Contract Impossibility Even if a contract lacks, or a has a weak, force-majeure clause, the promisor can often seek relief under the common-law doctrines of “impossibility” or “frustration of purpose,” which allows a party to be excused of its contractual obligations if unforeseen circumstances makes the agreement impossible or impracticable to carry out. Courts have held that just because a party has experienced some unforeseen difficulty or expense, that does not constitute “impossibility” and will generally not be a legally valid excuse. In order to claim contract “impossibility,” the thing to be done must be objectively impossible, and not just that the promisor is simply unable to perform. The party seeking to invoke the doctrine of impossibility or frustration of purpose should marshal evidence demonstrating the impact the pandemic has had on their business as well as the impact to the industry as a whole. By highlighting supply chain disruptions, lack of availability of personal protective equipment and vendor shut downs, the party may be able to escape the terms of the contract. Finally, it should be noted that companies sometimes invoke force majeure not to void the agreement, but rather to encourage renegotiation of the contract or to force a compromise of a payment obligation. Going forward, members are advised to ensure their contracts cover global pandemics and similar events, and to always have their contracts reviewed by legal counsel.
look to whether under the particular circumstances there was such an insurmountable obstacle occurring without the party’s intervention as could not have been prevented by exercising reasonable diligence and care. However, a business may be allowed to continue to operate during the outbreak, and not be completely shut down, making it more difficult for the business to be excused from the contract. And mere financial difficulties, without more, may not be enough to rely on the force majeure provisions. Contracts are often drafted in a way to make it near impossible to terminate due to unforeseen circumstances. Typical force majeure language will provide that a party may be excused if performance is rendered “impossible” due to some specified event. If that specific event doesn’t occur, or if the event happens, but does not render performance “impossible,” but merely impracticable, the promisor may be held to the terms of the contract. A Western Growers member called me to say he understood when his restaurant customer invoked the force majeure clause to reduce the quantity of produce purchased by 60 percent due to the government order compelling restaurants to serve meals by take out or drive-through only. The restaurant could show it was doing 60 percent less business, year over year. However, when another restaurant customer attempted to jettison their contract because the chef decided to change the menu offerings, the member held the customer to the contract and pursued his PACA trust rights to collect what was owed.
Jackson Lewis proudly supports Western Grower & Shipper
Jonathan A. Siegel 200 SpectrumCenter Drive, Suite 500 Irvine, CA 92618 (949) 885-1360 Jonathan.Siegel@jacksonlewis.com
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