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Impossibility and California contracts

| Jun 29, 2018 | Firm News

For California business owners, contracts play an essential role in their companies’ operations. They enter into contracts with vendors, clients and their own employees. They buy or lease property. When one party does not live up to its obligations, serious problems can ensue.

Ordinarily, breaking a contract can give the party who suffered as a result the right to various legal remedies. However, under some circumstances the law may excuse a breach and not hold the breaching party legally responsible.

What impossibility is

One such defense is that of impossibility. A party can invoke impossibility and argue that it did not perform its contractual obligations because it was impossible for it to do so. Defining impossibility in a particular situation can call for complex legal and factual analysis.

In cases that involve the impossibility defense, one party may argue it was impossible for it to perform, while the other claims it was merely difficult or burdensome. In the context of this defense, impossibility means there was literally no possible way for the party to perform its duties. If the only way to perform would be to go to extreme hardship or expense, it is still possible.

Basic types of impossibility

Generally, 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. Another case of impossibility is when an item crucial to performance becomes destroyed (through no fault of the defaulting party) and there is no reasonable substitution. Third, impossibility also arises if, after the parties sign the contract, a new law comes into being that makes performing illegal.

Commercial impracticability

The Uniform Commercial Code carves out an exception and allows the defense of commercial impracticability for contracts that involve the sale of commercial goods. Impracticability can apply if, after the contract, an unforeseen event occurred to make performance unreasonable difficult or expensive. The event must be such that the parties cannot reasonably foresee it happening and it cannot be something within the parties’ control.

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