Expert Voices: ‘Dear GC, You May Need to Amend Your Form Natural Gas Contracts’

The Uniform Commercial Code — in all its forms — tells us that the increased or unforeseen cost of selling a good alone does not excuse performance. After all, a rise in prices or the collapse of a given market is no justification, the UCC states, “for that is exactly the type of business risk which business contracts made at fixed prices are intended to cover.”

In other words, if a seller agreed to sell 1000 MMBtu of natural gas per day to a buyer, and the price skyrocketed or the seller’s supply source fell through, that risk fell on the seller alone. The seller under the UCC was still obligated to procure and sell the 1000 MMBtu of gas as contracted — the source and the seller’s purchase price are irrelevant. What matters is that the seller agreed to sell the 1000 MMBtu at a set price per week.