A contract is a binding agreement formed between at least two parties that requires them to fulfill certain legal obligations provided in the terms of the contract. When a contract is said to be “terminated”, it means that the parties are discharged from having to perform their legal obligations under the contract.
There are a number of ways that a party can terminate a contract. Some of the most common grounds for terminating a contract include the following:
- Termination by prior agreement;
- Breach of contract;
- Fraud, mistake, or misrepresentation;
- Impracticability or impossibility of performance;
- Rescission (note that though rescission is often cited under contract termination, it is a separate contract remedy and its effects differ from termination);
- Invalid or illegal contract;
- Frustration of purpose;
- Termination by contract clause; and
- Completion of contract.
Once a contract is terminated, the parties will no longer need to fulfill the terms of the contract. However, if one or more of the parties breached the contract prior to it being terminated or if the contract contains a termination clause instructing the parties as to what must occur in the event that the contract is terminated, then they may still owe certain obligations to one another.
For instance, if a party can prove that the contract was breached prior to termination, then the non-breaching party can pursue several legal remedies, such as restitution or monetary damages. Alternatively, if the contract contained a termination clause, then the parties will need to adhere to those guidelines and complete any necessary steps.
As is evident from the above discussion, contract termination involves many complex laws and elaborate legal procedures. Thus, if you believe you have grounds to terminate an existing contract or are embroiled in a contract dispute, then you should contact a local contract lawyer to learn more about your options for legal recourse.
What Does Contract Impossibility Mean?
In a contract setting, the doctrine of impossibility refers to an unforeseen event that occurs after the formation of a contract, but before performance of the contract is complete, that would make completing the performance objectively impossible. For instance, if a subsequent law is passed that would make contract performance illegal or if the material subject matter of the contract is stolen, lost, or destroyed and would render performance objectively impossible.
The doctrine of impossibility is often raised as an affirmative defense against a breach of contract claim. As an example, suppose a famous musician has contracted with a music venue to perform every night for the next six months, but then gets hit by a car and dies.
If the music venue sues the deceased musician’s estate for breaching their contract and no provisions in the contract provide for this event, then the estate can raise impossibility of performance as a defense against the music venue’s breach of contract claim.
What Are the Types of Impossibility of Performance?
As discussed above, there are several events that may make contract performance objectively impossible. One type of event that would trigger impossibility of performance is known as a “supervening impossibility”. A party may be able to raise the defense of supervening impossibility if after the contract was formed, but before performance was due, a regulation was passed that would make contract performance illegal.
In order to assert this defense successfully, the contract must not contain any provisions assuming the risk, the breaching party must not have contributed to its occurrence, and the supervening impossibility must not have been foreseeable.
Some other types of impossibility include weather conditions that prevent contract performance (e.g., a buyer contracts to purchase a house from a seller and an earthquake destroys the house), the subject matter of the contract gets destroyed (e.g., a will bequeaths a necklace to a relative, but the necklace is stolen), and in some instances, death (e.g., an individual with unique talents was hired to perform, then dies).
One other issue that comes up when discussing impossibility of performance is the difference between “true impossibility” and “objective impossibility” of contract performance. “True impossibility” is defined as an event that has occurred that would make it factually impossible to carry out the duties and obligations assigned in the contract. This term is equivalent to the definition for an “objective impossibility”, but is only used in certain states.
As for “objective impossibility”, this means the same thing as a true impossibility, but usually arises in situations where it is being contrasted against the subjective conditions found under the affirmative contract defense of impracticability of performance.
What Do Impracticability and Frustration Mean?
Similar to impossibility of performance, impracticability of performance also refers to an unforeseen event that occurs after the formation of a contract, but before performance of the contract is complete. However, instead of making completion of contract performance objectively impossible, an impracticable event will make performance possible, but only with extreme and/or unreasonable difficulty or expense.
On the other hand, frustration of purpose refers to an event that would “frustrate” or undermine a contracting party’s primary reason for entering into the contract. This may include an unforeseen event that destroys the purpose of the contract or when a person or object that is necessary for performance is no longer available.
The main difference between impossibility or impracticability of performance and frustration of purpose is that the former is concerned with the duties specified in the terms of the contract, whereas the latter focuses on the reasons the parties created the contract in the first place.
When Is Impossibility or Impracticability Not a Defense?
A defendant to a breach of contract case may be able to raise impossibility or impracticability of performance as an affirmative defense against the claim. To properly raise an affirmative defense, the defendant must assert it (e.g., impossibility or impracticability of performance) in their initial answer to the complaint and the burden will be on the defendant to satisfy the necessary elements.
If the defendant fails to raise impossibility or impracticability of performance in their answer or does not satisfy the necessary elements, then they will not be able to assert either affirmative defense against the claim.
In reviewing the affirmative defense of impossibility of performance individually, this defense will also fail (e.g., not excuse the breach of contract, performance, etc.) in two separate scenarios. First, impossibility of performance will not be available as a defense when the promisor assumed the risks associated with the contract. Second, this defense will also fail if the event making the contract impossible to fulfill was reasonably foreseeable.
As for impracticability of performance, this defense will not be available when a party caused the circumstances that led to making the contract impracticable to fulfill. Likewise, this defense will also not apply if the grounds for impracticability were reasonably foreseeable or if the parties assumed the risk of impracticability when forming the contract.
Do I Need a Lawyer for Assistance With Grounds for Contract Termination?
If you are involved in a dispute over a contract and wish to terminate the agreement, it may be in your best interest to consult a local contract lawyer for further guidance. An experienced contract lawyer will be able to discuss the various grounds for terminating a contract as well as inform you of the myriad consequences in applying each of those grounds to your specific case.
In addition, your lawyer can review your contract to ensure that it is valid and complies with relevant laws, such as impossibility and impracticability contract laws or state statutes regarding the requirements for terminating a contract in your jurisdiction. Your lawyer can also make sure that you raise any defenses you may have at the appropriate time and/or explain the different remedies you may be able to recover due to contract termination.
Finally, your lawyer can review your contract for any significant clauses that may provide other defenses or grounds for termination. Your lawyer can also help you settle any contract disputes out of court or provide representation in court in the event of a contract termination lawsuit.