Last week, Vince Sliwoski wrote a post titled “Cannabis and Coronavirus: What Your Business Should Do Right Now” offering some high-level thoughts on how to mitigate the impact of COVID-19 on cannabis businesses. One of the topics included reviewing contracts, regarding which Vince said:
Pull these out and dust them off, whether it’s a lease, loan agreement, or a purchase order subject to “terms and conditions” that may be published on a vendor website. Look carefully for words and terms related to default on payment or performance obligations, including: “act of God”, “force majeure”, “excuse of obligations”, “frustration”, “impossibility”, “interruption” etc. At some point very soon, someone is going to tell you they cannot pay you because of something COVID-19 related, or you will be saying the same.
(emphasis added). This post delves into the common law legal doctrine referred to as impossibility of performance, or the defense of impossibility.
What is the defense of impossibility?
The doctrine of impossibility is an affirmative defense that excuses certain breaches of contract. (“Affirmative defense” means a defense raised by the defendant in answering a complaint alleging breach of contract). Generally, the defense applies when someone makes a promise they are