• The details of how this defense applies to disputes between buyers and sellers could vary slightly based upon prior court decisions in certain states, but some general principles are likely to apply in most situations.  

• The defense applies to the sale of goods, not to services. Contracts that involve both goods and services are covered by UCC provisions like commercial impracticability only if the sale of goods was the “predominant purpose” of the contract.    

• The defense applies only if the disruptive event – in this case a pandemic – was unforeseen by the parties. It is not available when the evidence shows that the parties discussed the disruptive event while negotiating the contract or before orders were placed but chose not to address the risk through contractual provisions.  

• The seller must demonstrate that no alternative means existed for it to meet the obligation to supply the products at issue. Sellers should document their unsuccessful efforts to procure goods from other sources, even competitors, to satisfy this requirement. 

• The defense generally will not be sustained for sellers who elect to fully satisfy accepted orders from their “favorite” customer(s) while attempting to cancel accepted orders for other customers.  

• Quantities available to the seller must be allocated among affected customers until supply constraints are resolved. There is no requirement for absolute equality in allocated supplies to customers. However, the allocation method must be fair and reasonable and ideally based upon objective factors such as pro rata percentages based on each customer’s past sales history.  

• The defense is often forfeited through self-dealing in which a seller prioritizes orders from companies in which the seller holds a direct financial interest (i.e., subsidiaries, affiliates or joint ventures) over orders from “independent” customers.