Contracts Law. The doctrine of impossibility of performance provides that when a condition which is part of a contract becomes impossible for a party to perform, that condition is excused. It absolves a party from liability for nonperformance.
In order for nonperformance to be excused under the doctrine, the party asserting the impossibility defense must establish each of the following:
- that an event occurred which made performance under the contract impossible or impracticable (not just more difficult or more expensive);
- that the party seeking relief was not at fault in causing the event to occur;
- that the non-occurrence of the event was a basic assumption upon which the contract was made; and
- that the party seeking relief did not assume the risk of the event occurring.
Typical examples of events that might implicate the impossibility of performance doctrine include “acts of God,” unexpected unavailability of materials, strikes and other labor problems, governmental orders, etc.
Restatement Second of Contracts, § 261:
Where, after a contract is made, a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.
Uniform Commercial Code, § 2-615 Excuse by Failure of Presupposed Conditions:
Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance:
(a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faithwith any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
(b) Where the causes mentioned in paragraph (a) affect only a part of the seller’s capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contractas well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
(c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.
Alcan Forest Products, LP v. A-1 Timber Consultants, Inc., 982 F. Supp. 2d 1016 (2013):
Alaska courts recognize the affirmative defense of “[i]mpossibility of performance… as a valid defense to an action for breach of contract when the promisor’s performance becomes commercially impracticable as a result of the frustration of a mutual expectation of the contracting parties.” Alaska Civil Pattern Jury Instruction (“ACPJI”) 24.08C provides that a party must demonstrate two elements when claiming this defense:
(1) an event occurred which made the [party’s] performance impracticable because of extreme and unreasonable difficulty (expense) (injury) (loss) to [party]; and
the event which occurred was not reasonably foreseeable by the parties when the contract was made.
Comment (b) to the Restatement (Second) Contracts § 261 explains: “In order for a supervening event to discharge a duty under this Section, the non-occurrence of that event must have been a `basic assumption’ on which both parties made the contract.” Here, impossibility/impracticability is A-1’s affirmative defense, so A-1 bears the burden of proof.
Far West Federal Bank, S.B. v. Director, 787 F. Supp. 952 (1992):
A party seeking to rescind an agreement based on frustration of purpose must establish the occurrence of a supervening circumstance by which “… a thing, event or condition which was essential so that the performance would yield to the promisor the result which the parties intended him to receive, fails.” West Los Angeles Institute for Cancer Research v. Mayer, 366 F.2d 220, 223 (9th Cir.1966). Rescission of a contract based on impossibility of performance requires a similar showing. See, e.g., Opera Co. of Boston v. Wolf Trap Foundation, 817 F.2d 1094, 1102 (4th Cir. 1987) (the elements of impossibility are: (1) the occurrence of an intervening act; (2) the non-occurrence of the act was a basic assumption of the agreement; and (3) the occurrence of the act made performance impracticable).