Omnia Commercial Co. v. United States
Headline: Court upholds that wartime government requisition of a steel company’s production does not require paying owners for frustrated private contracts, making it harder for buyers to recover lost profits.
Holding: The Court held that when the Government lawfully requisitions a company’s products and thereby makes contractual performance impossible, that action is not a taking requiring compensation, so the contract holder cannot recover.
- Allows government wartime requisition of goods without compensating contract holders for lost profits.
- Leaves buyers with no recovery when performance becomes impossible due to lawful government orders.
- Limits lawsuits for indirect economic losses from lawful government actions.
Summary
Background
A buyer became the owner, by assignment on May 19, 1917, of a valuable contract to purchase a large amount of steel plate from a Pittsburgh steel company at below-market prices. Before any deliveries, the United States in October 1917 requisitioned the company’s entire 1918 production and ordered the company not to comply with the buyer’s contract, threatening to take over the plant for public use. The buyer sued the Government in the Court of Claims seeking compensation under the Constitution for the loss; the lower court sustained the Government’s demurrer and dismissed the complaint, and the matter was appealed.
Reasoning
The Court assumed the requisitioning officer had authority and acknowledged that a contract is a kind of property. But it explained that lawful government actions that injure or destroy property do not always count as a constitutional “taking” that requires payment. The Court drew a clear line between a contract (the obligation between people) and the contract’s subject-matter (the actual goods). When the Government lawfully seized the steel, performance of the contract became impossible and the contract ended; it was frustrated, not appropriated for the Government’s use. Because the Government had not taken the contract itself as property, no constitutional compensation was required.
Real world impact
The decision means holders of contracts for future deliveries may not recover when lawful government requisitions make performance impossible, especially in wartime. It limits recovery for indirect economic losses caused by lawful government orders and confirms compensation is required only when the Government actually appropriates property as such, not when it simply prevents a contract from being performed.
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