Understanding Discharge by Impossibility in Contracts

What is a common result of discharge by impossibility?

• A. The parties are bound to fulfill the contract
• B. Restitution of any performance or payments made may be sought
• C. The contract is automatically reformed
• D. Parties can demand penalties from each other

Answer: (B)

Discharge by impossibility occurs when a party cannot fulfill their contractual obligations due to unforeseen events that make performance impossible. In such cases, the objective is to restore fairness between the parties involved. When discharge by impossibility is established, courts often allow for restitution of any performance or payments made prior to the impossibility occurring. This means that if one party has provided something of value under the contract before the impossibility arose, they can seek to recover that value. This principle is rooted in the idea that it would be inequitable for one party to benefit from the efforts or payments of another when performance can no longer be completed. The law seeks to return the parties to their pre-contract position as much as possible, thus allowing for restitution of any payments or performance provided before the impossibility arose. In contrast, the other options do not accurately reflect the legal consequences of discharge by impossibility. For instance, parties are not bound to fulfill the contract if performance is impossible. The concept of automatic reformation does not apply since reformation typically involves correcting a contract rather than nullifying obligations due to impossibility. Lastly, the idea that parties can demand penalties contradicts the contractual principle that both parties should be treated fairly when unforeseen events disrupt their contract.

Discharge by impossibility—sounds heavy, right? But let’s break it down. Picture this: you sign a contract to host an outdoor wedding, and suddenly a monsoon hits on your big day. You can’t fulfill your part without a little divine intervention! In legal terms, that’s discharge by impossibility. But what happens next?

Here’s the crux: when a situation like this arises, the parties might not be locked into fulfilling the contract. Instead, they can look for restitution—essentially a reset button to restore fairness, as if the contract never happened. It’s about returning to a point before the storm, so to speak. So, if you’ve already paid for flowers or a venue, you might be able to get some of that back.

The principle here is straightforward: it’d be pretty unfair for one party to keep the other’s hard-earned cash, especially when circumstances have turned against them. Let’s think about fairness for a sec. Isn’t it nice to know that the law aims to balance things out?

Now, this rule isn’t a free pass to jump out of contracts without consequence. It only kicks in under specific, unforeseen circumstances that make performance impossible. And no, you can’t just decide you don’t want to deliver that cake because you’re having a bad day. Proving impossibility requires a solid argument based on unforeseen events, like natural disasters, government actions, or even sudden incapacitation.

But hey, what about those other options we threw out? If we look critically at them, they don’t hold up. For instance, if performance is impossible, there’s no way anyone can be forced to stick to their side of the deal. Automagic contract reforms? Not quite—the law doesn’t just wave a wand to correct things. Rather, it accepts that sometimes, life throws curveballs. And demanding penalties? That contradicts the entire purpose of restitution; it just wouldn’t be fair to penalize someone for something completely beyond their control.

So, as we tether back to our main point, discharge by impossibility centers on fairness and restoring equity when the unpredictable happens. Knowing that helps demystify this often-misunderstood area of contract law. And as you prep for your upcoming Contracts and Sales Multistate Bar Exam, remember this principle. It’s all about approaching the law with a sense of justice—no matter how difficult circumstances may be. And isn’t that what we all want? To walk away knowing we’ve been treated fairly, even when life throws us a curve?