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  • Writer's pictureMicahel N. Bress, Esq.

Commercial Breach of Contract Defenses of Force Majeure, Impossibility, and Frustration


Commercial Breach of Contract Defenses. Bress Law Firm Blog Post

INTRODUCTION

The commercial breach of contract contract defenses to performing a party’s obligations under a contract, of Force Majeure, Impossibility of Performance, Impracticability of Performance, and Frustration of Purpose, are legal defenses that may defeat or mitigate liability in a commercial breach of contract case.


The Force Majeure, Impossibility, Impracticability, and Frustration defenses are distinct but also related defenses in that they seek to excuse a party’s obligations under a contract based on a change in circumstances that has impeded that party’s ability to deliver on their promises. This post focuses on the similarities and distinctions among these four defenses, which in our volatile age have become increasingly popular defenses in breach of commercial contract cases.


BREACH OF CONTRACT DEFENSE OF FORCE MAJEURE

Force Majeure is a French term that means an “overwhelming force” and in the law is also known as an “Act of God.” A Force Majeure is an event such as a hurricane, flood, or fire, that is from nature as opposed to humans. Legally speaking, a force majeure event can also include human activities such as war, riot, or a restrictive change in the law. It can also include whatever other events are covered or anticipated in a contract’s force majeure clause.


The legal defense of force majeure requires that the events that caused a delay or failure of the defendant’s performance were beyond the defendant’s control. In other words, not the result of wrongful conduct or negligence. A force majeure clause "excuses performance of contractual obligations — either wholly or for the duration of the force majeure — upon the occurrence of a covered event which is beyond the control of either party to the contract." Fitness International, LLC v. 93 FLRPT, LLC, No. 2D22-1182 (Fla. Dist. Ct. App. May 10, 2023).


If the parties to a contract have included a force majeure clause, as they often do in commercial contracts, Florida’s courts will usually enforce the terms of the contract. “The plain language of the force majeure clause itself define[s] when, and under what circumstances, the contracting parties are excused from performing under the agreement.” Vereit Real Estate, LP v. Fitness International, LLC, No. 3D22-1273 (Fla. Dist. Ct. App. May 17, 2023).


For example, in Fitness v. 93 FLRPT, the tenant, who operated a health club, argued that under the lease’s force majeure clause the landlord should have abated tenant’s rental payments during the Covid-era government-mandated closure of fitness facilities. In Fitness, however, the court held that, while the force majeure clause did cover restrictive laws, the tenant was not entitled to recoup their rent. The court based their decision on the findings that 1) the contract did not specifically warrant that the tenant would be able to operate a health club, and 2) the government restrictions did not prevent the tenant from paying their rent, which was clearly shown by the fact that the tenant paid their rent. See Fitness at 11-14.


If the parties have not covered or anticipated the event in the force majeure clause, which would control the court’s decision, Florida’s courts may still excuse a defendant’s performance under the doctrines of Impossibility, Impracticability, and Frustration of Purpose.


IMPOSSIBILITY OF PERFORMANCE

The doctrine of impossibility of performance is a defense to a breach of contract claim where the performance of the contract was rendered impossible. To prevail on an impossibility defense, the circumstances that made the performance impossible must have been unanticipated and unforeseen when the contract was formed.


The defense of Impossibility may excuse a party from performing its obligations under a contract only when an event renders performance impossible, as opposed to difficult or impracticable. See Marathon Sunsets, Inc. v. Coldiron, 189 So. 3d 235, 236 (Fla. 3d DCA 2016).


For example, in Fitness v. 93 FLRPT, the court rejected Fitness’ argument of impossibility of performance, stating, “Once again, it is plain on the record that government-mandated restrictions did not render tenant’s obligation to pay rent impossible- to the contrary, Tenant paid rent,” that the tenant’s duty was, “not impossible but merely inconvenient, profitless, and expensive.” Fitness at 15 (citation omitted).


In other words, if the event did not render performance impossible, the defendant would have to prevail on the defenses of either impracticability of performance or frustration of purpose.


IMPRACTICABILITY OF PERFORMANCE

The defense of impracticability of performance is a similar to the impossibility defense, but it also includes a party’s inability to perform due to an unreasonable burden or expense.


An example might be where LLC promises to deliver C-CORP 10,000 widgets a year for five years, and then the price of a component part of producing the widget skyrockets because of a supply shortage. It would not be impossible for LLC to keep producing the widgets, but LLC could argue it now imposes an unreasonable expense that would result in LLC going bankrupt.


Under the doctrine of impracticability, however, the performance of the contract has to be made impracticable not due to the breaching party’s fault or negligence but “by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made.” Ferguson v. Ferguson, 54 So. 3d 553, 556 (Fla. 3d DCA 2011). Moreover, a court may reject the defense if they determine that the issue should be governed by the terms of the contract.


The defenses of Impossibility and Impracticability, to summarize, respectively deal with the impossible and the impracticable. They are defenses that may apply to particular sets of facts to relieve a party of all of part of their obligations under a contract, but only if it was not covered or anticipated by the contract. Courts also do not want these defenses to be used as opt-out provisions. Courts are very hesitant to modify the terms of a contract. Upholding the reliability of contracts is important to society and the U.S. constitution provides for freedom of contract. Therefore, Florida’s courts apply these doctrines with great caution.


FRUSTRATION OF PURPOSE

The doctrine of frustration of purpose is related to the prior defenses and doctrines but is distinct in that it focuses on the principal purpose of why the parties entered into the agreement. This does not mean the court will ignore the contract’s language. Rather, the frustration defense applies to cases where the issue ultimately revolves around the “frustration” of the contract’s purposes.


Perhaps the best illustration of the frustration doctrine is the contract-law classic Krell v. Henry [1903] 2 KB 740, the English case that established the doctrine. In Krell, Paul Krell rented a flat that had a great view for the upcoming procession of the coronation of King Edward VII. For this front seat, Krell promised to pay good money. But when the coronation was canceled because King Edward became ill, Krell refused to pay Henry for the rental. Henry sued Krell, but the court found in Krell’s favor. The court reasoned that while the contract was for a one-day rental, the purpose of the contract was to view the coronation, that the occurrence of the coronation was an implied condition of the contract.


Like the above doctrines, the frustration of purpose defense is usually not applicable where the frustration was anticipated or foreseeable at the contract’s inception. Courts are also hesitant to apply the doctrine to the merely impracticable but may excuse “performance […] where the value of performance regarding the subject agreement has been frustrated or destroyed.” Hopfenspirger v. West, 949 So.2d 1054, 1054 (Fla. 5th DCA 2006). That is, as opposed to a situation where an event transformed the agreement into a losing proposition, a bad bargain, where the other party would still be entitled to the benefit of their bargain. In other words, do not confuse the purpose of a contract, for example, of making money with the purpose of contracting for the means to make money.


CONCLUSION

In conclusion, the above defenses and doctrines are subject to a fact-intensive inquiry that depends on the contract, its purposes, the facts of the case, and is always subject to a court’s hesitance to interfere with or rewrite contracts.


The future is of course unpredictable and, for one reason or another, we do live in times where is not unreasonable to expect the unexpected. But contracts law is the accumulation of centuries of experience and is ever evolving, in light of which an attorney can protect your interests by drafting a well-written contract that anticipates a reasonably wide range of contingencies.


Last Updated 05.31.23

© 2023 Bress Law Firm, PLLC.


BRESS LAW FIRM, PLLC. Estate Planning (Wills, Trusts, & Estates), Business Law, and Landlord Tenant Law. The Bress Law Firm is the sole practice of Michael N. Bress, Attorney at Law. We are located at 2980 NE 207th St. #300, Aventura FL, 33180, but serve clients through Miami and Broward. Appointments are by appointment only. If you require the services of a contract law attorney, to schedule a free legal consultation, you can contact the Bress Law Firm by phone 954-336-8049, email michael@bresslaw.com, contact form, or visit our homepage at www.bresslaw.com.


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