During these uncertain times of shut downs and government orders to ‘stay at home,’ you may find fulfilling contractual obligations to be unreasonable, difficult, or even impossible. Under certain circumstances our courts recognize impossibility or impracticability as legitimate defenses to liability for breach of contract.
Impossibility is a limited and narrowly-defined circumstance where performance of the contract must be absolutely impossible because of an act of God, an act of the law, or the loss or destruction of the subject matter of the contract. A temporary modification of the law, such as the Governor’s shut down order for non-essential businesses, may provide an impossibility defense for many small business owners.
An impracticability may arise when a party will suffer extreme, unreasonable, and unforeseeable hardship due to an unavoidable event or occurrence. Performance may be impracticable due to extreme and unreasonable difficulty, expense, injury or loss to one of the parties.
For contracts entered before the COVID-19 pandemic reached the United States, courts will likely find the pandemic to be a major external event outside the control of the parties and not foreseeable at the time of the contract. Whether the pandemic made a particular party’s performance impossible or impracticable requires a fact-based analysis that considers the terms of the contract.
Contracts entered in the midst of the COVID-19 pandemic are less likely to be found to be impossible or impracticable, as the parties to the contract may have been aware of the challenges of performance.
If you find yourself in a contractual relationship that has become increasingly difficult to perform because of the COVID-19 pandemic, contact the attorneys at Reiling Teder & Schrier today. We are experienced in drafting and reviewing contracts and advising business owners in breach of contract claims.
The above information does not take the place of legal advice. Please contact the attorneys at Reiling Teder and Schrier if you have questions about a particular situation.
**Reiling Teder & Schrier, LLC is an Indiana Limited Liability Company. The information contained in this website has been prepared by Reiling Teder & Schrier, LLC for informational purposes only, and is not legal advice. The information on this website should not be relied upon to make any decision, legal or otherwise. If you have any specific questions or inquiries regarding any of the information contained in this website, you should consult with an attorney licensed in your state. The information contained in this website pertains only to matters of Indiana law and the laws of other states may be completely different from the laws of the State of Indiana.