codified the doctrine.As in California, the statutory language might provide guidance to or place limitations on its applicability. Third, impossibility also arises if, after the parties sign the contract, a new law comes into being that makes performing illegal. Walter included these provisions to incentivize his key employees to remain at the company following his death as his wife was not involved in running it. This doctrine is, however, the underlying rationale for some differing site conditions claims. As the force majeure event clause of the lease identified "governmental preemption of priorities or other controls in connection with a national or other public emergency" specifically, the court found that The Gap's frustration of purpose argument fell short (The Gap at 8). The difference between impracticability and impossibility is that impracticability is still physically possible; however, performance will result in a substantial hardship to the performing party. The doctrine of promissory estoppel 4. If the only way to perform would be to go to extreme hardship or expense, it is still possible. If you entered into a contract after March 11, the reality is that the doctrine of . (See, Whether performance is excused often depends on the event that makes performance impossible or unfeasible, and whether that event was contemplated under the contract. This is high stress litigation, often pitting sibling against sibling or second spouse against step-children. While commercial tenants sometimes use these doctrines in tandem, they are distinguishable in their underlying aims. Known risks assigned by contract will not excuse performance no matter how disastrous the consequence of that risk. For example, in a seminal California case, a tenant who leased commercial space for an auto parts and tire store was barred from using the doctrine of impossibility after governmental regulations on the sale of new tires triggered by WWII made performance impossible, simply because the contract was entered into when the country was debating . Termination by agreement or by a provision in the contract. In cases that involve the impossibility defense, one party may argue it was impossible for it to perform, while the other claims it was merely difficult or burdensome. CB Theater argued that both frustration of purpose and impossibility doctrines should excuse or delay their obligation to pay rent under the lease. The courts will not grant contractors relief under the impossibility doctrine for discontinuing work under these circumstances. One such defense is that of impossibility. The law often considers performance to be impossible if it is not practicable, and performance is not practical if it can only be done at an excessive and unreasonable cost. California courts may excuse a partys non-performance of a contractual obligation if such an unforeseen event occurs and prevents the party from performing. On March 11, 2020, the World Health Organization declared Covid-19 a pandemic. Courts often cite three levels of impossibility: Where performance becomes physically impossible, further performance would almost certainly be excused. In the leading California case approving this expanded meaning, Mineral Park Land Co. v. Howard, 172 Cal. Impracticability Law and Legal Definition. Simon Property Group L.P. v. Pacific Sunwear Stores LLC (2020 WL 5984297 June 26, 2020 (Ind. Am I excused? When one party does not live up to its obligations, serious problems can ensue. d (Am. California courts tend to find impossibility in a case where one of the parties died or suffered incapacitation, which would make it impossible for that person to perform. After Covid-19 swept through New York last spring, Phillips terminated the agreement to auction the painting and JN sued for breach of contract. Impossibility of performance is a doctrine whereby one party can be released from a contract due to unforeseen circumstances that render performance under the contract impossible. For example, a roofing contractor would not be in breach for failing to complete a roof on a building destroyed by fire through no fault of his or hers. Attorney Advertising. New York, for example, sets a high bar (i.e., objective impossibility) and requires not only that the force majeure clause includes a specific trigger event but also that the event is unforeseeable. 2022, Stimmel, Stimmel & Roeser, All rights reserved| Terms of Use | Site by Bay Design, Impossibility Of Performance As A Defense To Breach Of Contract, In the unique context of transactions between merchants, the Uniform Commercial Code carves out an exception and allows the defense of. One noted commentator on New York contract law states: "The doctrine of impossibility may provide a defense where unforeseen government action prevents the performance of a contract." [13] In one case, a court excused a fabric supplier from performing under a supply contract where the government requisitioned all cloth materials to meet wartime . A restaurant is closed due to the coronavirus pandemic. The parties in JN Contemporary Art LLC v. Phillips Auctioneers LLC entered into an agreement in June 2019 to govern the auctioning of a painting that was scheduled to take place in May 2020. The tenant, Equinox Bedford Ave Inc. operated a gym on the premises and argued that frustration of purpose and impossibility excused their obligation to pay rent during the New York state government shutdown that closed gyms. 1600 Walnut Corporation, General Partner of L-A 1600 Walnut LP v. Cole Haan Company Store LLC (E.D. . The impossibility must be the result of an unforeseen event that could not have been protected against in the contract. A party who is invoking a force majeure provision must show that despite its skill, diligence, and good faith, performance became impossible or unreasonably expensive due to an unforeseen event. The appellate court concluded that the Legislature did not mean to reject the doctrine of impossibility, but rather sought to modernize California probate laws. Citing Witkin Summary of Law, California courts have held that, "force majeure is the equivalent of the common law contract defense of impossibility and/or frustration of purpose: performance of a contract is excused when an (1) unforeseeable event, (2) outside of the parties' control, (3) renders performance impossible or impractical. We invite you to follow our blog and to get to know us through our posts. In a recent Massachusetts case, a General Contractor was permitted to cancel a material contract with a supplier because the owner unexpectedly deleted that material for the Project. The impossibility doctrine looks at whether the underlying action to be performed in a contract was possible under the circumstances, while the frustration of purpose doctrine analyzes whether the parties can achieve the stated or implied purpose of the contract. Start resolving your legal matters - contact us today! Under contract law, impossibility is an excuse that can be used by a seller as an excuse for non-performance when an unforeseen event occurs after the contract is made which makes performance impossible. Impracticability means the excuse in performance of a duty. John McIntyre is a litigation partner in Reed Smiths Pittsburgh office. Some common grounds or ways to terminate a contract include: Breach of contract; Impossibility or impracticability of performance; Fraud, mistake, or misrepresentation; Invalid or illegal contract; Recission; Frustration of purpose; Completion of the contract; or. Importantly, although absolute impossibility is not required, performance must present "extreme and unreasonable difficulty, expense, injury, or loss to one of the parties" in order to be excused. Turning to the impossibility doctrine, in response to CB Theater's argument that performance of the contract would have been impossible to perform under the circumstances, the court declined to apply the impossibility doctrine to the period in which the theater was fully shut down by government order. And such contracts cannot be enforced as they are void. The court reviewed decisions from California and other jurisdictions, concluding that by 1982 the modern rule recognized impossibility as an exception to the rule enforcing conditions precedent. In the context of this defense, impossibility means there was literally no possible way for the party to perform its duties. As the world struggles to come to grips with COVID-19, and to prepare for eventual recovery, many in the construction industry are grappling with how the pandemic may impact their projects. Introduction 2. Contractual force majeure provisions often contain special notice or timing provisions. However, despite severe economic consequences, further performance may not be legally excused unless the direct cause of the difficulty could never have been foreseen. Document impacts or issues as they occur and provide notice frequently and often. Section 56 of the Indian Contract Act 1872 states that "an agreement to do an act impossible in itself is void". Law Inst. This blog summarizes several recent cases dealing with this topic. The doctrine of impossibility of performance is also known as legal impossibility, legal impracticability and impossible performance. account. The court found that since the malls were closed during a portion of Pacific Sunwear's nonpayment period, Pacific Sunwear had established a likelihood of success on the merits in its impossibility doctrine argument. 1916F 1], the court accepted the defense of impracticability in an action which involved a contract to take all gravel necessary to effect the construction of a fill and complete the cement work on a proposed bridge . The doctrine of impossibility is a contract law concept and refers to situations in which it is impossible for a party to a contract to perform its obligations under it. California courts tend to find impossibility in a case where one of the parties died or suffered incapacitation, which would make it impossible for that person to perform. Relatedly, if one partys ability to perform rests on a third partys performance, courts will look to whether the third partys inability to perform falls within the scope of the force majeure provision and whether it is in fact impossible or unreasonably expensive for the party to satisfy its obligations despite exercising skill, diligence, and good faith. Many courts distinguish between subjective and objective impossibility, refusing to excuse subjective impossibility, or impossibility related solely to the individual promisor, but excusing objective impossibility relating to the nature of the promise. In applying the frustration of purpose doctrine, the court here found that while the economic forces surrounding the pandemic were unforeseen by the parties, they amounted to a market change rather than a frustration of purpose. Other excuse doctrines, however, exist at the common lawnamely impossibility and frustration of purpose. The court found that in all three states, parties may specifically delegate the risk of frustration of purpose by contract. For example, a commercial tenant may argue that because its doors were ordered to be closed, the reason the tenant entered into the lease to operate its business is no longer possible. Bigger picture, Schwan v. Permann shows the importance of updating trust documents following major life events such as the sale of a business. In recent cases where tenants have sought to avoid rent during the pandemic, state and federal courts have looked to the specific terms of each lease, rather than the highly unusual circumstances, to decide whether tenant performance under the lease was excusable due to either frustration of purpose or impossibility. Because the court found that the pandemic fit within the general parameters of a natural disaster, it concluded that Phillips properly terminated the agreement and dismissed JNs breach of contract claim. A judge from Contra Costa County Superior Court conducted a bench trial on the dispute. Proving impossibility is harder than it may seem. The doctrine of consideration 3. Frustration of purpose discharges contractual duties to perform when an unexpected, intervening event--the non-occurrence of which was a basic assumption of the contract--frustrates the underlying purpose of the contract. Before courts will apply the doctrine of impossibility, they typically require a showing that the cause of the impossibility was not "reasonably foreseeable." On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. Contractors, owners and others want to know whether the pandemic might excuse performance under a contract or whether a contractor might be entitled to recourse for delays associated with labor shortages, supply chain issues, or governmental orders suspending work or imposing restrictions on construction. This was a harsh result given that the trial court specifically found that the gift to Youngman was the reflection of a long-standing relationship, not the product of any affirmative fraud or undue influence. A year after the Covid-19 pandemic came to the U.S., more courts are showing a willingness to accept force majeure, impossibility or impracticability, and other defenses to excuse contract obligations in situations caused by the pandemic. The list is endless. Sometimes, subsequent to the formation of a contract, an impossibility arises with regard to its performance. Impracticability can apply if, after the contract, an unforeseen event occurred to make performance unreasonable difficult or expensive. All of us enter into dozens of contracts every week. In California probate law, impossibility was a recognized concept until 1982, when the Legislature repealed former Probate Code section 142. Schwan, Johnson and Ostrosky had worked with Walter for many years and they socialized together. Philips v. McNease, 467 S.W.3d 688, 695 . 35 East 75th Street Corporation v. Christian Louboutin LLC (2020 WL 7315470 (N.Y. However, under some circumstances the law may excuse a breach and not hold the breaching party legally responsible. Breaking Ground: West Coast Real Estate and Land Use Blog, Retail and Commercial Development and Leasing Blog, Bankruptcy, Restructuring and Creditors' Rights. According to the early version of common law, English courts refused to excuse a party to a contract when an event occurred following the making of the contract that affected one party's ability to execute. (For a more detailed discussion of the Frustration of Purpose doctrine, please see the Mayer Brown Legal Update "Coronavirus COVID-19: Construction, . The landlord responded by terminating the lease and bringing a breach of contract action. Impracticability or frustration of purpose may be temporary or partial. Another case of impossibility is when an item crucial to performance becomes destroyed (through no fault of the defaulting party) and there is no reasonable substitution. "Impossibility" is treated as but one example of a general category called "frustration." 4 At some point English law allowed impossibility of performance to be absorbed into the category of frustration of contract. In order to be an excuse for nonperformance of a contract, the impossibility of performance must attach to the nature of the thing to be done and not to the inability of the obligor to do it. Although each contract will have its own unique issues that should be considered in assessing the parties rights and obligations, below is a basic discussion of these defenses under California law. 902 [1987]). . 882-884). The key issue is defining what is true impossibility and determining what the actual effect of the impossibility should be. This suggests that the court here took quite a broad view of the underlying purpose of this lease. In this case, the landlord, UMNV 205-207 Newbury LLC, sought to recover unpaid rent and liquidated damages for the rest of the lease term due to the nonpayment of rent. It is vital for the parties to understand that unless in a commercial setting, increased difficulty or expense will not normally amount to an excuse to evade obligations under the contract. business law. When any such event or incident arises, which makes the performance of the contract impossible, the contract becomes frustrated or impossible. On Behalf of Buffington Law Firm, PC | Jun 29, 2018 | Firm News. The lease provided that Caff Nero may use premises solely for "the operation of a Caff Nero themed Caf under Tenant's Trade Name and for no other purpose" (Caff Nero at 2). On the other hand, if the risk that such an event could happen was one that the parties should reasonably have anticipated, or if the contract assigned that risk to one of the parties, then the Court normally would not excuse further performance. The Limits of Force Majeure. We discuss trust contests, will contests, and administration disputes. If the event was so unusual and unexpected that the parties could not reasonably have foreseen it, and if it is unfair to place the risk of its happening on either party, then the Court may excuse further performance of the contract on both sides. 5407-5411). 1931, pp. 187-192; Taylor v. The expression force majeure does not denote a common law doctrine. Thus, the court held that in all of the leases, since the leases did specifically contemplate the risk of disruption by governmental regulations and allocated that risk via the force majeure clauses, the force majeure clauses superseded the frustration of purpose doctrine. Impossibility, Frustration, and Impracticality in Contract Law. 692, 697 [109 P. Citing Witkin Summary of Law, California courts have specifically held that "force majeure is the equivalent of the common law contract defense of impossibility and/or frustration of purpose: performance of a contract is excused when an (1) unforeseeable event, (2) outside of the parties' control, (3) renders performance impossible or . Contract language may disallow reliance on the doctrine of impossibility, impracticability or frustration of purpose. Generally, however, the doctrine of frustration of purpose has been applied narrowly, and courts generally find that it does not apply except in very narrow circumstances. The focus of the courts on the specific language of each lease highlights the importance of careful and specific lease drafting. It is settled that if parties have contracted with reference to a state of war or have contemplated the risks arising from it, they may not invoke the doctrine of frustration to escape their obligations Northern Pac. Retail apparel store owner Pacific Sunwear sought a temporary restraining order (TRO) and preliminary injunction to compel landlord Simon Property Group to allow Pacific Sunwear to reenter its 16 stores in Simon Property Group malls, on which Simon Property Group had changed the locks due to Pacific Sunwear's nonpayment of rent. Defining impossibility in a particular situation can call for complex legal and factual analysis. Accordingly, Youngman asked a colleague, who worked in same building, to review the trust with Walter. The party asserting the defense of impossibility has the burden to prove the following elements: (1) a supervening event made performance impossible or impracticable; (2)the nonoccurrence of the event was a basic assumption upon which the contract was based; (3) the occurrence of the event resulted without the fault of the party seeking to be excused; (4)the party seeking to be excused did not assume the risk of occurrence; and (5) the party has not agreed, either expressly or impliedly, to perform in spite of impossibility or impracticability that would otherwise justify nonperformance. The court ultimately held that, under the frustration of purpose doctrine, Caff Nero's obligation to pay rent was discharged during the period in which the caf could not serve food and beverage on the leased premises. In this case, tenant Christian Louboutin, a luxury shoe store, sought rescission of the remainder of its lease on the grounds of frustration of purpose and impossibility in light of decreased foot traffic in Manhattan due to pandemic shutdowns. Because of this, the tenant could argue that it receives no value from the lease, and should be relieved of the obligation to pay rent. There are at least two principles that commonly limit the application of a force majeure clause: if the event (1) made performance impractical and (2) was the cause of a party's nonperformance. If the only way to perform would be to go to extreme hardship or expense, it is still possible, and the obligation is not usually excused.