Court Rejects Contractor’s Claim That COVID-19 Rendered Performance Impossible

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A fundamental premise of contract law is that promises must be kept. If legally enforceable promises or “contracts” are not kept, courts may step in to enforce them by ordering performance, awarding damages, or granting some other form of relief. Over time, courts have developed exceptions to the general rule that promises must be kept. One such exception is where performance has been rendered impossible. The classic case of impossibility, Taylor v. Caldwell, involved two parties who contracted to rent out a music hall. Before the contract could be fulfilled, the music hall burned down. The English court in that case held that performance of the contract was excused because it had been rendered impossible.

Taylor v. Caldwell was decided in 1863. Fast forward 160 years and the impossibility doctrine lives on. Here is the modern formulation of the impossibility doctrine according to a Massachusetts’ decision last month in Soep Painting Corp. v. Graycor Construction Company, Inc.

Where from the nature of the contract it appears that the parties must from the beginning have contemplated the continued existence of some particular specified thing as the foundation of what was to be done, then, in the absence of any warranty that the thing shall exist, the contract is to be construed not as a positive contract, but as subject to an implied condition that the parties shall be excused in case before breach performance becomes impossible from the accidental perishing of the thing without the fault of either party.  The misfortune which has occurred releases both parties from further performance of the contract and gives no right to either to claim damages from the other.

Soep Painting

Soep Painting involved a dispute between a general contractor and a subcontractor. The GC claimed that its breach of contract should be excused because the COVID-19 pandemic created financial difficulties that rendered performance of the contract impossible.  The court disagreed, observing that “[being] unable to perform a contract because of the inability to obtain money … will not ordinarily excuse nonperformance in the absence of a contract provision in that regard … Simply positing two facts – that the pandemic has occurred, and that a party finds it very difficult or even impossible to perform its contractual obligations – is not enough.” The court went on to reject the GC’s impossibility defense under the facts presented and affirmed the lower court’s award of breach of contract damages for the subcontractor.  

While the impossibility doctrine remains alive and well, its application still involves a fact-intensive inquiry and may only carry the day under the right set of circumstances.