## Facts

- Wisconsin Electric Power Company (WEPCO) and Union Pacific Railroad Company entered a long-term contract for Union Pacific to transport coal from Colorado mines to WEPCO facilities from 1999 through 2005.
- Union Pacific reduced costs by using the coal cars for a return-trip backhaul: after delivering coal, it reloaded the cars with iron ore for shipment to a steel mill.
- The contract contained a force majeure clause addressing the contingency that Union Pacific could be prevented from reloading cars with iron ore; if that occurred, Union Pacific could increase the coal-hauling rate.
- The force majeure clause required Union Pacific to provide notice and to take reasonable steps to abate (mitigate) the effects of the force majeure if possible.
- The steel mill closed, eliminating the iron-ore backhaul, and Union Pacific notified WEPCO that it would increase the coal rate under the force majeure clause.
- WEPCO alleged Union Pacific (1) improperly invoked the force majeure clause to raise rates and (2) breached the duty of good-faith performance by failing to ship the full tonnage WEPCO requested on Union Pacific-supplied railcars.
- The contract included a non-waiver clause stating that failure to assert a contractual right on one occasion did not waive it for the future.

## Issues

1. Whether the force majeure clause permitted Union Pacific to increase coal-hauling rates after the loss of the iron-ore backhaul, and whether Union Pacific satisfied contractual notice and abatement requirements.
2. Whether Union Pacific breached the duty of good-faith performance under Wisconsin law by not shipping all tonnage requested by WEPCO on Union Pacific-supplied cars.

## Decision

- The Seventh Circuit affirmed summary judgment for Union Pacific.
- The force majeure clause, as written, covered the loss of the iron-ore backhaul and authorized a rate increase upon that contingency.
- Union Pacific’s notice and its efforts regarding abatement were sufficient under the contract’s reasonableness standard.
- Union Pacific did not breach the duty of good faith; WEPCO’s theory would have imposed obligations inconsistent with the contract’s express allocation of rights and risks, reinforced by the non-waiver clause.

## Legal Principles

- When a contract expressly allocates a contingency through a force majeure clause, courts enforce that allocation rather than recast the dispute through generalized impossibility concepts.
- Contract “impossibility” analysis turns on risk allocation; the question is which party the contract (or, absent clear language, the law) assigns the risk of the relevant contingency.
- A contractual mitigation/abatement requirement generally demands commercially reasonable efforts, not extraordinary or uneconomic measures.
- The duty of good-faith performance constrains the exercise of contractual discretion but cannot be used to rewrite clear contractual terms or override express risk allocation.
- Enforceable non-waiver clauses defeat arguments that prior nonenforcement of a right permanently relinquished that right.

## Conclusion

The Seventh Circuit held that Union Pacific permissibly invoked a specifically drafted force majeure provision to adjust rates after losing its iron-ore backhaul and that WEPCO could not use good-faith doctrine to impose shipping and pricing obligations beyond the parties’ written agreement.


Wisconsin Electric Power Co. v. Union Pac. R.R. Co., 557 F.3d 504 (7th Cir. 2009)