May 2004
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
Sometimes unanticipated problems at a construction project make it impossible for the general contractor or subcontractor to perform under the contract. Under such circumstances, the doctrine of impossibility of performance provides an excuse from performance under the contract.
In the recent case of Miller d/b/a Double Diamond Construction v. Mills Construction, Inc. decided by the Eighth Circuit Court of Appeals, the court applied the doctrine, holding that the subcontractor was excused based upon impossibility of performance.
Background
Mills, a general contractor, subcontracted with Double Diamond to provide labor and equipment for steel erection work on a construction project. Mills agreed to provide the prefabricated steel and other component parts from a third-party supplier.
Much of the steel required to be provided by the contractor was either delivered late, was defective or of the wrong dimensions. At a point in the construction when the frame was mostly completed, but none of the metal sheeting was in place that was to form the sides and roof of the building, the subcontractor informed the general contractor that it could not complete its work until the materials problems were corrected. The steel supplier inspected the work, and opined that the structure did not require additional bracing. Unfortunately, that very night the structure collapsed due to wind.
Following the collapse, the subcontractor billed the general contractor for work completed up to the date of the collapse, but Mills refused to pay. The subcontractor refused to return to the project unless it was paid, and when the parties failed to reach agreement regarding completion of the project, and what amounts were payable to Double Diamond, Mills completed the project on its own.
The subcontractor sued Mills for breach of contract, and on the alternative theory of recovery based on the reasonable value of the work performed up to the date the contract was effectively terminated. Mills counterclaimed for breach of contract, for failure to construct in a good and workmanlike manner, negligence, and the subcontractor's abandonment of work at the project after the collapse.
The trial court held Mills had breached the contract by failing to provide appropriate materials. The court stated that the sheer number of problems made it impossible for the subcontractor to perform under the contract. The court also found that the collapse did not result from negligence on the part of the subcontractor, and that Mills, having failed to comply with its own obligations, could not maintain an action for breach of contract.
The general contractor appealed the lower court's decision to the United States Court of Appeals.
Decision
The appellate court agreed with the trial court that the general contractor had breached the subcontract, because Mills failed to substantially comply with its obligations to supply appropriate materials. The court addressed the doctrine of impossibility of performance, holding that the subcontractor was excused because the general contractor made Double Diamond's performance of the contract impossible. According to the court, the doctrine of impossibility "provides an excuse for non-performance of contractual obligations caused by supervening or existing conditions not contemplated by the parties."
The court stated that the impossibility of completing performance was caused by the collapse, which was unanticipated given the assurance by the steel supplier that nothing further was needed to protect the structure from collapse. On these facts, the court concluded that the furnishing of defective materials by Mills and the resulting collapse made it impossible for the subcontractor to complete the contract within the "time of the essence" completion date. Accordingly, the court held that the subcontractor did not breach the contract.
Commentary
Although the Double Diamond case reached a sound result, the vagueness of the impossibility of performance standard can be troubling. The general contractor or subcontractor is well advised to consult with experienced construction counsel prior to abandoning a project based on the belief that performance has become "impossible." It is often difficult to distinguish between a mere hardship situation at a project, and the "impossibility" standard. While unexpected difficulty, expense or hardship will not normally excuse performance, greatly increased difficulty, due to unanticipated events or changes in pre-existing conditions, may suffice to establish impossibility as a defense to performance.
About the author: Mr. Miuccio is a partner in the law firm of Goldberg & Connolly, and legal counsel to the Construction Industry Council of Westchester and Hudson Valley, Inc. Geoffrey S. Pope, a senior associate with the firm, assisted in the preparation of this article.