What is Impossibility of Performance?

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What is Impossibility of Performance?

Impossibility of performance occurs when the contractual duties of one or more parties cannot be fulfilled due to circumstances out of their control. It is a defense to a breach of contract claim.

Sometimes unforeseen or unexpected events make it impossible to fulfill the terms of the contract. Some typical examples of impossibility of performance include:

  • Destruction of something that is necessary to perform the contract;
  • Natural disaster that prevents delivery of goods;
  • Weather conditions that prevent performance under the contract;
  • Valuable property is stolen or lost;
  • A law is passed making contract performance illegal;
  • A key player becomes seriously ill or dies.

To be valid, impossibility must be legal or physical; it cannot be due to circumstances or ability. Difficulty of performance due to unforeseen or extreme cost or lack of capacity to perform does not constitute impossibility, and does not relieve a party from their obligation to fulfill the contract.

There are certain circumstances when impossibility of performance would not be a defense to a breach claim, including (1) when the party making the promise in the contract caused the impossibility, or (2) if the impossibility is foreseeable, meaning that a party could have predicted that the event causing the impossibility would occur.

Impossibility may exist at the time the contract was executed. When this occurs, there are no rights or obligations and the contract is invalid from the beginning. Impossibility may also arise following execution of a contract, which makes the contract void.

Many times a contract will specify which party is responsible for bearing the cost of non-performance due to impossibility. The impossibility provision written into the contract for this purpose must clearly state each method of impossibility covered (e.g., fire, flood, earthquake, etc.).

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