Also known as: impracticability · defense of impracticability · impracticable · commercial impracticability · impossibility defense
Written by attorneys · grounded in primary & secondary sources — see below
A contractual defense that excuses a party's duty to perform when, after formation, performance becomes impracticable without the party's fault because of an event whose non-occurrence was a basic assumption of the contract. The defense applies unless the contract language or circumstances indicate the contrary. It extends to cases involving destruction of specific property, regulatory changes, or other supervening events that fundamentally alter the nature of performance.
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After a hurricane, National Shield Insurance refuses to pay Carla and Jordan's homeowners claims, citing an exclusion the parties never discussed. The policy contains no force-majeure clause allocating storm risk. The court determines whether the unprecedented storm damage discharged the insurer's duty because the non-occurrence of total loss was a basic assumption of the contract.
Royal Lines contracts with Silver Lines to truck components daily through a specific mountain pass for five years. An unanticipated avalanche leads the state to order indefinite closure after experts conclude rebuilding is impossible. Alternate routes triple fuel costs and Royal ceases performance. The court determines whether the closure discharged Royal's duty because the non-occurrence of indefinite closure was a basic assumption of the contract.
A subdivision's covenants require approval of new construction by a two-person Architectural Control Committee. One member dies and the other retires without a succession mechanism. A lot owner seeks declaratory relief excusing compliance. The court assesses whether the committee's demise discharged the approval duty because the non-occurrence of the committee's continued existence was a basic assumption of the covenant.
Factory owner Apex contracts to supply goods to neighbor Baker using a process that later causes emissions. A post-formation regulation requires costly new equipment that would make performance commercially senseless. Apex ceases performance. The court determines whether the regulatory change discharged Apex's duty because the non-occurrence of the regulation was a basic assumption of the contract.
A seller agrees to deliver goods using a specific port's loading facilities. A storm destroys the pier without fault of either party. A commercially reasonable substitute port is available nearby. The seller must tender and the buyer must accept delivery at the substitute facility.
A trust is created to fund a scholarship program at a specific college that later closes permanently. The trustee petitions the court to modify the purpose. The court determines whether the original charitable purpose has become impracticable and whether modification is appropriate under the cy pres doctrine.
The party must show that performance became impracticable after contract formation without its fault due to an event whose non-occurrence was a basic assumption of the contract. The defense is unavailable if the contract allocates the risk to the performing party or if performance remains possible though more expensive.
Supporting sources
…. . invalidating legislation on the basis of their view on that question at the moment of decision, a practice which has proved impracticable in other fields.'" Id. , at 240-241 (quoting United States ex rel. TVA v. Welch , 327 U. S. 546, 552 (1946)); see Berman, supra , at 32 ("[T]he legislature, not the judiciary, is the…
…method of performance, compare Annot., 84 A.L.R.2d 12, 19 (1962), there is nothing necessarily inconsistent in claiming commercial impracticability
…of the price on the basis of mutual mistake of fact, unilateral mistake of fact, unconscionability, frustration of purpose, and
…rights. And it would be the case if the agreement imposed filing and administrative fees so high as to make access to the forum impracticable
No. Courts hold that even significant cost increases, including those exceeding fifty percent, do not discharge performance unless they fundamentally alter the nature of the contractual undertaking rather than merely making it more expensive.
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An express clause providing for termination upon a stated event may discharge the duty if the event occurs. However, if continuance of the duty would subject the obligor to a materially increased burden due to impracticability, the exception preventing discharge does not apply.
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Yes. When a post-formation change in law or regulation renders performance unlawful or practically unavailable and the non-occurrence of the regulatory barrier was a basic assumption of the bargain, the affected party's nonperformance is excused.
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