Arabian Score v. Lasma Arabian Ltd.

Arabian Score (Arabian) (plaintiff) bought a horse named Score from Lasma Arabian Ltd. (Lasma Limited) (defendant). The purchase agreement provided that it would be governed by the laws of Arizona. Under the contract, $250,000 of the purchase price was to be used by Lasma Corporation (defendant) to advertise and promote Score as a 2-Star Stallion under a license agreement with Lasma Star Stallion, Inc. (Lasma Star). Under paragraph four of the contract, if Lasma Star determined that Score was not eligible to participate in the Star Stallion Program, Lasma Corporation would replace Score or refund the unused portion of the $250,000 to Arabian. The contract also provided that the risk of loss passed upon closing. Arabian obtained a mortality insurance policy on Score. Score died within one year after purchase. Lasma Star and Lasma Corporation regularly promoted deceased horses in order to enhance an owner’s reputation and increase the value of the horse’s progeny, and Lasma Corporation was able and willing to continue promoting Score. Arabian sued Lasma Limited and Lasma Corporation for the unused portion of the $250,000 on the ground of impossibility of performance and under paragraph four of the contract. The district court held that the doctrines of impossibility and commercial frustration did not apply, because Score’s death was a foreseeable risk that was assumed by Arabian under the contract, and it was not an arbitrary or capricious abuse of discretion to determine that Score remained eligible to participate in the Star Stallion Program. The district court granted summary judgment in favor of Lasma Limited and Lasma Corporation. Arabian appealed.