Impossibility of performance

What Is Impossibility of Performance?

Impossibility of performance is a doctrine within Contract Law that excuses a party from fulfilling their contractual obligations when unforeseen circumstances make performance literally impossible. This principle operates as a legal defense against a claim of breach of contract, asserting that the failure to perform was not due to fault or negligence but rather to events beyond control. The core idea behind impossibility of performance is that the law cannot compel an impossible act⁵⁰, ⁵¹. For this doctrine to apply, the intervening event must fundamentally alter the nature of the contractual obligation.

History and Origin

The roots of impossibility of performance trace back to English common law. Historically, contractual obligations were often viewed as absolute, meaning parties were held liable for non-performance even if circumstances made fulfillment exceptionally difficult or impossible. However, this rigid stance began to evolve with landmark cases. The English case of Taylor v Caldwell in 1863 is widely recognized as a pivotal moment in establishing the doctrine. In this case, a contract for the rental of a music hall was discharged when the hall burned down before the performance, demonstrating that the destruction of the subject matter could excuse performance⁴⁸, ⁴⁹. This case introduced the concept of an implied condition that the continued existence of a person or thing essential to the contract would excuse performance if that person or thing perished⁴⁷. The Supreme Court of the United States later adopted this rule, broadening its application in American jurisprudence⁴⁵, ⁴⁶.

Key Takeaways

• Impossibility of performance is a legal defense excusing contractual duties when unforeseen events make performance literally unattainable.
• The event causing impossibility must be objective, meaning no one could perform the contract, not just the specific party.
• The doctrine typically applies to situations involving destruction of the contract's subject matter, changes in law making performance illegal, or death/incapacity in personal service contracts.
• Financial hardship or increased costs generally do not qualify as impossibility of performance.
• Successful invocation of the doctrine typically leads to the termination of the contract, releasing both parties from future obligations.

Interpreting the Impossibility of Performance

Interpreting impossibility of performance requires a careful assessment of the circumstances surrounding a contract. The key is to determine if the performance has become objectively impossible, meaning that the task cannot be performed by anyone, rather than subjectively impossible, which would mean it is only impossible for the specific obligor due to their own limitations⁴⁴. Courts examine whether an unforeseen event, the non-occurrence of which was a basic assumption of the agreement, has made performance literally unfulfillable⁴³.

For instance, if a contract requires the delivery of a unique artifact and that artifact is destroyed by fire, performance becomes objectively impossible. However, if a contractor merely faces unexpected financial difficulties or increased costs in fulfilling a construction project, this typically does not qualify as impossibility of performance, as the task itself remains possible, albeit more burdensome⁴⁰, ⁴¹, ⁴². The burden of proof lies with the party seeking to invoke this defense³⁹. The doctrine is applied narrowly, recognizing that contract law aims to allocate the risk allocation that might affect performance³⁸.

Hypothetical Example

Consider a scenario where a specialized manufacturing company, "TechFab Inc.," enters into a contract with "GreenEnergy Solutions" to custom-fabricate 50 unique wind turbine blades using a proprietary 3D printing facility. The contract specifies that these blades must be produced at TechFab's primary factory, which houses the highly specialized equipment.

Before production can begin, a sudden and severe earthquake strikes the region, completely destroying TechFab's primary manufacturing facility, including the unique 3D printing equipment. This event renders the production of the specified wind turbine blades at that particular facility literally impossible.

In this situation, TechFab Inc. could invoke the doctrine of impossibility of performance. The destruction of the specific factory, which was essential to the contract's subject matter and the means of performance, makes it objectively impossible for TechFab to fulfill its obligation under the terms agreed upon. The earthquake was an unforeseen event beyond TechFab's control, and its non-occurrence was a basic assumption of the contract.

Practical Applications

Impossibility of performance is primarily applied in legal contexts as a defense to contractual non-performance. It arises in various real-world scenarios, particularly when unexpected events disrupt typical business operations. For example, if a government enacts a new law that makes the performance of a contract illegal, the parties may be excused from their obligations due to legal impossibility³⁵, ³⁶, ³⁷. Similarly, the death or incapacitation of a party in a personal service contract, where that individual's unique skills are indispensable, can also trigger this doctrine³⁴.

During periods of widespread disruption, such as the COVID-19 pandemic, the doctrine of impossibility of performance, alongside related concepts like force majeure clauses, gained significant attention³⁰, ³¹, ³², ³³. While many contracts include specific force majeure clauses to address unforeseen events, in their absence, courts may turn to common law principles like impossibility. However, courts generally require a high standard for applying this doctrine, often not excusing performance for mere economic hardship or increased costs²⁸, ²⁹. For example, significant supply chain disruption can lead to parties attempting to claim impossibility, though courts will scrutinize whether performance is truly impossible or just more difficult²⁶, ²⁷.

Limitations and Criticisms

Despite its role in providing relief from unforeseen burdens, the doctrine of impossibility of performance has significant limitations and is applied narrowly by courts. One major critique is that it does not apply if the impossibility was foreseeable at the time the contract was made, or if the party seeking relief caused the impossibility²⁴, ²⁵. For instance, if a party promises to deliver goods knowing there's a high risk of import restrictions, they generally cannot later claim impossibility when those restrictions materialize, as they assumed the foreseeability of the risk.

Furthermore, financial difficulties or economic hardship, even severe ones, typically do not constitute impossibility of performance. A contract becoming unprofitable or more expensive to fulfill is usually not enough to excuse performance²⁰, ²¹, ²², ²³. This is because the purpose of Contract Law is, in part, to allocate risks between parties. Courts are hesitant to relieve a party of their liability simply because a bad bargain was struck or market conditions changed adversely¹⁹. As some legal analyses highlight, the doctrine focuses on whether performance is literally impossible, not merely difficult or unprofitable¹⁸.

The stringent requirements for impossibility mean that many attempts to invoke it as a defense fail. This can lead to frustration for parties facing genuine, yet not "impossible," challenges, pushing them towards other forms of dispute resolution or renegotiation of terms.

Impossibility of Performance vs. Frustration of Purpose

While often discussed together in the context of unforeseen events impacting contracts, impossibility of performance and frustration of purpose are distinct legal doctrines.

Impossibility of performance arises when the act itself cannot be done (e.g., the subject matter is destroyed or a new law prohibits the activity)¹⁷. The event makes performance literally unattainable. In contrast, frustration of purpose occurs when performance remains physically and legally possible, but the fundamental reason why the parties entered into the agreement has been completely undermined by an unforeseen event¹³, ¹⁴, ¹⁵, ¹⁶. The focus shifts from the inability to perform to the worthlessness of the performance given the changed circumstances. Both doctrines provide a basis for excusing contractual obligations but do so under different sets of conditions and criteria¹².

FAQs

What types of events typically lead to impossibility of performance?

Events that can lead to impossibility of performance include the destruction of the specific subject matter essential to the contract, a change in law that makes the performance illegal, or the death or incapacitation of a person whose unique skills are required for a personal service contract⁹, ¹⁰, ¹¹. These are generally unforeseen events beyond the control of the parties.

Is financial hardship considered impossibility of performance?

Generally, financial hardship or increased costs do not constitute impossibility of performance⁸. The doctrine typically applies when performance is literally impossible, not just more difficult or expensive. Courts expect parties to account for normal business risks, including potential market fluctuations or increased costs.

How does impossibility of performance differ from a force majeure clause?

Impossibility of performance is a common law doctrine, meaning it's a legal principle established through court decisions. A force majeure clause, on the other hand, is a specific provision written into a contract that explicitly defines events (like natural disasters, wars, or epidemics) that may excuse a party from fulfilling their contractual obligation⁵, ⁶, ⁷. While a force majeure clause can encompass events that would also fall under impossibility, it provides a contractually agreed-upon framework for addressing such disruptions, often with specific notice requirements and agreed-upon remedies³, ⁴.

Can a party cause the impossibility themselves and still claim it as a defense?

No, a party generally cannot claim impossibility of performance if they are responsible for causing the impossibility¹, ². The doctrine requires that the unforeseen event be beyond the control and fault of the party seeking to be excused from the contract.