NIPSCO v. Carbon County

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NIPSCO v. Carbon County
Court 7th Circuit
Citation 799 F.2d 265
Date decided August 13, 1986


  • Northern Indiana Public Service Co. = "NIPSCO" = plaintiff = coal buyer = electric utility company
  • Carbon County Coal Co. (Carbon County) = coal mine company = company with a Wyoming coal mine on federal land = coal seller
  • In 1978, the 2 parties contracted for NIPSCO to receive 1,500,000 (1.5 million) tons of coal/year for 20 years.
  • The 2 parties agreed on $24/ton of coal subject to change.
  • The contract included a force majeure clause.
  • Coal prices went up:
$24/ton of coal
$44/ton of coal

  • NIPSCO found a cheaper source of electricity; so, NIPSCO suspended the coal shipments from Carbon County.

Procedural History

  • NIPSCO sued Carbon County in federal court in Indiana seeking a declaratory judgment that NIPSCO was excused from buying coal from Carbon County under the force majeure clause.
  • NIPSCO lost.
  • The jury awarded Carbon County $181,000,000 (181 million).


  1. Does monetary loss resulting from economic risk-taking
    • constitute a force majeure or
    • satisfy the doctrines of
      1. frustration of purpose or
      2. impossibility?
  2. Does the doctrine of illegality automatically void a contract?


NIPSCO argued that the contract was un-enforceable because it violated the Mineral Lands Leasing Act of 1920.


  1. No. Monetary loss resulting from economic risk-taking doesn't constitute a force majeure or satisfy either the doctrines of frustration or impossibility.
  2. No. The doctrine of illegality doesn't automatically void a contract.




Richard A. Posner: The Indiana commission's authorization of the fuel surcharge didn't constitute a force majeure excusing NIPSCO's performance.

Posner: Also, this wasn't an inherently illegal contract. The Department of Interior & DOJ hadn't objected to Carbon County's mining.