Impracticability: Overview, definition and example
What is impracticability?
Impracticability refers to a situation where it becomes extremely difficult or impossible for one party to perform their obligations under a contract due to unforeseen circumstances. While not strictly impossible, performing the contract may be so burdensome or costly that it becomes unreasonable to expect it. This concept is often used in contract law as a defense to excuse non-performance when circumstances drastically change.
Why is impracticability important?
Impracticability is important because it provides a legal way out for a party who cannot fulfill their contractual obligations due to unexpected and uncontrollable events. It helps prevent unfair consequences in situations where fulfilling the contract would result in extreme hardship. This allows businesses to manage risk and maintain fairness in unforeseen situations, such as natural disasters or other disruptions that make performance overly difficult.
Understanding impracticability through an example
Imagine a company enters into a contract to provide a specific service at a fixed price. Due to an unexpected natural disaster, the cost of materials skyrockets, making it financially unfeasible for the company to complete the service under the original terms. The company can claim impracticability, arguing that fulfilling the contract is now overwhelmingly burdensome.
In another case, a construction company is contracted to build a project within a specific timeframe. However, due to a government-imposed ban on construction for health reasons, the company cannot complete the work as planned. In this case, the company may invoke impracticability to excuse their failure to meet the original contract deadlines.
Example of an impracticability clause
Here’s an example of an impracticability clause in a contract:
“Neither party shall be liable for failure to perform any obligation under this Agreement if such failure is due to circumstances beyond their reasonable control, including but not limited to natural disasters, strikes, or changes in law that make performance impracticable.”
Conclusion
Impracticability allows parties to adjust or even exit a contract when unforeseen events make it unreasonably difficult to perform their obligations. This legal principle helps maintain fairness by acknowledging that sometimes, external circumstances can make fulfilling a contract overly burdensome.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.