Contracts Lecture Fourteen: Impossibility and Impracticability

These sources primarily explain legal doctrines that can excuse contractual performance when unforeseen events occur, especially in the absence of a force majeure clause. They define impossibility, where performance is literally unachievable, and impracticability, which applies when performance becomes excessively difficult or expensive. The concept of frustration of purpose is also discussed, excusing performance when the contract's fundamental reason is destroyed. These principles, rooted in common law and codified in the Uniform Commercial Code (UCC), emphasize that the excusing event must be unforeseeable and not a risk assumed by the parties, often requiring objective impossibility rather than mere financial hardship.

Objective impossibility means no one could possibly perform the contract due to an unforeseen event (e.g., destruction of the subject matter). Subjective impossibility, in contrast, refers to a particular party's personal inability or difficulty to perform (e.g., lack of funds), which typically does not excuse performance.

New York law applies impossibility narrowly, requiring performance to be objectively impossible. It was deemed easiest for "non-essential" businesses forced to shut down 100% due to Gov. Cuomo's orders, but harder for service businesses able to work remotely, considering the temporary nature and availability of alternative means.

UCC § 2-615 states that a seller of goods is not in breach if performance is made "impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption" or by compliance with a government regulation. It is essentially a codification of impossibility for goods, often applied more broadly as commercial impracticability.

A classic example of frustration of purpose is renting an apartment to view a specific parade, and then the parade is canceled. Performance (renting the apartment) is still possible, but the fundamental reason for entering the contract (watching the parade) has been destroyed, making the performance worthless to the renter.

A force majeure clause allows parties to predefine specific events (like natural disasters or pandemics) that will excuse contractual performance. It clarifies and can expand or narrow the scope of excusable events beyond what common law doctrines like impossibility or impracticability might cover, explicitly allocating risk.

Courts are reluctant to excuse performance due to mere cost increases because commercial contracts are generally intended to cover such foreseeable market risks. Only extraordinary and disproportionate cost increases, far outside the normal range and unforeseeable, might qualify as true impracticability.

To successfully assert commercial impracticability, a party must demonstrate that a supervening, unforeseen event occurred after contract formation, that this event was not caused by them, that it made performance extremely difficult or burdensome, and that its non-occurrence was a basic assumption of the contract.

Under Restatement (Second) of Contracts § 261, a party's duty to render performance is discharged if, after the contract is made, their performance is made impracticable without their fault by an event whose non-occurrence was a basic assumption on which the contract was made.

The absence of a force majeure clause might strengthen an argument for common law defenses because it suggests that the parties did not explicitly allocate the risk of events like a pandemic in their contract. This leaves room for courts to apply general legal principles regarding unforeseen circumstances.

Two key practical steps are to carefully examine existing contracts to understand obligations and any force majeure provisions, and to communicate proactively and regularly with contract partners about disruptions, potential limitations, and ongoing updates.