There is an international food festival held in Canberra during March each year.

Question

There is an international food festival held in Canberra during March each year. Individuals and companies can hire stalls and sell food and drink to the public. a) Lucie sells Belgium beer at the festival each year. In January 2018 she enters into a contract with Fiona, Festival Manager, to hire a stall. In February 2018 the ACT government enacts a new law requiring stallholders to have a liquor licence if they sell beer. A liquor licence costs $2000. This is too expensive for Lucie and she wants to get out of the contract.

Explanation / Answer

There may be several legitimate reasons to withdraw from a contract. Depending on the state, and the type of contract, you may be able to change your mind, or “rescind” the contract if your decision is made within a specific time period..

Impossibility of performance” is one of the legitimate reasons under the law to cancel the contract. This means that if you contract with someone to paint your house, and they die before fulfilling the contract, it is impossible for them to perform, and therefore you may void the contract.

To claim impossibility, it must be impossible for anyone to perform. In addition, some courts recognize that contracts may become impracticable. This means that after the contract was formed, extreme circumstances that were unanticipated made it extraordinarily expensive or inconvenient to perform under the terms of the contract. The problem must not be something that should have been anticipated at the time the contract was formed.

In the above mentioned case, the ACT government enacting a law to get a liquor license is an external circumstance arising after the contract and the circumstance makes it impractical for Lucie to continue as the additional costs laid down were not expected and it changes the dynamic under which the contract was functioning.

The legal doctrine of commercial impracticability is triggered when something happens that makes performance of a commercial duty excessively burdensome, unbearably difficult or extremely expensive. In the above case, we have an example of making the performance expensive. Consider the 2011 earthquake and subsequent tsunami in Japan. The widespread destruction destroyed commercial facilities, making delivery of products and services impossible. Not only the unavailability of products contributed to commercial impracticability, but the ensuing massive price increases for the limited availability of certain products caused by the natural disaster. In such a case, a major price increase may be enough to trigger the doctrine of impracticability..

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