Contracts, Coronavirus, and Impossibility of Performance

Due to the National Emergency related to the Coronavirus COVID-19 Pandemic, questions regarding breach of contract and contractual obligations (e.g., events, travel, work, rent, leases, dining, and contract) are being asked by many people and businesses. Many contractual parties in Maryland and Washington DC are very concerned about their ability to meet contractual obligations due to COVID-19. As a result, two related legal doctrines that will likely become important regarding these contracts are: Impossibility of Performance and Frustration of Purpose

In Maryland and Washington DC, the legal theories of Impossibility of Performance and Frustration of Purpose can be used to excuse a party from a contract if certain facts are present. For a contract made prior to the Coronavirus COVID-19 Pandemic, the doctrines of Impossibility of Performance and Frustration of Purpose can possibly be used by a contracting party to negate that party’s performance in light of the National Emergency facing the parties: the COVID-19 Pandemic. The Maryland Court of Special Appeals has specifically stated that, through the doctrine of legal impossibility, “If a contract is legal when made, and no fault on the part of the promisor exists, the promisor has no liability for failing to perform the promised act, after the law itself subsequently forbids or prevents the performance of the promise. (See Equitable Trust v. Towson Manor). Similarly, the DC Court of Appeals explained: “The doctrine of impossibility relieves non-performance only in extreme circumstances.” (East Capitol View v. Robinson).

The Maryland Court of Appeals has clarified that in order for a party to succeed under Impossibility of Performance (and excuse their obligations under this doctrine theory), the party’s performance under the contract at issue must be specifically objectively impossible. (See Levine v. Rendler). The Second Restatement of Contracts (as cited by the Court of Appeals) explains the theory directly: “[I]f the performance remains practicable and it is merely beyond the party’s capacity to render it, he is ordinarily not discharged” from the contract.” Section 261 cmt.e (1981). Similarly, the Maryland Court of Appeals has described the principle behind the Frustration of Purpose doctrine, stating that a contract will be discharged “where the purpose of a contract is completely frustrated and rendered impossible of performance by a supervening event or circumstance” (Harford County v. Town of Bel Air). A contracting party seeking to negate their obligations under a contract as a result of the Coronavirus Pandemic must prove an actual “impossibility” and not merely an “inconvenience.” (East Capitol View v. Robinson).

Bottom Line: Under Impossibility of Performance (which are both applied by Court in Maryland and Washington DC), a contracting party can possibly excuse a contract as a result of the COVID-19 Pandemic. As evidence of some types of impossibilities, certain activities have been legally ordered by governments to not occur. In fact, Maryland has ordered a “stay at home” order as of March 30, 2020, Maryland Courts are publicly closed, DC Courts are publicly closed, and the IRS has altered taxpayers 2020 filing obligations. Thus, certain actions have actually been made truly “impossible” due to the Coronavirus Pandemic  Nonetheless, the legal doctrines of Impossibility of Performance and Frustration of Purpose are very fact specific evaluations and

courts review the facts very carefully to evaluate the validity of the impossible nature of the contractual obligations. Thus, before a party decides to ignore their contract obligations, the party should make sure that their actions would not have adverse consequences.

If you would like to speak to Adam Van Grack or a Longman & Van Grack, LLC contract attorneys about a contract issue (or issue regarding the Coronavirus Pandemic), Mr. Van Grack and our Maryland and Washington DC contract lawyers will evaluate your issue. Our firm’s Maryland and Washington DC contract litigation attorneys work with each of our contract clients on the most efficient resolution. Our firm’s contract attorneys have handled contract disputes in Montgomery County Circuit Court (located in Rockville, MD near our firm’s Rockville Office), Frederick County Circuit Court, Howard County Circuit Court (located in Ellicott City, MD), Prince George’s County Circuit Court (located in Upper Marlboro, MD), DC Superior Court, Baltimore County Circuit Court (located in Towson, MD), and Montgomery County District Court (located in Rockville, MD). Contact Mr. Van Grack or our other attorneys at (301) 291-7156 regarding any contract legal consultation today at our Maryland Offices (Rockville, and Bethesda, in Montgomery County).