By Wyatt Johnson
Words on paper are nothing more than ink and pulp. Words in the air are less than that. You have no “contract” unless a court will enforce the words. Unless the contract is enforceable, the courts won’t give you any help when someone breaks a promise. This can be a problem when a contract was enforceable at one time, but changed circumstances make it unenforceable.
The Covid 19 pandemic created questions about the continued enforceability of some contracts. This is due the doctrine of “impossibility.” Historically, the “impossibility” doctrine has rarely had much impact. It was not even acknowledged by the Idaho Supreme Court until 1968. Since that time, you will find very few cases where a court actually finds a contract is unenforceable due to the doctrine. It is much like earthquakes in Idaho – they can happen, but only rarely.
The pandemic has triggered a legal earthquake. The basic statement of the “impossibility” rule is that a contract becomes unenforceable when some “event” happens (or doesn’t) after the parties agree to the contract, neither party is at fault, and the occurrence (or non-occurrence) “event” is “a basic assumption on which the contract was made.” Admittedly, the rule is not very clear. In 1985, the Idaho Court of Appeals provided some clarity when wrote an opinion that included an example of what it thought would be an “impossibility.” In Landis v. Hodgson the court observed that “[o]ne such . . . event has been the government imposition of a new law, regulation or order which makes the performance of a duty [under the contract] impractical.” For the next 35 years, nobody paid very much attention to the Landis case. However, the events of 2020 gave that statement new significance.
As most people are well aware, on March 25, 2020, the Idaho Department of Health and Welfare entered an isolation order to prevent the community spread of Covid 19.
Among other things, the order directed all businesses to stop “non-essential” operations at physical locations within the state, prohibited non-essential gatherings, and prevented all non-essential travel. Later, the order was lifted and walked back in different stages. The state is currently subject to much less stringent guidelines outlined in the “Stay Healthy Guidelines” published on May 11, 2021. Nonetheless, there are certain businesses that were illegal to operate for some period of time because of government orders issued to control the pandemic.
There are undoubtedly many contracts entered before 2020 where a basic underlying assumption of the parties was that their business was legal. When these businesses became illegal to operate, the “impossibility” doctrine undoubtedly became an issue. Each case will be different. The courts will likely be sorting this out for years. One thing that is certain, we have one more lingering problem as the result of a nasty virus.