A contract is a legally binding agreement between at least two parties where all involved entities agree to a set of terms. Non-performance of obligation to said terms of the agreement constitute a breach of contract. However, not all non-performance represents a breach of contract. As the terms of agreement are never exhaustive, unforeseen events that hinder execution of a party’s obligations to the terms of the contract is an example of an exception. Relative to the Valdez situation, however, the companies have a recourse against Exxon for the breach of contract when Exxon failed to supply crude oil to refineries on the west cost of the United States.
An argument might be made that the companies lack recourse and that Exxon did not breach its contract with them on the basis of two reasons. First, the Valdez situation was unexpected and beyond the control of Exxon. Secondly, Exxon did not have any malice against the companies that would justify their non-performance to the terms of their agreements.
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Note, however, that from a technical point of view, Exxon did breach their contract when it failed to supply crude oil due to the Valdez situation. Though the argument is not strong, it is still essential to point it out. Secondly, the Supreme Court Notes that an entity is in breach of a contract if it exhibits gross negligence, where they knew about a peril but did not take any actions to resolve it (Brown, 2017). According to Schaner & Ho (2008), Exxon admitted to its negligence by knowing about the ship captain’s alcoholism (and his recent lapse from his programme), but did nothing about it. Based on this gross negligence, it is clear that Exxon was in breach of contract. This means that companies have a recourse against it.
References
Brown, R. F. (2017). Oil, Gas and Mineral Law. SMU Ann. Tex. Surv. , 3 , 291.
Schaner, L., & Ho, G. (2008). US Supreme Court Slashes Punitive Damages Award in Exxon Valdez Oil Spill Case . International Bar Association Legal Practice Division. Retrieved from https://jenner.com/system/assets/publications/648/original/IBA_Negligence_Damages_October08_Schaner_Ho.pdf?1313677474
