Opinion ID: 4315021
Heading Depth: 3
Heading Rank: 2

Heading: Utica’s Failure to Satisfy the Condition

Text: Precedent Is Not Excused by Impossibility Though New York law provides for the general defense of impossibility, the defense is a feeble means of forcing another’s performance where conditions precedent go unmet. First, impossibility “excuses a party’s performance only when the subject matter of the contract or the means of performance makes performance objectively impossible.” Kel Kim Corp. v. Cent. Mkts., Inc., 70 N.Y.2d 900, 902 (1987). Second, “it is generally true that if a condition precedent to a party’s duty to perform does not occur, . . . the party will be excused from further performance under the contract even when the nonoccurrence [of the condition] is itself excused as the result of impossibility or impracticability.” 4 Williston on Contracts § 43:14, at 673–74 (Richard A. Lord ed., 2013) (emphases added, footnotes omitted). 23 In other words, the party whose obligation to perform depends on the prior occurrence of a stated condition need not perform if the condition is not met— even if the condition is impossible to satisfy. Clearwater need not perform even if it was impossible for Utica to get the requisite TPF&C approval. As an initial matter, Utica has not established that obtaining TPF&C’s authorization was impossible. Utica offered no evidence that, for example, TPF&C no longer exists. And although there are at least two instances where impossibility requires that the other party perform notwithstanding the unfulfilled condition, neither applies here. The first impossibility exception is where “the condition is of only minor importance, its happening is a mere technicality, and a forfeiture will result by insisting on its occurrence.” Id. at 674; see also Restatement (Second) of Contracts § 227 cmt. b (defining forfeiture as denial of contractual obligee’s compensation after substantial reliance). In that event, “the duty that was subject to the condition’s occurrence will become absolute despite [the condition’s] failure to occur.” 14 Williston on Contracts, supra, § 43:14, at 674. The second impossibility exception is a nod toward equity: “[A] party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented 24 the occurrence of the condition.” MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640, 646 (2009) (internal quotation marks omitted); see also In re Bankers Tr. Co., 450 F.3d 121, 127–28 (2d Cir. 2006) (per curiam); Grad v. Roberts, 14 N.Y.2d 70, 75 (1964) (“Persons invoking the aid of contracts are under implied obligations to exercise good faith not to frustrate the contracts into which they have entered.”); Restatement (Second) of Contracts § 225 cmt. b (“[A condition] may be excused by prevention or hindrance of its occurrence through a breach of the duty of good faith and fair dealing.”). Utica failed to show that Clearwater was obliged to follow the settlement under the TPF&C memoranda, notwithstanding that Utica never got TPF&C’s authorization before settling. Utica has established neither that (1) the condition is minor, a mere technicality, and would result in forfeiture, nor that (2) Clearwater hindered satisfaction of the condition. Although Utica argues that TPF&C’s decision to step away from managing the insurance consortium is attributable to Clearwater, it fails to show that Clearwater played a part in TPF&C’s decision. Finally, Utica has not successfully converted the impossibility defense from a shield to a sword. That one party’s performance of a condition is excused for impossibility does not necessarily mean the other party must perform. 14 Williston 25 on Contracts, supra, § 43:14, at 673–74. In other words, even if Utica had shown that obtaining TPF&C’s authorization was impossible and thus excused, Utica also needed to establish that Clearwater’s performance was not also excused by reason of the unrealized condition—the authorization for settlement. Contrary to the lower court’s conclusion, Utica did not establish its entitlement as a matter of law to have Clearwater pay according to the Goulds– Utica settlement.