/im-POSS-uh-bil-uh-tee and im-PRAK-tik-uh-bil-uh-tee of per-FOR-muhns/·doctrine
Also known as:impossibility of performance · impracticability of performance · impossibility and impracticability · commercial impracticability · objective impossibility · doctrine of impossibility · excuse by supervening impracticability
Written by attorneys · grounded in primary & secondary sources — see below
A defense to breach of contract that excuses a party's duty to perform when an unforeseen event makes performance impossible or commercially impracticable without the party's fault. The defense applies only when the event was a basic assumption of the contract and the party seeking excuse did not assume the risk.
Sources & Authorities
How it applies
Common Examples
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Temporary Venue Closure
Isaac Irving contracted with Ironwood Capital to host a series of investor conferences at a downtown hotel for six consecutive months. Two weeks after the contract was signed a citywide power failure closed the hotel for three weeks. Ironwood Capital postponed the remaining conferences until the hotel reopened. Because the closure was temporary and performance after reopening was not materially more burdensome, Isaac Irving's duty to perform was suspended but not discharged.
Destroyed Performance Venue
Ingrid Innes agreed to rent a specific music hall from Innovate Pharmaceuticals for a week-long series of product-launch concerts. The day before the first performance the hall burned down through no fault of either party. Because the continued existence of that particular hall was a basic assumption of the contract, both parties' duties were discharged.
Select any source to read its text and confirm it supports the definition.
Cases
Restatements
Casebooks
Taylor v. Caldwell3 B. & S. 825, 122 Eng. Rep. 309 (1863)
Sudden Fuel Price Spike
Interlink Communications contracted with Gulf Oil Corp. to purchase jet fuel at a fixed price for its fleet operations. An OPEC embargo caused the market price to triple overnight. Because the price increase was foreseeable in the industry and the contract allocated the risk of market fluctuations to the buyer, Interlink Communications remained obligated to pay the contract price.
Eastern Air Lines, Inc. v. Gulf Oil Corp.415 F. Supp. 429 (1975)
Canal Closure Forces Rerouting
Transatlantic Financing Corp. agreed to carry cargo from a Gulf port to Iran for a fixed sum. After the contract was signed the Suez Canal closed, forcing the ship to sail around the Cape of Good Hope at substantially greater expense. Because the parties did not allocate the risk of canal closure and the added cost was not so extreme as to alter the essential nature of performance, the carrier remained bound to complete the voyage.
Transatlantic Financing Corp. v. United States363 F.2d 312 (D.C. Cir. 1966)
Energy Cost Escalation Clause Dispute
Aluminum Company of America contracted to supply aluminum to Essex Group at a price indexed to a published electricity rate. When electricity costs rose far beyond any level the parties had contemplated, ALCOA sought to reform the price term. Because the contract contained no mechanism reallocating the risk of such an extraordinary increase, the court examined whether commercial impracticability excused or modified performance.
Aluminum Company of America v. Essex Group, Inc.499 F. Supp. 53 (W.D. Pa. 1980)
Personal Injury Prevents Contribution
India Inoue agreed to contribute several delivery trucks to a limited partnership in exchange for a profit interest. Before closing she suffered injuries that permanently barred her from operating commercial vehicles and forced closure of her sole proprietorship. Because the partnership agreement contained no provision excusing the contribution obligation on grounds of personal disability, the obligation remained enforceable.
Common questions
Frequently Asked
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Does temporary impracticability discharge the duty to perform or merely suspend it?+
Temporary impracticability suspends the obligor's duty while the condition exists. The duty is not discharged unless performance after the condition ends would be materially more burdensome than originally contemplated.
Supporting sources
When does destruction of the subject matter excuse performance under impossibility?+
Destruction of a thing whose continued existence was a basic assumption of the contract excuses performance when the destruction occurs without the fault of the party claiming excuse. The classic illustration is the burning of a music hall rented for specific performances.
Supporting sources
Are large cost increases alone sufficient to establish commercial impracticability?+
Substantial cost increases, even those exceeding fifty percent, are generally insufficient by themselves to establish commercial impracticability. The increase must transform the essential nature of performance rather than merely make it more expensive.
Supporting sources
What restitution rights exist when impracticability discharges a duty?+
A party whose duty is discharged by impracticability may obtain restitution for any benefit conferred on the other party by part performance or reliance.
Supporting sources
3 B. & S. 825, 122 Eng. Rep. 309 (1863)Contracts
…contracts in which performance depends on the continued existence of a given person or thing, an implied condition exists that impossibility of performance arising from the perishing of that person or thing without fault excuses performance. The principle applies whether the subject be a human being, an animal, or a chattel. In the present…