CPA Exam — REG (Regulation)Business LawMedium
A homeowner hires a contractor to build an addition to their house. The contract specifies that the contractor will complete the work by October 1st. On September 15th, a major hurricane unexpectedly causes significant damage to the existing structure and the partially completed addition, making further construction impossible until extensive repairs are made to the original house. The contractor informs the homeowner that they cannot meet the October 1st deadline and the project will be significantly delayed. Which of the following legal concepts would most likely excuse the contractor's delay in performance?
- ACommercial impracticability
- BMutual mistake
- CFrustration of purpose
- DAccord and satisfaction
Show answer & explanationAnswer & explanation
Correct answer: A. Commercial impracticability
Commercial impracticability applies when unforeseen circumstances make performance extremely difficult or expensive, though not impossible. The hurricane causing extensive damage and delaying the project significantly fits this doctrine, as it was an unforeseeable event making performance as originally planned commercially unreasonable.
Why the other options are wrong
- B. Mutual mistake occurs when both parties are mistaken about a material fact at the time of contract formation, not about a future event.
- C. Frustration of purpose applies when the *reason* for the contract is destroyed, not necessarily the ability to perform the contract itself.
- D. Accord and satisfaction involves settling a disputed claim, which is not the scenario here.
Commercial Impracticability
A contract defense where an unforeseen event makes performance extremely difficult, expensive, or burdensome, though not literally impossible, excusing performance.
- Event must be unforeseeable at the time of contract formation.
- Performance must be rendered commercially unreasonable, not just less profitable.
- The party seeking to be excused must not have assumed the risk of the event.
Memory trick: I-F-M-A: Impracticability, Frustration, Mistake, Alteration.