ILMA Compoundings - May 2020 - 39

alternate uses for the products in the
market that alleviated the switch earlier
this year, including utilities and sale to
Mexico. Once surpluses are used up,
there could be a steeper price drop for
high-sulfur fuels and, consequently,
used motor and industrial oils used
by re-refiners for that purpose. While
about 40% of used oil is sold to
re-refiners, smaller generators that feel
the sting of price increases may request
a reduction or elimination of sulfur
in products. Given that two of four
extreme pressure additives for industrial

lubricants use sulfur compounds, ILMA
members that produce such fluids
should keep an eye out for such changes.

Continued from page 36
the applicable jurisdiction's rules of
contract interpretation.
Accordingly, it makes sense to
include "disease outbreaks, epidemics
or pandemics" in any force majeure
list of foreseeable events to avoid the
assumption-of-the-risk argument in
future pandemic situations, along with
verbiage to address the issues like those
presented in my example. Here are
some items to consider during a force
majeure review of your contracts:

obligations, such as payment,
should continue in any event.

*	 What governing law applies to
the contract and the force majeure
clause? Because of differences in
state law, this is important.
*	 Make sure that foreseeable events
are specifically listed and include
notification of the force majeure
and the time within which such
notice must be provided.
*	 Provide for rights to suspend
performance or terminate the
contract, as appropriate. In some
situations, it makes sense to allow
for reduced performance without
penalties or liquidated damages.
*	 Consider if all obligations should
be suspended during the force
majeure period or if specific

DOWN THE PIPE
Based on research I conducted in
writing this article, there is already an
underutilization of sulfur products.
Though there are a number of ideas
to deal with surplus, such as sulfur
concrete and polymers, until there are
expansive viable markets for sulfur
compounds, the price of high-sulfur
fuels will likely continue to drop.
There is no guarantee that re-refiners

*	 Consider if any matter should
be included or excluded, such as
severe price spikes or declines.
*	 If an arbitration clause is selected, ensure that the arbitration
rules of the relevant arbitration
institution provide for emergency
arbitration procedures.
Linked to this discussion is what
happens if a party is unable to invoke
successfully a force majeure clause,
such as to excuse performance during
a pandemic, or if a contract does
not contain a force majeure clause.
There may be other avenues, such
as the defenses of impossibility and
impracticability under the Uniform Commercial Code, to excuse
performance. Lawyers often start
with the Restatement (Second) of
Contracts that defines "impossibility"
as "not only strict impossibility but
impracticability because of extreme
and unreasonable difficulty, expense,
injury or loss involved."
If a contract does not contain a force
majeure clause, and an impossibility or
impracticability defense fails, "frustration of purpose" is another possible

will add more pressure to generators,
who will then request a reduction in
sulfur-compounds fluids. However, if
there is anything we have learned the
last few months, we live in interesting,
unpredictable times, so better to know
what changes may come down the
pipe in the next few years.
Levetown serves as associate
counsel to ILMA through
Bassman, Mitchell, Alfano &
Leiter Chtd. He may be reached
at 202-466-6502 or mlevetown@bmalaw.net.

defense for a party unable to fulfill its
contractual obligations. Typically, for
this doctrine to apply, "the frustrated
purpose must be so completely the
basis of the contract that, as both
parties understood, without it, the
transaction would have made little
sense." The frustration of purpose
occurs where the change in circumstances makes one party's performance
virtually worthless to the other,
frustrating the purpose in making the
contract. Keep in mind that economic
hardship, including an increase in the
cost of performing under a contract, is
usually not enough to assert a frustration of purpose defense.
As always, check with your local
counsel. Hopefully, this challenging
period from the COVID-19 pandemic will end soon and the upheavals
it has caused will abate. I have been
impressed by both the grace and
stamina exhibited by ILMA members
and their workers and families during
this unprecedented period.
Leiter serves as general
counsel to ILMA, representing
the Association since 1981.
He may be reached at
202-466-6502 or jleiter@bmalaw.net.

39



ILMA Compoundings - May 2020

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