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Aluminum Co. of America v. Essex Group, Inc. Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A long-term aluminum processing contract’s price index failed due to unforeseen energy cost spikes, causing massive losses for the processor (ALCOA). The court found the contract voidable for mistake, impracticability, and frustration, but instead of rescinding, it reformed the price to ensure a minimal profit.
Legal Significance: This case is a landmark for expanding the doctrines of impracticability and frustration to cover severe price escalations and for crafting a novel equitable remedy (price reformation) to preserve a long-term contract rather than terminating it.
Aluminum Co. of America v. Essex Group, Inc. Law School Study Guide
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Case Facts & Court Holding
Key Facts & Case Background
In 1967, Aluminum Company of America (ALCOA) and Essex Group, Inc. (Essex) entered into a long-term toll conversion agreement, effective until 1988, under which ALCOA would convert alumina supplied by Essex into molten aluminum. The contract’s price formula was designed to provide ALCOA with a stable profit of approximately 4¢ per pound. A key component of the formula indexed ALCOA’s non-labor production costs to the Wholesale Price Index-Industrial Commodities (WPI-IC). Both parties, after examining historical data, made a basic assumption that this index would reliably track ALCOA’s actual non-labor costs, primarily electricity. The contract included a price ceiling beneficial to Essex but lacked a corresponding price floor to protect ALCOA. Following the 1973 OPEC oil embargo and the imposition of new pollution-control regulations, ALCOA’s electricity costs surged dramatically, far outpacing the WPI-IC. The failure of the index meant the contract price fell substantially below ALCOA’s actual costs, projecting a loss for ALCOA exceeding $60 million over the remainder of the contract term, while providing Essex with a substantial windfall. ALCOA sued to reform the contract, asserting the doctrines of mutual mistake, commercial impracticability, and frustration of purpose.
Court Holding & Legal Precedent
Issue: Can a court grant equitable relief by reforming a contract’s price term when an unforeseen, extreme escalation in production costs, not tracked by the contract’s chosen price index, frustrates the contract’s purpose and renders performance impracticable?
Yes. The court held that ALCOA was entitled to relief because the Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in cul
IRAC Legal Analysis
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Legal Issue
Can a court grant equitable relief by reforming a contract’s price term when an unforeseen, extreme escalation in production costs, not tracked by the contract’s chosen price index, frustrates the contract’s purpose and renders performance impracticable?
Conclusion
The decision is a leading, though controversial, authority for judicial intervention to Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nost
Legal Rule
A party's duty to perform may be discharged under the doctrines of Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit,
Legal Analysis
The court found ALCOA was entitled to relief under three distinct but Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure d
Flash-to-Full Case Opinions
Flash Summary
- Holding: Court reformed a long-term contract when its price index failed
