When managing a project, a contractor must overcome several challenges, such as outsourcing needs and regulatory compliance. However, some things are simply out of their control.
Natural disasters and other extraordinary circumstances can make finishing a project impossible. In these situations, can the contractor face legal action for breach of contract? Or can they protect their business from an unreasonable claim?
Common grounds for contract termination (outside of “Breach”)
Businesses can terminate contracts for several reasons, such as:
- A unilateral or mutual mistake made on the contract
- Failure to sufficiently define essential terms, such as: quality, quantity, or price
- Unconscionability or an unfair advantage for one of the parties
- Lack of consent to contract terms (no mutual assent or “meeting of the minds” on all the essential terms of the agreement)
- Signing under duress or undue influence
- Fraud
- Circumstances that make performance impossible
Most contracts have termination clauses that help you identify conditions that must be met or procedures you must follow to begin the process.
Circumstances that can make performing a contract impossible
Florida construction law recognizes circumstances where fulfilling a contract becomes impossible. But how can contractors know when terminating a contract makes sense under the law?
The law requires factual proof, not just the contractor’s belief that fulfilling the contract is impossible. They can cite unforeseeable factors beyond their control and aren’t their fault. These include:
- Unexpected death or disability of a person indispensable to the project
- Destruction of the subject matter of the contract, such as property
- The passing of a new law that makes the project illegal
- Material and labor shortages or significant price increases due to changes in domestic regulations or other geopolitical factors
- “Force majeure” (extraordinary events outside the control of the parties, often referred to as “acts of God”)
Generally, unforeseen circumstances that can cause unreasonable difficulty, expenses, injury, or loss may be considered.
Starting the contract termination process
If you decide to pursue contract termination, the process typically involves:
- Reviewing the contract for clauses related to impossibility and force majeure
- Documenting evidence of grounds for impossibility
- Notifying the other party of your intent to terminate the contract
- Filing a declaratory judgment in court if the other party disputes your claim
If a dispute arises, you can look into negotiating a settlement or prepare for litigation. You want to ensure you’re mitigating financial risk instead of adding more.
Gauging whether you have solid grounds for your claim can be challenging. Consulting an experienced construction law attorney is advisable to determine whether you do and ensure you meet the legal requirements of the termination process.
Additionally, there is no need to wait until a problem arises before looking at these contract provisions. Consulting an experienced construction law attorney is often the most effective way to determine if there are suitable protections for issues related to impossibility and force majeure BEFORE you sign a contract or present a contract for signature by the other party.
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