Contract Impracticability — Defense to Breach of Contract
What happens if you enter into a contract to achieve a specific purpose, and then the performance of that contract renders it impractical to carry out the contract? Impracticability may excuse performance by a contracting party because the happening of an event unforeseen by the parties that destroys the value of performance or the object of the contract.
This doctrine is often applied in business/commercial cases. In Missouri Public Service Co. v. Peadbody Coal Co., 583 S.W. 2d 721, 725-26 (Mo. App. 1979), the Court asserted that that “the doctrine [of commercial impracticability] may be applicable upon the occurrence of a supervening, unforeseen event not within the reasonable contemplation of the parties at the time the contract was made. Such occurrence must go to the heart of the contract.” Accordingly, what happens if this is a drastic increase in prices in between the making and performance of the contract? What if there is an international contract and weather or political circumstances changes the way the contract is to be performed? In such cases of a change in market conditions, commercial impracticability may be invoked to excuse contract performance and nullify the rights, duties, and obligations arising thereunder.
How does one officially excuse non-performance? Well, of course, if all parties to the contract are in agreement, they can mutually execute an instrument which cancels out the contract. Alternatively, if a dispute arises, and a breach of contract action ensues, then one party may rely on commercial impracticability as a defense. To further this defense, experts would have to be use to testify as to the change in circumstances as applied to the specific contract market, and then the parties would have to testify as to how their material expectations were impacted.
Contract impracticability is not an easy defense. It takes lots of discovery and time to flesh out each particular case. Contact us with questions relating to contracts and business disputes.