In these days of apparent climatic change, natural events such as earthquakes or floods are not beyond interrupting or even preventing contractual performance. But even without the intervention of nature, human beings are very adept themselves at causing disruption with the resulting political, social and military mayhem. Without wanting to turn every contract into a dystopian document of disaster, it is important to consider in the contract text itself the impact that external events should have. This is very much the case for cross-border transactions and common law contracts with strict liability concepts.
Common law lawyers tend not to refer to “impossibility” but use different terminology. So, just for the record:
Act of God: natural event beyond the reasonable control of a party which interrupts or temporarily prevents performance of the contract. Force majeure: any event (human or natural) which is beyond the reasonable control of a party and which interrupts or temporarily prevents performance of the contract. Frustration: doctrine in common law systems whereby the performance of a contract and/or the acheiving of the purpose as originally intended becomes impossibile for reasons beyond the reasonable control of the parties.
The first two concepts traditionally deal with delay liability and must be regulated by the contract. Contracts should also set down clearly when delay events (force majeure) continue for such a long period that the parties should allow for termination (frustration). Frustration exists as a concept at law and considers where the contract must be ended because of permanent impossibility either in relation to non-performance or the non-achieving of the intended aim.
Don’t get frustrated: control the impact of impossibility in your contract.