Omkara, a furniture manufacturer, contracts with Foam Gnome for $50,000 worth of foam, which Omkara will use for making ten sofas she has agreed to make for Duke's Furniture. A day before Gnome is going to ship the foam to Omkara, a flood destroys its entire inventory. Gnome tells Omkara it cannot send her the foam in time, but tells her that FirmFoam can supply her with an identical shipment for $65,000. This increase in price will wipe out twenty percent of Omkara's profit from her contract with Duke's. Omkara wants to get out of both contracts. Can she?

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Business

Ari Watson

19 May, 00:18

Omkara, a furniture manufacturer, contracts with Foam Gnome for $50,000 worth of foam, which Omkara will use for making ten sofas she has agreed to make for Duke's Furniture. A day before Gnome is going to ship the foam to Omkara, a flood destroys its entire inventory. Gnome tells Omkara it cannot send her the foam in time, but tells her that FirmFoam can supply her with an identical shipment for $65,000. This increase in price will wipe out twenty percent of Omkara's profit from her contract with Duke's. Omkara wants to get out of both contracts. Can she?

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Blaze Page · Answer 1

Omkara can terminate its contract with Gnome due to true impossibility, since unforeseen and uncontrollable circumstances make the contract impossible to perform.

But Omkara can not discharge its contract with Duke's Furniture, it is still valid and if Omkara doesn't perform then Duke might sue them.