Impossible and Illegal Contracts


Today’s case also comes from the Court of Appeals. In Botts v. Tibbens, the court considered the circumstances under which an otherwise valid contract can be unenforceable because it is either impossible or illegal.

Background

Since it occurs to me that I have never really done a contracts case where I went back to basics, I am going to begin here at the beginning. In the most general terms, a contract is an exchange of promises between two parties. It can be written, oral, or implied by conduct.

The whole point of a contract is that if the other party does not do the thing he promised to do, you can get a court to enforce the contract. Even though in most cases it will not come to that, the mere fact that you could get it enforced if you wanted to is important to making contracts work. Therefore, when we talk about contracts we talk a lot about enforceability. Certain kinds of contracts have to be in writing in order to be enforceable, but most of the time an oral contract is enforceable.

When you sue someone over a breach of contract, the first step is to prove that a contract existed. This is a lot easier if the contract is in writing. Next you have to prove that the contract has been breached, meaning that the other person failed to do the thing he promised to do. That can be to perform some task, to pay you some amount of money, etc. Once you have proven the existence of a contract and a breach of that contract, it is up to the defendant to prove that he has some defense that makes the contract unenforceable.

The defenses at issue in today’s case are illegality and impossibility. You cannot enforce a contract to do something illegal. For instance, if you make an agreement with your drug dealer to sell you cocaine and he decides not to sell you the cocaine, you cannot sue him for breach of contract. Your agreement, while a valid contract, is unenforceable.

Impossibility usually means literal impossibility. If you contract to pay someone to build you a time machine, you probably cannot sue them when they fail to invent time travel. More prosaically, if you contract to build a cathedral in two days, it may be unenforceable due to impossibility. I say it may be unenforceable because, in that case, it was probably foreseeable when the contract was made that it was impossible. If you, in making the promise, know that it is impossible or assume the risk that it is, you will probably still be held to have breached the contract when you cannot do the thing you agreed to.

There is some overlap between the two defenses. If a new law gets in the way of performing your promise, it could be said to be either illegal or impossible. For instance, if you contract to build a house on a piece of land but then the government confiscates that land so it can build a highway there, building the house is now both illegal and impossible.

The Case

Tibbens owned a parcel of land in Orange County. In January 2088 he sold 15 acres of it to Botts, who wanted to build a house there. As part of the purchase, the parties signed a written contract for installation of a septic system. Tibbens agreed to install the system, with Botts paying the first $10,000 of the cost and Tibbens paying any amount over $10,000.

At some point, Tibbens apparently figured out that the septic system was going to cost a lot more than $10,000. In February 2010, he wrote Botts a letter, telling her that the contract was unenforceable. He argued that since he was not a licensed contractor, it would be both illegal and impossible for him to install her septic system. Under state law, only a certified contractor can install a septic system. Botts hired a contractor to install the system, then sued Tibbens for breach of contract. He once again asserted that the contract was both illegal and impossible.

The court first determined, looking at the language of the contract, that it did not require Tibbens to personally install the septic system himself. It only required that he make sure the system was installed. Therefore he could easily have performed the contract by paying a contractor to install the system. The court also noted that it was two years from the time when the contract was made and the time when Tibbens decided that he was not going to install the septic system. As the court noted, even if the contract had required Tibbens to personally install the system, two years was plenty of time for him to become certified.

Similarly, the performance was not impossible just because Tibbens did not know how to install a septic system. Again, he could have hired someone or sought out the knowledge himself. As the court noted, someone who contracts to do something is expected to make reasonable efforts to gain the required skills and can only plead impossibility if he is still unable to perform.

The Bottom Line

Don’t contract to do something until 1) you are fairly sure how much it will cost you and 2) you actually know how to do it. The fact that you agreed to do something you didn’t know how to do is not going to save you from a breach of contract claim.

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