Commercial Impracticability: Is COVID-19 an Excuse for Nonperformance?

The Coronavirus pandemic has allowed the world to reach an unprecedented era where several businesses and commercial enterprises have been put to the ultimate test. As many of our questions are still left in the unknown, there may come some ease knowing that the law offers consideration during times like this. More recently, government intervention and closures have created shortages in staff and labor workers, while a shortfall in supplies have deviated businesses from performing their contractual duties. One thing to keep in mind is that contractual obligations still remain valid and enforceable throughout this time but given a seller’s inability to perform due to the pandemic may qualify as a valid excuse for not holding up their end of the bargain.

What Are Some Excuses for Non-Performance Allowed in Article 2 Of UCC? 

Commercial Impracticability UCC § 2-615. Excuse by failure of presupposed conditions. Sellers of goods under this provision of the UCC are not in breach for a delay in delivery or non-delivery of goods where the seller’s performance has become “commercially impracticable because of unforeseen supervening circumstances not within the contemplation of the parties at the time of contracting.” See Official Comment 1. In order for §2-615 to apply, the following conditions must be satisfied: (1) there must be a contract for the sale of goods, (2) the contingency at question cannot have been foreshadowed at the time of contracting, (3) the seller must not have assumed the risk for loss contractually, and (4) the seller’s performance must be made impracticable. When a delay or non-delivery is expected, the seller is required to “seasonably” put the buyers on notice. As for increased costs alone, “performance is not excused unless the rise in cost is also due to some unforeseen contingency which alters the essential nature of the performance.” See Official Comment 4. As for governmental interference, non-performance is not excused “unless it truly supervenes in such a manner as to be beyond the seller’s assumption of risk.” See Official Comment 10.

What Is the Difference Between Impossibility and Impracticability?

Although impossibility and impracticability are both doctrines that excuse non-performance of a contract, they share one major difference. Impossibility is a defense that can be asserted by either party when there is physically no possible way they can perform their duty or obligation. Common examples of conditions that make it impossible to perform are destruction by natural disasters, death of any party to the contract, or when the government passes a law that makes the performance now illegal. Impracticability plays in context when a sudden, unforeseeable event or occurrence makes the performance unreasonable, difficult or expensive. Impracticability excuses non-delivery and delay in delivery, meaning that, although difficult or expensive at the moment, performance may still be carried out by the seller in the future once the sudden unforeseeable event subsides.

EPGD Business Law is located in beautiful Coral Gables, West Palm Beach and historic Washington D.C. Call us at (786) 837-6787, or contact us through the website to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns. Contacting us through our website does not establish an attorney-client relationship.*

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