Impossibility-of-Performance Doctrine is a principle whereby a party may be released from a contract on the ground that uncontrollable circumstances have rendered performance impossible. In contracts where the performance depends on the continued existence of a given person or thing, an implied condition is that the perishing of the person or thing shall excuse performance.
The doctrine of impossibility of performance has gradually been freed from the earlier fictional and unrealistic strictures of such tests as the implied term and the parties contemplation. It is now recognized that 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. When the issue of impossibility of performance is raised, the court is asked to construct a condition of performance based on the changed circumstances, a process that involves at least three reasonably definable steps. First, a contingency (something unexpected) must have occurred. Second, the risk of the unexpected occurrence must not have been allocated either by agreement or by custom. Finally, occurrence of the contingency must have rendered performance commercially impracticable. Unless the court finds these three requirements satisfied, the plea of impossibility must fail. [Transatlantic Financing Corp. v. United States, 363 F.2d 312 (D.C. Cir. 1966)]