Section 11.2
Impossibility of Performance and
Operation of Law
Section 11.2 Impossibility of Performance
and Operation of Law
What You’ll Learn
How to explain situations in which the
law will permit a discharge by
impossibility (p. 231)
How to identify discharges that occur by
operation of law (p. 233)
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
What You’ll Learn
How to define the statute of
limitations (p. 233)
How to identify debts that cannot be
discharged in bankruptcy (p. 235)
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Why It’s Important
Understanding when contracts are
discharged by impossibility and by operation
of law will help you know your legal rights
and obligations in such situations.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Legal Terms
impossibility of performance (p. 231)
operation of law (p. 233)
statute of limitations (p. 233)
bankruptcy laws (p. 235)
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section Outline
Involuntary Discharge
Discharge by Impossibility of
Performance
Death or Illness in a Personal Service
Contract
Destruction of the Exact Subject Matter
Illegality
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section Outline
Discharge by Operation of Law
Wrongful Alteration
Statute of Limitations
Bankruptcy
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Pre-Learning Question
How can a contract be involuntarily
discharged?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Involuntary Discharge
Some contracts come to an end
despite what the parties intend or
what they actually do. In these
situations, the obligations that exist
under the contract may also expire.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Involuntary Discharge
Two ways contracts are discharged:
1. By impossibility of performance
2. By operation of law
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Pre-Learning Question
How can contracts be discharged by
impossibility of performance?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Discharge by Impossibility
of Performance
A contract that becomes legally
impossible to perform generally may
be discharged and both parties
released from the obligation.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Discharge by Impossibility
of Performance
Three situations in which the courts
will allow a discharge for
impossibility of performance are:
1. Death or illness that prevents the
performance of a personal service
contract
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Discharge by Impossibility
of Performance
2. Destruction of the exact subject
matter or the means for
performance
3. Illegality, or situations in which the
performance of a contract
becomes illegal
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Death or Illness in a Personal
Service Contract
The death or illness of a party to a
contract may be an excuse for
nonperformance only if the contract
requires the personal service of the
person who has died or become ill.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Destruction of the
Exact Subject Matter
If the subject matter that is essential to
the performance of the contract is
destroyed through no fault of either
party, then the contract is discharged.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Destruction of the
Exact Subject Matter
The destruction must occur after the
contract is entered into, but before it is
carried out.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Illegality
A contract is considered void if its
performance would be illegal at the
time the agreement was initiated.
The same general rule applies when
performance becomes illegal after the
contract has been initiated.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Pre-Learning Question
How can contracts be discharged by
operation of law?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Discharge by Operation of Law
At times, the best interests of society
demand that a contract be terminated.
Under these circumstances, the law
declares contract discharged by
operation of law.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Discharge by Operation of Law
These situations include:
When a wrongful alteration has
occurred
When the statue of limitations has
run its course
In cases of bankruptcy
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Wrongful Alteration
Sometimes wrongful acts committed
by one of the parties, such as altering,
or changing, a contract, will discharge
a contract by operation of law.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Statute of Limitations
All states have a law that specifies
the time period in which legal
action may be brought on a
contract. This law is called the
statute of limitations.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Bankruptcy
Congress has the authority to pass
bankruptcy laws, which are set
procedures for discharging a debtor’s
obligations.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Bankruptcy
Certain debts cannot be discharged
under bankruptcy laws.
Education loans, during the first five
years of the repayment period
Taxes
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Bankruptcy
Alimony
Child support
Maintenance payments
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Explain which method of involuntary
discharge would be suitable in each of
the following cases.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
1. Kimi added a “0” after the date
March 3 to attempt to extend the
date a contract was to be
completed.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
ANSWER
Wrongful alteration
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
2. Kharim was hired to paint a mural
for the middle school gym one week
before a tornado ripped through the
school.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
ANSWER
Destruction of exact subject matter
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
3. Between amassed credit card debt,
car payments, and school loans,
Bob, who could not find a wellpaying job when he graduated from
college, was totally unable to pay
his bills.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
ANSWER
Bankruptcy
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
1. When will the law permit a
discharge by impossibility?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
Answer
Death or illness of a party in a personal
service contract, destruction of the exact
subject matter of the contract, and when
the contract becomes illegal
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
2. When will the law permit a
discharge by operation of law?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
Answer
When a wrongful alteration has occurred,
when the statute of limitations has run its
course, and in cases of bankruptcy
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
3. What is the statute of limitations?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
Answer
Specifies the length of time within which
legal actions can be brought
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
4. What debts cannot be discharged in
bankruptcy?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Reviewing What You Learned
Answer
Education loans, taxes, alimony, child
support, and maintenance payments.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Critical Thinking Activity
Bankruptcy
What is the legal philosophy behind the
idea that certain contracts cannot be
discharged in bankruptcy?
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Critical Thinking Activity Answer
Bankruptcy
Answers will vary, but should recognize
that certain debts are too important to
society be discharged.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Legal Skills in Action
Debts after Bankruptcy
Your friend Charlotte says her parents are
about to go to bankruptcy court. She
believes that all of the family’s debts will
vanish as a result of the bankruptcy
proceedings.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Legal Skills in Action
Debts after Bankruptcy
Write a letter to your friend explaining that
some of her family’s debts will remain even
after declaring bankruptcy.
Understanding Business and Personal Law
How Contracts Come to an End
Section 11.2 Impossibility of Performance
and Operation of Law
Section 11.2 Assessment
Legal Skills in Action Answer
Debts after Bankruptcy
Letters will vary, but may include that
educational loans, taxes, alimony, child
support, and maintenance payments are
not affected by a general discharge of
debts in bankruptcy.
Understanding Business and Personal Law
How Contracts Come to an End
End of Section 11.2
Impossibility of Performance and
Operation of Law