Arabian Score v. Lasma Arabian Ltd.

814 F.2d 529 (1987)

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Nature of the Case

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Facts

P entered into an agreement to purchase from D a colt named Score. P agreed to pay $1 million 'for the purchase of Score and the performance by D of various services in the promotion of Score.' The contract required D to spend $250,000 for the performance of those services, which consisted of advertising and promoting Score as a 2 Star Stallion. Paragraph 4 of the agreement provided that for a period of five years after the date of his purchase, Score would be a 2 Star Stallion. If Lasma Star Stallion, Inc., in its sole discretion, determined that Score was not eligible to participate in the Star Stallion Program, D would, at P's option, replace Score with an eligible stallion or refund to P the unused portion of the promotional monies. Pursuant to paragraph 6 of the agreement, D guaranteed that Score was not infertile. Paragraph 9 of the agreement provided: 'Except as provided by paragraphs 4 and 6 above, the Partnership accepts SCORE AS IS, all implied warranties being excluded. Risk of loss passes upon closing. All incidental and consequential damages are excluded.' P obtained a mortality insurance policy from Transit Casualty Company insuring Score for Score's actual cash value. Score dies on September 11, 1984, having sired two foals during his brief life. Transit Casualty Company went broke. D spent $52,891.14 for the promotion of Score, P sued D seeking recovery of the $197,108.86 not expended from the $250,000 that the purchase agreement allocated for the promotion of Score. The court ruled that because Score's death was a foreseeable risk that was assumed by P by the terms of the purchase agreement, neither the doctrine of impossibility nor of commercial frustration was applicable. Likewise, because the unrebutted evidence established that it is not unusual for Lasma Star Stallions, Inc. and D to promote deceased horses, it was not an arbitrary, capricious, or irrational exercise of discretion by D to determine that Score was still eligible postmortem to participate in the Star Stallion Program. P appealed.