This doctrine would be used as a defense in a breach of contract claim that is brought by the plaintiff against the defendant. The doctrine of impossibility and judicial treatment of force majeure clauses vary from state to state. We hope that our blog will be of interest to estate planning professionals and to family members immersed in trust and estate disputes. Frustration and supervening impossibility 1. Impossibility is usually defined to mean that there was literally no possible way for the party to perform its duties. The court rejected this framing, pointing out that as it was possible for CB Theater to operate a movie theater after the partial capacity reopening, CB Theater could still fulfill the purpose of the lease. By, Mr. MANOJ NAHATA, FCA, DISA (ICAI) The doctrine of "Lex non Cogit Ad impossibilia . The event must be such that the parties cannot reasonably foresee it happening and it cannot be something within the parties control. but only during the executory period. The appellate court concluded that the Legislature did not mean to reject the doctrine of impossibility, but rather sought to modernize California probate laws. The court decided that the government travel ban between the U.S. and Europe rendered performance impracticable. Although courts across the country have varied in their interpretations of the frustration of purpose and impossibility doctrines, the language of the underlying lease contract is universally paramount. The statutory restriction on donative transfers to drafters such as attorney Youngman is unyielding even when the evidence shows that the drafter has not done anything wrong. Co. v. American Trading Co., 195 U.S. 439, 467-68 [25 S. Ct. 84, 49 L. Ed. The attorney concluded that Walter was acting of his own free will with respect to favoring Youngman and executed the certificate. The legal expansion of the meaning of "impossibility" as a defense, (which at common law originally meant literal or physical impossibility of performance) to include "impracticability" is now generally recognized as a valid defense (6 Williston on Contracts (rev.ed.) Usually not, since the task is simply more difficult, not impossible. By using this site, you agree to our updated Privacy Policy and our Terms of Use. In the last few months, courts increasingly have recognized the contract defenses of force majeure, impossibility/impracticability, and/or discharge by supervening frustration of purpose to excuse contract obligations affected by ripple effects of Covid-19. Downey Brands Trust and Estate Litigation Group has the experience and depth of knowledge to help advance your interests. We discuss trust contests, will contests, and administration disputes. A judge from Contra Costa County Superior Court conducted a bench trial on the dispute. In this case, tenant Christian Louboutin, a luxury shoe store, sought rescission of the remainder of its lease on the grounds of frustration of purpose and impossibility in light of decreased foot traffic in Manhattan due to pandemic shutdowns. And whether the facts justify the impractical defense is a matter of fact for the judge to determine. Known risks. Law Inst. For example, a roofing contractor would not be in breach for failing to complete a roof on a building destroyed by fire through no fault of his or hers. Our New Normal: Dealing with COVID-19 Concerns in the Workplace, Member Feature: Jeff Cruz, an in-house attorney with a passion for the construction industry, American Bar Association . We follow how California courts grapple with dementia attributed to Alzheimers disease, which is becoming more prevalent in our population. Here, tenant Cole Haan, a footwear and accessories retailer, permanently vacated one of its storefronts in March 2020 and had not paid rent since that time. As such, the court found that the tenant was not in default under the lease. Since then, an evolving patchwork of federal, state, and local government shutdown orders and travel restrictions has challenged the ability of businesses to comply with contract obligations created prior to the outbreak of the virus. Force majeure, frustration, and impossibility are all defenses that companies are likely to encounter in the wake of COVID-19. Superior Ct., Feb. 8, 2021, 2084CV01493-BLS2). Accordingly, the termination or suspension of work on a project may not relieve a party from its obligation to pay for materials or their delivery and shipment, if appropriate provisions have not been incorporated into those agreements. Impossibility in other systems of law 5. The party asserting the defense of impossibility has the burden to prove the following elements: (1) a supervening event made performance impossible or impracticable; (2)the nonoccurrence of the event was a basic assumption upon which the contract was based; (3) the occurrence of the event resulted without the fault of the party seeking to be excused; (4)the party seeking to be excused did not assume the risk of occurrence; and (5) the party has not agreed, either expressly or impliedly, to perform in spite of impossibility or impracticability that would otherwise justify nonperformance. Absent extraordinary circumstances, losing money is not a legal defense to a breach of contract action. Force majeure clauses are often included in commercial contracts to excuse a partys performance hampered by various mutually agreed-to events such as fires, hurricanes, and terrorist attacks. 902 [1987]). This suggests that the court here took quite a broad view of the underlying purpose of this lease. A business owner in California filed suit against its insurance carriers after it was required to close due to the State of California's Executive Order N-33-20 and other public health orders . The landlord responded by terminating the lease and bringing a breach of contract action. Impossibility or Impracticability The doctrine of impossibility or impracticability has evolved to excuse contract performance in certain circumstances due to what are deemed unexpected and radically changed circumstances. The court also took care to distinguish the "Effect of Unavoidable Delays" clause from a force majeure clause, under which the failure to timely pay rent would not have been an excusable default. Cole Haan argued that its duties under the lease were discharged or in the alternative limited under the frustration of purpose doctrine. This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners. Introduction 2. Expansion of the Doctrine of Impossibility in California. On the other hand, if the risk that such an event could happen was one that the parties should reasonably have anticipated, or if the contract assigned that risk to one of the parties, then the Court normally would not excuse further performance. In the leading California case approving this expanded meaning, Mineral Park Land Co. v. Howard, 172 Cal. Courts often cite three levels of impossibility: Where performance becomes physically impossible, further performance would almost certainly be excused. In recent days, certain cities and counties and the State of California have ordered mandatory closures of non-essential businesses or imposed other restrictions in operations through shelter-in-place or safer at home ordinances or orders. It is not referred to in the Uniform Commercial . 34296(U)(Trial Order)). If the event was so unusual and unexpected that the parties could not reasonably have foreseen it, and if it is unfair to place the risk of its happening on either party, then the Court may excuse further performance of the contract on both sides. The court interpreted these conditions as evidence that the caf's purpose is to serve customers food and coffee inside the caf. For example, a commercial tenant may argue that because its doors were ordered to be closed, the reason the tenant entered into the lease to operate its business is no longer possible. Please note, however, that as with many situations in the current environment, federal, state, and local legislation or other orders are being implemented almost daily and may otherwise modify the discussion below. On March 11, 2020, the World Health Organization declared Covid-19 a pandemic. Provisions concerning allocation of risk may also impact a party's ability to rely on these doctrines. Even if a beneficiary may seem to be ineligible to receive a distribution from a trust because a condition has not been satisfied, a court may excuse the condition if it became impossible to meet and if recognizing the excuse would square with the settlors overall intent. (See City of Vernon v. City of Los Angeles, 45 Cal. For example, in a seminal California case, a tenant who leased commercial space for an auto parts and tire store was barred from using the doctrine of impossibility after governmental regulations on the sale of new tires triggered by WWII made performance impossible, simply because the contract was entered into when the country was debating . We cover hot button issues in California trust litigation and probate litigation, ranging from the flash points that we see in our cases to recent developments in the field. The . Temporary impracticability occurs when the unexpected, intervening event renders performance temporarily impracticable. 330 Views. One such defense is that of impossibility. The soundness of including "pandemic" or "epidemic" within the definition of a force majeure clause. The court ultimately held that, under the frustration of purpose doctrine, Caff Nero's obligation to pay rent was discharged during the period in which the caf could not serve food and beverage on the leased premises. It is not sufficient to show that performance was impracticable for the individual contractor-you must prove that performance would have been impossible for any similarly situated contractor. In the absence of a force majeure provision that might excuse performance under a construction contract, a party might be able to rely, instead, on the common law doctrines of impossibility, impracticability and frustration of purpose. Third, impossibility also arises if, after the parties sign the contract, a new law comes into being that makes performing illegal. Address any underlying conditions and assumptions related to (1) the pandemic, (2) present restrictions on construction and (3) the availability of labor and materials. Copyright 19962023 Holland & Knight LLP. The doctrine of impossibility is available when circumstances occur that render performance of a contract objectively impossible. . Further, the court noted that nothing prevented CEC Entertainment from opening pizza restaurants or different styles of businesses in the leased space that did not involve arcade games. Thus, if (as the trial court found) the statute applied retroactively, the certificate of independent review prepared back in 1999 was insufficient to validate the gift. On Behalf of Buffington Law Firm, PC | Jun 29, 2018 | Firm News. Appropriately addressing these assumptions can help ensure the availability of these defenses if things go sideways. (See, Whether performance is excused often depends on the event that makes performance impossible or unfeasible, and whether that event was contemplated under the contract. The court in this case focused on the particularly specific statement of the lease purpose when examining Caff Nero's frustration of purpose argument. The court here dismissed Cole Haan's frustration of purpose argument, citing the lease's force majeure clause, which stated that the tenant was not relieved of its duty to pay rent even in the event that restrictive governmental laws or regulations prevented performance under the contract. Notably, economic hardship, even that resulting in bankruptcy or insolvency, does not constitute a factor bearing on the determination of impossibility. In February, the Southern District of New York found that the Covid-19 pandemic constituted a natural disaster, sufficient to trigger a force majeure provision in the parties contract. Parties should examine their force majeure provisions to ensure that they are providing timely notice in the manner specified by the provision, such as personal service.