IMPOSSIBILITY, IMPRACTICABILITY, AND FRUSTRATION
This chapter covers situations where, after the formation of a contract, unexpected events occur which affect the feasibility or possibility of a party’s performance and cause the parties to be excused from continued performance under the contract. Key concepts:
- Impossibility: If performance by a party has been made literally impossible by the occurrence of unexpected events, then the contract may be discharged. Common situations where a party’s performance is rendered impossible include:
- Destruction or unavailability of the subject matter of the contract;
- Death or incapacitating illness of a party;
- Supervening illegality (where a contract is legal when it is entered into, but a subsequent change in the law renders its performance illegal).
- Impracticability: If performance by a party has been made highly impractical by the occurrence of unexpected events, then the contract may be discharged.
- Frustration of purpose: When unexpected events completely or almost completely destroy a party’s purpose in entering into the contract, the parties may be excused from performing.
- Remedies: When a contract has been discharged because of one of the above reasons, most courts allow parties to recover in quasi-contract. The measure of damages will be either restitution damages (the value of the benefit conferred by the plaintiff on the defendant) or reliance damages (expenditures the plaintiff made in partly performing or preparing to perform).