When Is Contract Performance Excused?

In contract law, the general rule is that a party must perform its contractual obligations regardless of how difficult or expensive performance becomes. However, the doctrines of impossibility and impracticability provide narrow exceptions to this rule. These defenses excuse performance when circumstances beyond the parties' control make performance truly impossible or unreasonably burdensome. Understanding these doctrines is critical for paralegals working in contract disputes and studying for the NALA Certified Paralegal exam.

Impossibility of Performance

What Is Objective vs. Subjective Impossibility?

The law distinguishes between two types of impossibility, and only one serves as a valid defense:

Objective impossibility exists when no one could perform the contract, not just the particular promisor. This is a valid defense that excuses performance. Examples include:

Destruction of the subject matter (a house burns down before the painter can paint it)
Death or incapacity of a party whose personal services are required
A change in law that makes performance illegal (supervening illegality)

Subjective impossibility exists when the particular promisor cannot perform, but someone else could. This is generally not a valid defense. Examples include:

Financial inability to pay or perform
Difficulty obtaining necessary materials or labor
Personal hardship or inconvenience

Categories of Impossibility

Destruction of Subject Matter

When the specific subject matter of a contract is destroyed through no fault of either party, performance is excused. The key requirement is that the destruction must be of the specific thing necessary for performance. If the contract involves fungible goods (goods that are interchangeable with others of the same type), the destruction of one source does not excuse performance because the promisor can obtain the goods elsewhere.

For example, if a farmer contracts to sell 1,000 bushels of wheat from a specific field and that field is destroyed by a wildfire, the contract is likely excused. However, if the farmer simply agreed to sell 1,000 bushels of wheat without specifying the source, the destruction of one field would not excuse performance because wheat can be obtained from other sources.

Death or Incapacity

When a contract requires the personal services of a specific individual and that person dies or becomes incapacitated, the contract is excused. This applies to contracts that depend on the unique skills, talents, or identity of a particular person. It does not apply to contracts that can be performed by anyone, even if a specific person was originally expected to perform.

Supervening Illegality

If a change in law makes contract performance illegal after the contract was formed, the contract is excused. The illegality must arise after contract formation; if the performance was already illegal when the contract was made, the contract is void from the start rather than excused by impossibility. Supervening illegality commonly arises in international trade when new sanctions or import/export restrictions are imposed.

Commercial Impracticability

How Does Impracticability Differ from Impossibility?

Impracticability is a broader and more modern doctrine that excuses performance when, although not literally impossible, it would be unreasonably expensive or difficult due to unforeseen circumstances. The Restatement (Second) of Contracts and the Uniform Commercial Code (UCC) both recognize this defense.

Under UCC Section 2-615, a seller is excused from performing when performance 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. To establish impracticability, the party must show:

An unforeseen event occurred: The event must not have been anticipated or allocated by the contract
The event was beyond the party's control: The party did not cause or contribute to the event
Performance is unreasonably burdensome: The cost or difficulty of performance has increased dramatically, not merely become more expensive
The non-occurrence of the event was a basic assumption: Both parties assumed that the event would not happen when they entered the contract

What Level of Hardship Is Required?

Courts set a high bar for impracticability. A mere increase in cost, even a substantial one, is generally insufficient. The party must show that the cost increase is extreme and unreasonable, that the hardship goes well beyond normal business risk, and that the situation was truly unforeseeable at the time of contracting. Courts have found impracticability in cases involving extreme price increases caused by embargoes, wars, or natural disasters, but have rejected the defense for ordinary market fluctuations, even severe ones.

Frustration of Purpose

What Is the Difference Between Impossibility and Frustration of Purpose?

Frustration of purpose is a related but distinct doctrine. While impossibility and impracticability excuse performance because the party cannot perform (or performance is unreasonably difficult), frustration of purpose excuses performance because the reason for entering the contract has been destroyed, even though performance is still possible.

The classic example is Krell v. Henry, where a party rented a room to view the coronation procession of King Edward VII. When the coronation was canceled due to the King's illness, the renter was excused from paying because the entire purpose of the rental had been frustrated, even though the room was still available for use.

To establish frustration of purpose, a party must prove that the purpose of the contract has been substantially frustrated, that the frustrating event was not foreseeable, and that the frustrated purpose was understood by both parties as the basis for the contract.

Force Majeure Clauses

Sophisticated contracts often include force majeure clauses that address impossibility and impracticability directly. These clauses define specific events (such as natural disasters, wars, pandemics, and government actions) that will excuse performance. When a force majeure clause exists, courts typically look to the clause rather than the common law doctrines.

Paralegals should carefully review force majeure clauses for the specific events listed, notice requirements (many clauses require prompt notice of the force majeure event), mitigation obligations, and whether the clause merely suspends performance or terminates the contract entirely.

The Paralegal's Role

Paralegals working on impossibility and impracticability cases assist with reviewing the contract language, including any force majeure provisions. They research the applicable law, especially whether the jurisdiction follows the UCC or common law approach. They gather evidence of the unforeseen event and its impact on performance, and they draft correspondence notifying the other party of the impossibility or impracticability. Review these concepts with our contract law flashcards to strengthen your understanding.

CP Exam Review

The NALA CP exam tests these doctrines within the contracts section. Key distinctions to remember include the difference between objective and subjective impossibility, the elements of commercial impracticability under the UCC, and how frustration of purpose differs from impossibility. Create your free account to practice with exam-style questions on contract defenses. Explore our pricing options for full access to all study materials.

Study Checklist

Objective impossibility excuses performance; subjective impossibility generally does not
The three main categories of impossibility are destruction of subject matter, death or incapacity, and supervening illegality
Impracticability requires an unforeseen event that makes performance unreasonably burdensome, not just more expensive
Frustration of purpose excuses performance when the reason for the contract is destroyed, even if performance is still possible
Force majeure clauses contractually allocate the risk of impossibility and impracticability

Impossibility and Impracticability of Contracts: A Paralegal's Guide