## Facts

- A wholesale electric generator entered a 15-year contract (1973) with an oil-and-gas producer for natural gas from the producer’s leases in the Stranger Creek gas field in Leavenworth County, Kansas.
- The producer agreed to sell, and the utility agreed to buy, 3 million cubic feet (MMCF) of gas per day, and the producer also promised to develop reserves to guarantee delivery of up to 7 MMCF per day.
- The contract set an initial price of $0.55 per MCF with limited annual increases and provided for renegotiation/arbitration after the fourth year.
- Delivery was arranged through a gas exchange: the producer delivered gas into a storage facility in Leavenworth County, and an exchange company delivered an equivalent amount near the utility’s generating plant in Finney County.
- Each party constructed its own pipeline to implement the delivery arrangement.
- The producer’s actual production substantially underperformed the contract requirements and ultimately ceased production and deliveries in July 1976.
- Evidence showed reserve estimates were overly optimistic and field characteristics (including heavy oil and reservoir limitations) interfered with recoverable gas volumes.
- The utility purchased replacement gas at higher prices and sued for breach of contract damages, including cover.
- The trial court found the field could not supply the promised volumes and excused the producer from liability under impossibility/impracticability, awarding no damages to the utility.
- The utility appealed.

## Issues

1. Whether the producer’s failure to deliver contracted quantities could be excused under impossibility/impracticability when the designated field’s reserves proved inadequate.
2. Whether the alleged impracticability was “original” (existing at contract formation) rather than supervening, and the legal effect of that classification.
3. Whether the contract language and circumstances showed the producer assumed the risk of inadequate reserves, defeating the impracticability defense.

## Decision

- The Kansas Court of Appeals reversed the judgment excusing performance.
- The court treated excuse by impossibility/impracticability as a question of law and held the trial court misapplied the doctrine.
- The court characterized the problem as original, objective impracticability because the field’s physical limitations existed when the contract was made, even if later revealed by production history.
- The court held the producer was not relieved of liability because inadequate reserves were foreseeable in oil-and-gas production and the contract allocated that risk to the producer.
- The case was remanded for further proceedings, including determination of damages.

## Legal Principles

- Whether a party is excused from contractual duties by impossibility or impracticability is a question of law.
- Impracticability must be objective (performance cannot be done), not merely subjective difficulty, hardship, or increased burden on the promisor.
- Original impracticability (existing at formation) is analyzed under Restatement (Second) of Contracts § 266: no duty arises only if the promisor lacks reason to know of the fact making performance impracticable, the nonexistence of that fact is a basic assumption, and the contract does not place the risk on the promisor.
- Even if performance is objectively impracticable, the defense fails when the contingency was foreseeable and the language or circumstances show the promisor assumed the risk.
- In contracts tied to uncertain natural-resource reserves, a producer’s express volume commitments and development/guarantee language can allocate reserve-inadequacy risk to the producer.

## Conclusion

The court held that the producer’s shortfall from a specified gas field was not excused by impracticability because the reserve risk was foreseeable and contractually assumed by the producer, requiring reversal of the no-liability judgment and remand for damages proceedings.


Sunflower Elec. Coop., Inc. v. Tomlinson Oil Co., 7 Kan. App. 2d 131, 638 P.2d 963 (1981)