speidel’s book, it is important to discuss the paradigmatic nature of his first chapter as a representative of the text as a whole. Clearly, from this initial analysis, Speidel’s perspective as a contract law scholar dominates the narrative of the text. As such, this book will provide a context for critical discourse among legal academicians. However, the author’s direct writing style, clarification of the central propositions of his thesis, and direct summarization of his arguments allow the book to be of interest to readers in the business world and public policy arena. That being said, this book is challenging and would require persistence on the part of the reader if she or he has little familiarity with the tenets of contract law that almost are prerequisites for understanding the book.
After the introduction, in Part One, Speidel focuses on the development of contractual excuse doctrine up to the Great Depression. Chapter Two begins with a fascinating discussion of English common law and its preeminent cases in this area. These cases include PARADINE v. JANE (1647), which set forth a doctrine of absolute obligation in response to a claim of contractual excuse. According to Speidel, although subsequent English courts approached this defense doctrine in contrasting ways, American common law at the start of the twentieth century provided only three limited exceptions to the PARADINE rule: “Excuse would be granted where: (1) A thing essential to performance was destroyed; (2) A person necessary for performance died or was impaired; or (3) There was legal impossibility resulting from a change in the law” (p.43). Speidel then uses a succession of cases to illustrate the courts’ applications of the contractual excuse doctrine based on the aforementioned exceptions. In this discussion, Speidel focuses on the lack of a consistent remedy where discharge was allowed due to the operation of retrospective government acts. Some courts provided that there was no available relief, while other courts stated that the appropriate measure of damages was restitution for the value of retained property (rather than specific performance or consequential damages, because there was no breach). While Speidel deems this latter rationale a “sensible and fair result where the promisee has fully performed its part of the exchange before the retrospective act” (p.51), the author posits that judicial analysis becomes more difficult when addressing issues of illegal purpose (as compared to illegal performance), which was realized in Prohibition Era cases.
In Chapter Three, Speidel focuses on World War I, which he deems a “fertile testing ground for contract excuse doctrine” (p.75). He uses this time frame and the later drafting of the Restatement (First) of Contracts, as outlined in Chapter Four, to demonstrate the tightening of this contractual doctrine by courts and commentators, who claimed that contracting parties in times of crises took on the risk of retrospective legislation: “if the act did not directly affect performance of the contract, excuse was likely to be denied even though the cost of performance was [*918] increased or the purpose of the contract was frustrated” (p.75).
Chapters Five and Six continue to interweave history and law to outline the treatment of the excuse doctrine by courts, a doctrine that Speidel designates to be in crisis during the Great Depression and World War II. Speidel argues that PARADINE’s influence was still “alive and well . . . Parties to an exchange could expect no ‘bailout’ by the law of contracts from the adverse economic effects of the depression” (p.102). Further, he uses this time frame to illustrate the continued judicial hesitance in allowing excuse based on frustration of purpose, citing public policy reasons in one case: “[w]e were at war, everyone suffered hardships of one kind or another, and compromise or adjustment were an accepted way to survive” (p.133).
Part Three argues that the post-WWII era provided a respite for the excuse doctrine in decline and served as a time for reformulation. Speidel claims that Article 2 of the Uniform Commercial Code and the Restatement (Second) of Contracts were the vehicles for this doctrinal reformulation. He states that, pursuant to Article 2 and the second Restatement, the key question in litigation revolving around contractual excuse due to retrospective legislation now is “whether performance as agreed has been made impracticable by changed circumstances” (p.178). The result is as follows: “if the promisee fails to prove that the promisor assumed the risk that the law would change, the promisor wins if there is good faith and the retrospective government makes performance as agreed impracticable” (p.179).
Yet, in spite of this reformulation, Speidel stresses that there has not been that many instances of litigation that have tested the boundaries of the excuse doctrine in the last 55 years. He takes the remaining chapter of Part Three and the chapters of Part Four to illustrate the few examples that have involved this area in contracts. Specifically, he looks at the energy and the Savings and Loans crises in explaining how the reformulated excuse doctrine has been applied. While these examples provide reinforcement of Speidel’s theories, it seems that a return to his introductory discussion of September 11 and Hurricane Katrina legislation and litigation may have been more useful to round out his overall analysis.
CONTRACTS IN CRISES concludes with Speidel’s recommendations for further refinement of the excuse doctrine in the context of retrospective government acts. He asserts that private contract law does not adequately protect the contractual parties in a “retrospective constitutional taking of contract rights” (p.282). He further claims that the foreseeability test should be eliminated from contract disputes that concern excuse doctrine in the zone of coercion. Finally, the author proposes his solution for remedies for contractual discharges based on zone of coercion excuse: “reasonable, foreseeable reliance expenditures made before or after the retrospective act” (p.293). In its entirety, the text provides an informative perspective on these concentrated issues of the intersection of private contract law and public law in times of crisis. Because the United States stands at the crossroads of this type of legal quandary, it will be of interest to note whether [*919] courts and/or legal commentators will consider or implement Speidel’s suggestions for the near future.
PARADINE v. JANE, 82 ENG. REP. 897 (K.B. 1647).
© Copyright 2008 by the author, Amanda Harmon Cooley.