It's Still Impossible! Or, At Least It Should Be

Impossibility or impracticability? In other words, when should courts let a contract party off the hook? When it's physically impossible to perform? Or when it's really, really hard (read: expensive) to perform? Go here to download the latest foray into this morass of contract law where you can read Mission Impracticable: The Impossibility of Commercial Impracticability by Jennifer Camero.

Today, a contract party will raise the defense of commercial impracticability when the cost of performance has unexpectedly shot through the roof. Perhaps an oil embargo has driven up the cost of fuel. Perhaps a canal has been closed, which forces ships to take a much longer--and much more expensive--route. 

Professor Camero does a fine job of laying out in brief compass the history of the doctrine(s) of impossibility and its modern bastard child, commercial impracticability. (For those who want to read more about impossibility's historical and putatively Puritan-theological origins, download an article I co-wrote, The Puritan Revolution and the Law of Contracts by going here.)

Professor Camero next illustrates both the judicial inconsistency in applying the law which, in turn, is a function of the barely-coherent expression in both the contemporary common law and Article 2 of the Uniform Commercial Code. (For the truly curious, you are welcome to read my article Clear Rules Still Produce Fuzzy Results: Impossibility in Indian Contract Law , which addresses the sad failure of Indian courts to apply a straightforward statute by downloading it here.)

She goes on to demonstrate that even the seemingly more precise solution to the problem of when a contract party should be released is unavailing. Judges enamored of neo-classical economics hold that the party who is the superior risk bearer (or cheaper insurer) should be held to perform come hell or high water. The contract party that is more at-risk, so to speak, should be given a pass.  As I regularly explain to my students, however, the "superior-risk-bearer" test calls for more than even a well-informed court can deliver. And I'm pleased to read that Professor Camero agrees.

Next, Professor Camero shows that the "can't we all get along" solution to the problem of impracticability--one where the court "reforms" the contract to make the contract parties share in the unexpectedly high cost of performance--also fails. Judicial competence is a problem here as it is with identifying the superior risk bearer and, besides, forced sharing is simply un-American.

Many years ago I reviewed many of these points in one of my first published pieces, Mission Possible: A Paradigm for Analysis of Contractual Impossibility (download here). I came to no conclusion 14 years ago but I have today. While I'm not certain Professor Camero and I fully agree, we're very close and she provides an excellent contractual provision by which the parties can provide the court with the means by which to excuse performance. After all, if the parties agree in advance that one may be let off under certain circumstances, and if the parties tell the court how to make the decision, then the fundamental problem of how to deal with an extraordinary change in the cost of performance is resolvable.