Contract Impossibility and COVID-19

The COVID-19 pandemic has many business owners scrambling to understand how their contractual obligations may be impacted. Many are scouring their contracts and leases for a force majeure clause but are coming up empty handed. If you find yourself in that position, don’t fret.

In contract law, the doctrine of “impossibility” may excuse a party’s performance and prevent a breach of contract claim in certain circumstances which may be applicable to the coronavirus pandemic.

Essentially, a party will claim something made it impossible to perform its’ contractual obligations. However, the alleged impossibility must be caused by an unanticipated event that could not have been foreseen or guarded against in the contract. Moreover, the reason for the impossibility must not have existed at the time the contract was made.

While you must go back in time, many courts have considered the impossibility doctrine in the context of quarantines and epidemics.

For example, a New York court excused a shipping company from delivering coffee beans because the board of health quarantined the vessel and ordered that the infected coffee beans not be unloaded. J.H. Labaree Co. v Crossman, 100 AD 499, 507 (1st Dep’t 1905), aff’d, 184 NY 586 [1906] (“Performance of the contract by the defendants was legally excused“) (emphasis added).

On the other hand, a wool manufacturer’s contractual performance to a private party was not excused because it had voluntarily entered into the contract with the government that prevented it from performing under its earlier contract. Crown Embroidery Works v Gordon, 190 AD 472, 477 (1st Dep’t 1920).

Finally, in another instance, a manufacturer’s time to build a boat was extended by the “time lost through strikes, epidemics, and causes beyond the control of the contractor.” Vandegrift v Cowles Eng’g Co., 161 NY 435 (1900).

Without contracts, there is no commerce. So, you will likely hear the term “impossibility” more and more over the coming weeks and months. Know your rights. And, if you find contract negotiation and resolution of related disputes to be impossible to deal with, Russo Law LLC is here to help.

Be safe and stay healthy,

Lou Russo

Republished 4/22/2020 by CourtBuddy

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