Key Takeaways

  • Commercial impracticability is a legal defense that excuses contract performance when unforeseen events make performance extremely difficult or unreasonably expensive.
  • It is codified under UCC § 2-615 and commonly used in disputes involving supply chains, construction, or natural disasters.
  • Courts evaluate whether the event was unforeseeable, beyond control, and not assumed as a risk by the party claiming the defense.
  • There are two recognized forms: supervening impracticability (arising after contract formation) and existing impracticability (present at the time of contracting but unknown).
  • Even if a contract is deemed impracticable, courts may allow recovery for partial performance or require proof that reasonable alternatives were exhausted.

Commercial impracticability means that performance under a contract is impracticable, and cannot be accomplished. This means that it is either difficult or impossible to perform under the contract.

The reason for impracticability is due to an unforeseen circumstance or event that doesn’t occur due to fault or negligence of either party. If after the occurrence, the parties can’t agree as to the proposed changes in the contract, the court will need to determine the commercial practicability of such performance and obligations.

Commercial Impracticability: An Overview

This legal doctrine is triggered when something occurs which would make it burdensome for the performing party to act under the contract. This doctrine would be used as a defense in a breach of contract claim that is brought by the plaintiff against the defendant. In this case, the defendant would argue that performance is commercially impracticable. It will be up to the judge to determine if it is in fact impracticable based on the event that triggered such a breach.

This doctrine can be found in the Uniform Commercial Code under section 2-615. This section provides the requirement that the event must have occurred due to an unforeseen or unexpected circumstance that occurred due to no fault of either party. This defense can prove difficult in some instances, particularly due to the fact that it deals with subjective issues – perceptions, expectations, and an understanding of the facts rather than the actual facts themselves.

Types of Commercial Impracticability

There are two legally recognized forms of commercial impracticability:

1. Supervening ImpracticabilityThis occurs when an unforeseen event arises after the contract is formed, making performance unreasonably difficult or costly. The event must not be the fault of the party seeking relief, and its non-occurrence must have been a basic assumption of the contract.

2. Existing ImpracticabilityThis applies when a fact or condition that existed at the time the contract was signed made performance impracticable, but was unknown to the party claiming the defense and was not assumed in the risk allocation. The condition must not have been reasonably foreseeable.

Examples of Commercial Impracticability

There are several examples of commercial impracticability as follows:

  1. Natural disaster
  2. Weather-related event, i.e. flood, hurricane, tornado, earthquake
  3. Injury of the performer
  4. Death or disability of the third party involved in the contract

Let’s assume that Sarah, a homeowner, enters into a contract with Brian, an electrician. Brian is being contracted to do lighting work in Sarah’s backyard. Immediately after entering into the contract, but before performance has begun, a weather-related event occurs that causes significant flooding around Sarah’s home. Therefore, Brian is unable to complete the work due to such flooding issues.

Another example would be if after entering into the contract, Brian is physically injured and cannot complete the work on the date promised in the contract. In this case, performance under the contract will be delayed for a period of time until Brian is able to successfully complete the work.

Commercial Impracticability vs. Other Doctrines

Commercial impracticability is often compared to other legal defenses like impossibility and frustration of purpose:

  • Impossibility requires that performance is literally impossible, not just difficult or expensive.
  • Frustration of purpose applies when the principal purpose of a contract is destroyed due to unforeseen events, even if performance is still technically possible.
  • Commercial impracticability falls in between: performance is still possible but only at extreme, unforeseen cost or hardship.

Understanding these distinctions helps determine the most appropriate defense based on the facts of the case.

How to Determine Impracticability

The following elements must be proven when using this doctrine as a defense:

  1. An unforeseen event or occurrence
  2. The occurrence must make performance difficult or impossible
  3. The parties must not have been able to foresee that the event would occur

The court will take into account the above elements, along with the circumstances regarding the contract, to determine if this defense is appropriate. The court will specifically look at the language of the contract to better determine the parties’ obligations under the contract.

The court could determine that performance is in fact impracticable, and order that the contract be voided. In this case, both parties can freely walk away from the contract with no liability.

However, if partial performance already took place when the event occurred, the party performing might want to be paid for the work he already performed at the time the event occurred. Therefore, the party could bring a suit against the other party for partial payment under the contract. While both parties agree that further performance would be impossible, the performing party wants the money that is due to him for the work that is already complete. The court could determine that any further performance is impracticable, but could further require that partial payment be made to make the plaintiff whole again.

We can see that there are a few instances when commercial impracticability can be brought in a contractual dispute, particularly when the parties can’t agree as to what other actions should be taken to restore both parties. Since such disputes can become complex, it is a good idea to speak to a qualified contract attorney who can assist you in determining your rights and obligations under a contract.

Risk Allocation and Assumption

Courts often examine how the contract allocates risk when determining whether commercial impracticability applies. Key factors include:

  • Which party had greater expertise or control over the conditions?
  • Who proposed the design or performance method?
  • Did the contract explicitly assign responsibility for certain types of risk?

If the party claiming impracticability had superior knowledge or drafted the contract language, courts may find that they assumed the risk and are thus not excused from performance.

Burden of Proof and Legal Standards

To successfully assert a commercial impracticability defense, the claiming party must demonstrate:

  • A qualifying event occurred that was beyond their control;
  • The event made performance extremely difficult or expensive;
  • The event’s non-occurrence was a basic assumption of the contract;
  • They did not assume the risk explicitly or by contract terms;
  • Reasonable alternatives were explored and found unfeasible.

Federal courts, especially in government contracting cases, apply this standard rigorously. Cost increases alone are usually not sufficient—courts often expect to see substantial, disproportionate impacts (e.g., extreme delays, massive cost overruns).

Frequently Asked Questions

  1. What is the difference between commercial impracticability and impossibility?
    Impossibility means performance is objectively impossible, while commercial impracticability excuses performance when it's unreasonably difficult or expensive due to unforeseen circumstances.
  2. Can a price increase justify commercial impracticability?
    Generally no. Courts require extreme, disproportionate cost increases and evidence that the situation was unforeseeable and beyond the party’s control.
  3. Does commercial impracticability apply to all types of contracts?
    It is most commonly invoked in contracts governed by the UCC (especially for the sale of goods), construction contracts, and federal government contracts.
  4. What must be proven to claim commercial impracticability?
    You must prove an unforeseeable event occurred, made performance extremely difficult or expensive, and that you didn’t assume the risk in the contract.
  5. Can partial performance still be compensated under this doctrine?
    Yes. If partial work has been done before the impracticability arose, the performing party may seek payment for completed work, even if full performance is excused.

If you need help learning more about commercial impracticability, or if you need legal assistance regarding a contractual dispute in which you want to raise impracticability as a defense, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.