Key Takeaways

  • Discharge by impossibility of performance occurs when unforeseen events make contract obligations impossible to fulfill.
  • Impossibility may be objective (no one could perform, e.g., destruction of subject matter) or subjective (the specific promisor cannot perform, e.g., illness or death).
  • Courts carefully distinguish between frustration of purpose (performance is possible but meaningless) and impossibility (performance is truly unattainable).
  • Examples include death/incapacity, changes in law, destruction of the contract’s subject matter, or natural disasters.
  • Discharge can also occur voluntarily through novation, accord, or satisfaction, or by operation of law such as bankruptcy or statutory limits.
  • The defense of impossibility is narrowly applied; courts often require proof that the event was unforeseen and beyond the control of both parties.

Discharge of contract by impossibility of performance usually occurs when the contractual duty cannot be performed because of death, illness, or a reason caused by the other party. Objective impossibility is when no one can provide the service due to frustration of its purpose, destruction of subject matter, or supervening impossibility. Subjective impossibility occurs when the promisor is unable to perform the service due to death or illness.

Important Terms

  • Performance – obligation completed as part of a contract.
  • Partial Performance – not fully completing the performance as stated in the contract. For example, a contract lists several acts or deliveries with payment for each act. Partial completion may be delivered or performed, but there is an absence of complete performance.
  • Breach of Contract – failure or non-performance of a contractual duty.

Duties Discharged Under a Contract

Unforeseen or unexpected events can affect the performance of a contract. During the performance of a contract, if events occur that could not be predicted by either party, the possibility of performing the contract could become impossible and ultimately create a discharge from the duty to perform.

Additionally, a performance of the contract could become impossible if there is an additional or unexpected event that frustrates the terms of the contract. In this event, the parties may have the performance of the contract discharged.

Common Circumstances Leading to Impossibility

Contracts may be discharged when extraordinary circumstances prevent performance. Typical scenarios include:

  • Death or incapacity of a party whose personal skills are essential.
  • Destruction of subject matter, such as a leased building burning down.
  • Government intervention or change in law, making performance illegal or restricted.
  • Natural disasters (earthquakes, floods, pandemics) that physically prevent performance.

These situations differ from mere inconvenience or financial difficulty. Courts generally require that the event was truly unforeseeable and not allocated as a risk in the contract.

Does the Breach of Contract End If There Is an Impossibility of Performance?

Depending on the facts surrounding the breach of contract, the breaching party may or may not be liable for damages caused – even if the job performance is physically impossible.

Judicial Treatment of the Impossibility Defense

Courts view impossibility of performance as an affirmative defense. The burden of proof lies on the party claiming impossibility. Judges typically examine:

  • Foreseeability: Was the risk of the event contemplated when the contract was signed?
  • Fault: Did either party contribute to the impossibility?
  • Alternative means: Could performance have been achieved in another reasonable way?

If the impossibility is proven, the contract is discharged, and neither party is liable. However, if only the method of performance is impeded—but alternatives exist—courts may reject the defense.

Types of Impossibility of Performance

Post-contractual impossibility, also known as the Doctrine of Frustration, occurs when an impossibility to complete a contract comes after the contract is created. This type of impossibility makes the contract void, and the parties involved are released from performing the contract equaling a discharged contract.

Void from the Beginning, also known as Impossibility at the Time of Agreement, occurs when the contract is invalid from the formation. When this happens, there are no obligations or rights created from the beginning.

The statute of limitations and bankruptcy can also discharge these obligations by operation of law. When a contractual obligation is terminated in this way, there is no liability to either involved party. Although, if there is an abandonment of performance or rejection of contractual agreement, this creates a breach of contract and will result in liability to the offending party.

Temporary vs. Permanent Impossibility

  • Temporary impossibility (e.g., a short-term embargo, strike, or supply chain disruption) may suspend performance until the obstacle is removed.
  • Permanent impossibility (e.g., destruction of property central to the contract) discharges obligations entirely.

Courts sometimes distinguish between the two to determine whether duties are postponed or extinguished.

Difference Between Frustration and Impossibility

Frustration or impracticability occurs when a performance would be deemed impractical because of an unforeseen event. Impossibility occurs when a party is not able to complete a contract because of an event that happens after the contract is executed. The main difference is that frustration means a contract cannot be performed because of an extreme burden to the contracting party, while impossibility means the contract cannot physically be performed.

There are only certain events where frustration and impossibility can be applied. Usually, these terms apply when there a risk involved in the performance of a contract, making it impossible or frustrated through no fault of the parties involved or the courts. When this occurs, the parties are released from their obligation to perform the contract automatically.

Practical Examples to Differentiate

  • Frustration: A concert venue remains standing, but the purpose (a performance) is canceled due to a ban on public gatherings. Performance is possible, but the contract’s value is lost.
  • Impossibility: The concert hall itself is destroyed by fire, making performance physically impossible.

Both doctrines release parties, but frustration centers on purpose, while impossibility centers on feasibility.

Methods of Voluntary Discharge

There are three methods of voluntary discharge: novation, accord, and satisfaction. A novation will occur when a new party is substituted to perform the contract, releasing the original party from the agreement. All parties must agree, and a new contract, with the same terms, is created. The only change is the parties involved.

An accord will occur when the receiving party agrees to a performance different than the one owed under the contract. All parties must agree to the change.

A satisfaction will occur if the elements outlined in the accord contract are performed as agreed. When this happens, there is a satisfaction of the performance.-

Frequently Asked Questions

  1. What is the difference between objective and subjective impossibility?
    Objective impossibility means no one could perform the contract; subjective means the specific party cannot perform, often due to illness or incapacity.
  2. Does financial hardship qualify as impossibility of performance?
    Generally, no. Increased costs or reduced profitability rarely meet the legal standard for impossibility.
  3. Can a contract be suspended instead of discharged?
    Yes, in cases of temporary impossibility, obligations may be paused until conditions allow performance to resume.
  4. Who bears the burden of proving impossibility in court?
    The party claiming impossibility must prove that the event was unforeseeable, beyond their control, and rendered performance unattainable.
  5. How is impossibility different from frustration of purpose?
    Impossibility prevents performance entirely, while frustration makes performance pointless due to a change in circumstances.

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