Question

At a coffee shop on the 30th of April 2019, Freddy, a licensed diamond dealer, entered into a contract with Sylvia for the purchase and sale of 10 twenty-one carat diamonds at a purchase price of N$ 25 000. It is agreed between the parties that Freddy will deliver the 10 diamonds to Sylvia on the 2nd of May 2019. When Freddy returned to his shop in order to package the diamonds he discovered that he had insufficient stock to meet his obligations in terms of the contract as he only had 2 twenty- one carat diamonds in the safe.

On the day of delivery he advised Sylvia that the contract is void because it is impossible for him to perform and as such not liable. Advise Sylvia whether or not Freddy is correct about the status of their contract.

Answer 1

Contract impossibility, or “impossibility of performance”, is a commonly cited ground for contract termination. Impossibility is when the duties and contractual obligations of one or more parties cannot be fulfilled under normal circumstances.

In addition to impossibility, some similar contract defences include impracticability and frustration. Impracticability occurs where it has become impracticable or unreasonable for one or both parties to proceed with their contract duties. This is sometimes more difficult to prove than impossibility, since the duties might still be performed, but are difficult to do so in some way.

Frustration occurs where the overall purpose of the contract has been frustrated or negated. Again, the duties need not be impossible to perform, but it’s usually necessary to prove that both parties would not benefit by proceeding with their duties.

Impossibility or Impracticability Not a Defense

Impossibility or impracticability is not a defence if the person making the promise in the contract caused the contract to be impossible or impracticable.

Impossibility and impracticability is not a defence if the impossibility or impracticability is foreseeable.

Impracticability is not a defence if the situation is not severe enough. In many business transactions, contract performance may often result in more costs than a party could foresee. A mere increase in costs though is not a barrier to contract enforcement unless the costs are extreme and unreasonable.

In the above case, Mr Freddy who is a licensed diamond dealer, the impossibility for the performance of the contract is foreseeable as the contract was made on 30 April and he has the knowledge that he doesn't have the diamonds before the due date and not severe enough so contention of Mr Freddy is not correct the contract is valid.