Opinion ID: 1901284
Heading Depth: 1
Heading Rank: 4

Heading: 1. Impossibility/Impracticability

Text: ¶ 17. 4-County argues that its obligations under the contract have been discharged under the doctrine of supervening impracticability. It relies upon the Restatement (Second) of Contracts § 261 Discharge by Supervening Impracticability (1981) which provides, [w]here, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary. 4-County further notes that passage of a legislative enactment is one of the specific instances in which performance under a contract may be rendered impracticable. Section 264 of the Restatement states [i]f the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made. The governmental regulation or order to which § 264 speaks may emanate from any level of government and may be, for example, a municipal ordinance or an order of an administrative agency. Any governmental action is included and technical distinctions between `law,' `regulation,' `order' and the like are disregarded.... Restatement (Second) of Contracts § 264 cmt. b (1981). ¶ 18. 4-County maintains that the 1987 amendments to the §§ 77-3-17 and 77-3-21 were not within either parties' contemplation when they entered into the agreement. It notes that in 1963, at the time of contract formation, the City possessed an unqualified right of eminent domain. 4-County claims it entered into the agreement with the City solely to avoid the expense and hassle associated with condemnation proceedings when loss of its rights and facilities was unavoidable. Now that the City's right is no longer absolute, 4-County maintains it should not be forced to sell its service rights and distribution facilities. Accordingly, it seeks a discharge from its obligations under the contract. ¶ 19. There are no Mississippi cases recognizing the doctrine of impracticability. [2] However, in Piaggio v. Somerville, 119 Miss. 6, 80 So. 342 (1919), this Court discussed the doctrine of impossibility as relieving a party from his duties under a contract. In that case, the owner of a ship entered into an agreement, or charter party, with a transport company to deliver a cargo of lumber to Europe. Id. at 343. The transport company later assigned its rights and obligations under the contract to another party who in turn assigned its rights to the plaintiff, Somerville. Id. The plaintiff then assigned his rights to the defendant, Piaggio, in consideration of $7,500 payable in cash ... on clearance of [the] vessel at Mobile, Alabama.... Id. The owners of the vessel would not let it sail to the designated ports in Europe because of the unrestricted submarine warfare then being conducted by Germany. Id. Somerville sued Piaggio, seeking to recover the $7,500 due him under the contract. Piaggio argued that clearance of the vessel at Mobile was a condition precedent to his duty to pay Somerville. Piaggio argued he could not have enforced the contract's performance, because the owners of the vessel [were] released from the obligation of the charter party because of the danger of being sunk by a German submarine to which the vessel would have been subjected had it attempted to make the voyage. Id. ¶ 20. The trial court found in favor of Somerville, and this Court affirmed, holding that the risk of submarine warfare did not excuse the vessel's owners from performing under the contract. The Court explained, the owners of the vessel were bound to transport the cargo of lumber as provided therein, notwithstanding the risk to the vessel of being sunk by a submarine, or pay damages for their failure so to do, for the rule is that when a party by his own contract creates a duty or charge upon himself he is bound to discharge it, although so to do should subsequently become unexpectedly burdensome or even impossible; the answer to the objection of hardship in all such cases being that it might have been guarded against by a proper stipulation. Id. at 344. The Court went on to recognize that there are certain classes of events the occurring of which are said to excuse from performance because they are not within the contract, for the reason that it cannot reasonably be supposed that either party would have so intended had they contemplated their occurrence when the contract was entered into, so that the promisor cannot be said to have accepted specifically nor promised unconditionally in respect to them. Id. The three classes of cases include: (1) a subsequent change in the law, whereby performance becomes unlawful ; (2) the destruction, from no default of either party, of the specific thing, the continued existence of which is essential to the performance of the contract; and (3) the death or incapacitating illness of the promisor in a contract which has for its object the rendering by him of personal services. Id. (emphasis added). The Court held submarine warfare did not come within any of the classes of cases which would discharge the vessel owner's duties under the contract, explaining a contrary holding would necessitate the addition of a fourth category, a subsequent foreign war or a subsequent change by one or more of the belligerents in the method of waging such a war.... Id. at 345. ¶ 21. This Court reaffirmed its adherence to Piaggio in Hendrick v. Green, 618 So.2d 76 (Miss.1993). In order to become the majority shareholder of the Southeastern Savings Bank of Laurel, Green contracted to purchase 45,000 shares of stock in that corporation owned by Hendrick. Id. at 76-77. At the time of contract formation, Green was aware that federal and statute regulatory agencies' approval was required. However, he mistakenly thought he had obtained federal approval. Id. at 77. After attempting to obtain approval, Green withdrew his application for change of control from the Office of Thrift Supervision, the federal agency whose approval Green sought, because of various omissions. Id. The record revealed no evidence of additional steps taken by Green to conform his application to the guidelines set forth by the federal agency. Id. ¶ 22. Hendrick filed a complaint against Green seeking specific performance of the contract. Green claimed a subsequent vote by Southeastern's shareholders to increase the number of shares made it impossible for him to become majority shareholder. Id. at 78. The chancellor ruled that the contract was unenforceable because its implementation was prohibited by law, specifically, federal agency approval had not been granted. Id. ¶ 23. This Court held that the chancellor erred in dismissing the complaint, noting that the contract did not contain a provision making government approval a condition precedent for Green's performance. Id. at 79. The Court began its analysis by recognizing [t]he mere fact that a contract becomes burdensome or even impossible to perform does not for that reason alone excuse performance. Id. at 78. Moreover, if a contingency may be guarded against by the parties in the contract, i.e., it is foreseeable or within the control of one of the parties, its occurrence will not discharge the parties' obligations under the contract. Id. As the Court explained, where a party, by his own contract, engages to do an act, it is deemed to be his own folly, that he did not thereby expressly provide against contingencies, and exempt himself from liability in certain events.... Id. Finally, the Court, relying upon Piaggio, restated the only three exceptions which will relieve a party from performance under the doctrine of impossibility. Id. at 78-79. ¶ 24. In the present case, the parties could have guarded against the 1987 amendments. Surely the contract could have been worded to terminate should the City's right of eminent domain be lost or substantially changed by the Legislature or otherwise. ¶ 25. Applying the Restatement's provision regarding impracticability due to a governmental order or regulation, [i]f the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made, 4-County maintains it would not have entered into the contract had it known of the future changes to the statute. But is performance impracticable? Discussing impracticability, comment d to Restatement § 261 provides: Performance may be impracticable because extreme and unreasonable difficulty, expense, injury, or loss to one of the parties will be involved. A severe shortage of raw materials or of supplies due to war, embargo, local crop failure, unforeseen shutdown of major sources of supply, or the like, which either causes a marked increase in cost or prevents performance altogether may bring the case within the rule stated in this Section. Performance may also be impracticable because it will involve a risk of injury to person or to property, of one of the parties or of others, that is disproportionate to the ends to be attained by performance. However, impracticability means more than impracticality. A mere change in the degree of difficulty or expense due to such causes as increased wages, prices of raw materials, or costs of construction, unless well beyond the normal range, does not amount to impracticability since it is this sort of risk that a fixed-price contract is intended to cover. ¶ 26. It is still quite possible for 4-County to perform. It may sell its rights and facilities subject to Commission approval. Performance by 4-County is not impracticable or impossible. Rather, the statute grants 4-County new rights and it presumably now deems the contract detrimental. It made a contract, which at the time of formation, was to its benefit. Now that circumstances have changed, 4-County seeks to avoid performing under the contract. ¶ 27. Mississippi has recognized the doctrine of impossibility but not the doctrine of impracticability. However, the trend appears to be toward treating these doctrines similarly, and many courts even use the terms interchangeably. Indeed, Comment d to Restatement § 261 explains [a]lthough the rule stated in this Section is sometimes phrased in terms of `impossibility,' it has long been recognized that it may operate to discharge a party's duty even though the event has not made performance absolutely impossible. This Section, therefore, uses `impracticable,' the term employed by Uniform Commercial Code S 2-615(a), to describe the required extent of the impediment to performance. See also The Opera Co. of Boston, Inc. v. The Wolf Trap Foundation for the Performing Arts, 817 F.2d 1094, 1100 (4th Cir.1987) ([a] thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.); Commonwealth Edison Co. v. Allied-General Nuclear Servs., 731 F.Supp. 850, 855 (N.D.Ill.1990) (discussing the common law doctrine of impossibility and noting that it is today often called `impracticability'); United States v. Conservation Chem. Co., 661 F.Supp. 1416, 1422 (W.D.Mo.1987) ([t]he doctrine of impossibility has been tempered to some degree by characterizing it as `impracticable.'). ¶ 28. Piaggio requires that the subsequent change in the law make performance under the contract illegal. Here, performance is not necessarily illegal. 4-County and/or the City would simply be required to follow the procedures established in the amended statute concerning annexation. It would not be illegal unless Commission approval was not obtained. ¶ 29. Neither is performance impracticable. It is, perhaps, less profitable for 4-County.