The trust was drafted by Walter C. Youngman, Jr., a tax attorney and longtime friend (but not blood relative) of Walter Permann. To properly invoke a force majeure clause, the affected party must demonstrate that: (1) the unanticipated event was beyond its reasonable control; (2) it was prevented from performing its obligations as a direct result of the event; (3) it has taken all reasonable steps to mitigate damages and avoid nonperformance under the lease; and (4) it has impossibility performance defense breach contract. There are at least two principles that commonly limit the application of a force majeure clause: if the event (1) made performance impractical and (2) was the cause of a party's nonperformance. Where performance becomes so difficult or costly that the value of the contract to one party is destroyed, continuing that performance to completion may be financially impractical. Superior Ct., Feb. 8, 2021, 2084CV01493-BLS2). Contractual force majeure provisions often contain special notice or timing provisions. To the extent that certain assumptions or conditions are inherent in performance under one contract, ensure that you have taken appropriate steps to preserve the applicability of these defenses downstream. Contractual force majeure clauses and the doctrines of commercial frustration and impossibility are defenses that are likely to arise with regularity. The doctrine of impossibility is one of the important principles of equity and has been successfully argued in the taxation matters also. California courts tend to find impossibility in a case where one of the parties died or suffered incapacitation, which would make it impossible for that person to perform. 1. The court also took care to distinguish the "Effect of Unavoidable Delays" clause from a force majeure clause, under which the failure to timely pay rent would not have been an excusable default. In the contract setting, impossibility can excuse nonperformance with a condition precedent. In order to be an excuse for nonperformance of a contract, the impossibility of performance must attach to the nature of the thing to be done and not to the inability of the obligor to do it. A typical example would be a painter not finishing his contractual obligation to paint a home that had burned down during the project. For example, a commercial tenant may argue that because its doors were ordered to be closed, the reason the tenant entered into the lease to operate its business is no longer possible. A party should identify the governing law of its contract as jurisdictions may treat these doctrines differently. The Gap Inc. v. Ponte Gadea New York LLC (S.D.N.Y., March 8, 2021, WL 861121). The impossibility defense is an excuse to performance that Texas courts will refer to as impossibility of performance, commercial impracticability, or frustration of purposethough the choice of terminology is of no significance, as each is applied identically. Further, the court noted that nothing prevented CEC Entertainment from opening pizza restaurants or different styles of businesses in the leased space that did not involve arcade games. "Impossibility" is thus a doctrine "for shifting risk to the party better able to bear it, either because he is in a better position to prevent the risk from materializing or because he can. Eight days later, California became the first state in the U.S. to issue a stay-at-home order, which mandated that all residents remain confined except to go to an essential job or shop for essential needs. account. 1916F 1], the court accepted the defense of impracticability in an action which involved a contract to take all gravel necessary to effect the construction of a fill and complete the cement work on a proposed bridge . One noted commentator on New York contract law states: "The doctrine of impossibility may provide a defense where unforeseen government action prevents the performance of a contract." [13] In one case, a court excused a fabric supplier from performing under a supply contract where the government requisitioned all cloth materials to meet wartime . 289 [156 P. 458, L.R.A. If the only way to perform would be to go to extreme hardship or expense, it is still possible. Inheritance disputes are on the rise nationally as the baby boomers age and wealth passes from one generation to the next. The court based its ruling in part on Section 264 of the Restatement of Contracts governing impracticability of performance prevented by government regulation or order. Civil Code Section 1511 excuses a party's performance of a contractual obligation when performance is 'prevented or delayed by operation of law' or by an 'irresistible, superhuman cause.' The landlord responded by terminating the lease and bringing a breach of contract action. Under the impossibility doctrine, if a party's contractual performance becomes impossible due to an extraordinary event, she is excused from the contract. The doctrine of impossibility is available where performance of a contract is rendered objectively impossible. ), 2020 N.Y. Slip Op. This doctrine is, however, the underlying rationale for some differing site conditions claims. The Spearin doctrine was created in 1918, when the Supreme Court held that (1) the contractor is not responsible for defects in the plans and specifications, and (2) the owner's liability is not relieved by the general clauses requiring contractors to visit the site, check the plans, and inform themselves of the requirements of the work. Both of these doctrines allow for the argument that a default is excusable under circumstances that were unforeseeable to the parties at the time of the contract's formation. However, the Legislature amended the statutory scheme in 2010 to add California Probate Code section 21384, which imposed a more stringent independent attorney requirement on the review process. We hope that our blog will be of interest to estate planning professionals and to family members immersed in trust and estate disputes. Even when the doctrines of impossibility, impracticability and frustration of purpose may apply in one circumstance, they may not necessarily be applicable to other contractual agreements. Before courts will apply the doctrine of impossibility, they typically require a showing that the cause of the impossibility was not "reasonably foreseeable." On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 as a pandemic. But whereas proof of objective impossibility may be relatively easy for a manufacturer that has been forced . 589, SELECTED READINGS ON THE LAW OF CONTRACTS (1931) 979; Woodward, Impossibility of Per- . Some common grounds or ways to terminate a contract include: Breach of contract; Impossibility or impracticability of performance; Fraud, mistake, or misrepresentation; Invalid or illegal contract; Recission; Frustration of purpose; Completion of the contract; or. All Rights Reserved. While impossibility comes into play infrequently in California trust and estate disputes, the doctrine allows some flexibility in the terms of trusts and wills so as to achieve an equitable result. Absent extraordinary circumstances, losing money is not a legal defense to a breach of contract action. The First District Court of Appeal took up this issue in Schwan v. Permann (2018) 28 Cal.App.5th 678, finding that the doctrine of impossibility can excuse a condition precedent. The doctrine of impossibility and judicial treatment of force majeure clauses vary from state to state. 13:2 The impracticability doctrine evolved relatively recently out of the doctrines of impossibility and frustration of purpose.1 Indeed, until the middle of the nineteenth century, the common law almost always required specific performance of contractual obligations. Under the law in effect in 1999, a certificate of independent review from such an attorney could validate the bequest to Youngman, i.e., save a gift that otherwise would fail as the presumptive result of undue influence. . That provision included "governmental action" as one of the factors excusing a party's obligation to perform. The party asserting the defense of impossibility has the burden to prove the following elements: (1) a supervening event made performance impossible or impracticable; (2)the nonoccurrence of the event was a basic assumption upon which the contract was based; (3) the occurrence of the event resulted without the fault of the party seeking to be excused; (4)the party seeking to be excused did not assume the risk of occurrence; and (5) the party has not agreed, either expressly or impliedly, to perform in spite of impossibility or impracticability that would otherwise justify nonperformance. Sometimes, subsequent to the formation of a contract, an impossibility arises with regard to its performance. To invoke the doctrine of commercial frustration, a party must show that changed conditions have rendered the performance bargained for from the promisee worthless. Impossibility or Impracticability The doctrine of impossibility or impracticability has evolved to excuse contract performance in certain circumstances due to what are deemed unexpected and radically changed circumstances. They buy or lease property. He has substantial expertise litigating and trying complex breach-of-contract matters. In this case, CEC Entertainment, the operator of the children's entertainment-focused pizza parlor Chuck E. Cheese, sought rent abatement or reduction under leases for venues in North Carolina, Washington and California. (See, Whether performance is excused often depends on the event that makes performance impossible or unfeasible, and whether that event was contemplated under the contract. Partial impracticability or frustration occurs when the unexpected, intervening event renders only part of a party's performance impossible, in which case, the promisor must render the part of its performance that is possible. However, despite severe economic consequences, further performance may not be legally excused unless the direct cause of the difficulty could never have been foreseen. (Carlson v. Sheehan, 157 Cal. "Impossibility" is treated as but one example of a general category called "frustration." 4 At some point English law allowed impossibility of performance to be absorbed into the category of frustration of contract. In general, in commercial settings, unanticipated circumstances may excuse a failure to perform contract work completely but only where: an unexpected event occurs without the fault of the party invoking the defense; that event makes further performance impossible or so difficult or expensive as to frustrate the purpose of the contract or destroy its value; and. Government measures issued to "bend the curve" of the COVID-19 infection rate may also not meet the impossibility threshold. 461-462.). It is not referred to in the Uniform Commercial . CA MANOJ NAHATA 19/10/2021 26/06/2022. COVID-19 has upended the operations of countless California businesses. Reed Smith partner John McIntyre explains. For example, force majeure provisions in many leases exclude from its application the continuing obligation to pay rent. Parties who may want to rely upon the defenses of impracticability, impossibility or frustration of purpose to either excuse delay or to discharge their contractual responsibilities, should observe these best practices: A party who wishes to rely on these doctrines should first check its contract.