Is there a doctrine in the house? (Part 4)

In the absence of extraordinary situations, the courts will rely on the contract’s terms, not the Impossibility of Performance Doctrine.

My wife and I visited St. Peter’s Basilica in Rome a few years ago. A friend recommended that we try to see St. Peter’s tomb, which is located beneath the grand cathedral and requires a special ticket for admission. When I inquired about tickets, however, the Vatican sales clerk told me that these tickets are sold weeks in advance and it was “impossible” to merely walk up to the window and buy one. I thought for a moment about where I was and said, “With God, nothing is impossible.” He smiled and said, “With God, yes! But with you, it is impossible!” This harkens back to another legal doctrine, commonly known as the Impossibility of Performance Doctrine.

In the Supreme Court’s 1918 ruling in U.S. v. Spearin, it was stated that, “Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered.” But what if the “thing” to be done is not physically possible to perform? The courts have created the Impossibility of Performance Doctrine to cover such situations, which excuses a party to a contract from performance “when an act of God, the law, or the other party renders performance impossible.” The doctrine also covers physical constraints that make the work impossible. This doctrine is not based on whether a particular contractor cannot perform the work, but whether “any” contractor could perform it. Courts have held that, “performance is rendered impossible only when it is objectively determined that no contractor could perform the work.” Impossibility of performance is not subjective and is recognized only in the nature of the thing to be done, and not in the inability of the party to do it.

In the words of one court, “You can engage a contractor to make snowmen in August, if you spell it out clearly [that] you are not warranting there will be any subfreezing weather in that month.” This quote points out the reluctance of courts to excuse performance where commercial parties contract with each other for known and foreseeable risks, even when the work is very difficult. Problems encountered due to acts of God, changes in law, design errors or site conditions may be so extreme, however, that the contractor simply cannot perform the work as specified. Where problems are this severe, two questions are raised:

  1. Is it physically possible to perform the work?
  2. If so, is the cost or difficulty in the work so extreme that, while not impossible to perform, it is commercially impracticable?

One example of an impossible specification was one which required the contractor to build six bookcases four feet wide each, and to install them between two windows that were only 18 inches apart! In a 1965 case, the specifications called for use of a thin steel piling which turned out to be inadequate due to soil conditions. The contractor claimed that it was impossible to drive pilings to support the new hospital building using the specified pilings, and was awarded damages for delay plus extra costs incurred in installing the pilings under this doctrine.

However, due to improvements in modern construction technology, there are relatively few construction tasks which are physically impossible to perform – even making snowmen in August. This has given rise to a related legal doctrine called the Doctrine of Commercial Impracticability. Under this doctrine, a contractor may be excused from performance because the cost of performance makes literal compliance with the specifications commercially impracticable. Some courts have merged the two doctrines together, holding that, “the doctrine of impossibility does not require a showing of actual or literal impossibility of performance but only a showing of commercial impracticability.”

To widely apply the impracticability doctrine could give rise to abuse by contractors who seek contract relief every time work becomes more difficult than anticipated. As a result, a party may invoke the Doctrine of Commercial Impracticability as a defense to performance of a contract only when it can show that it had the ability to perform a contract at the time it entered into the contract, but that circumstances changed due to events beyond the party’s control, which now render performance commercially impracticable. Therefore, to fit squarely within the impracticability rule, there must be some intervening event which has occurred which makes performance impracticable. A substantial and latent design error, undetected in bidding, could be such a condition if it would cause “extreme and unreasonable difficulty, expense, injury, or loss to one of the parties.” If so, this is a type of constructive change and the contractor may be entitled to an equitable adjustment in compensation.

The Doctrine of Commercial Impracticability is embodied in Section 2-615 of the Uniform Commercial Code, which has been adopted in most states. That section of the UCC excuses delay in delivery or non-delivery, in whole or in part, by a seller of a product if performance as agreed has been made impracticable by:

  1. The occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made.
  2. By compliance in good faith with any applicable foreign or domestic governmental regulation or order, whether or not it later proves to be invalid.

Mission impossible? To prevent abuse, the impossibility and impracticability doctrines are not regularly accepted by the courts. In the absence of extraordinary situations, the courts will hold the contracting parties to the terms which were bargained for at the time the contract was signed. As the Supreme Court held 100 years ago in U.S. v. Spearin, if you sign a contract to do a job possible to be performed, the courts will not normally excuse performance or award additional compensation, merely because unforeseen difficulties are encountered. Also, if you fail to plan your vacation to Rome properly, you will find that the ticket clerks are also unsympathetic, and will not grant relief. So it is up to you to plan your construction projects and your vacations carefully and not rely upon the impossibility doctrine!

G. William Quatman, Esq., is general counsel and senior vice president at Burns & McDonnell Engineering Co. He can be reached at bquatman@burnsmcd.com.

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Posted in Articles | October 22nd, 2018 by