Today we continue our discussion of impracticability and now impossibility by learning about the case of Taylor v. Caldwell. This is another landmark English contract law case which helped to establish an important common law doctrine. It was decided by the Court of Queens Bench in 1863 during the U.S. Civil War. The opinion's author Justice Blackburn was a highly respected judge who is remembered for his work on contracts common law. Before we get to the facts of the case, let's review two key terms. The doctrine of impracticability is a common law doctrine that excuse performance of duty when that duty became unfeasibly difficult or expensive. You might hear a separate and related doctrine the doctrine of impossibility mentioned in the context of Taylor v. Caldwell case impossibility is impracticability on steroids. It excuses performance where the duty cannot be physically performed. In other words, the excuse of impossibility is raised when there is no way for performance to be accomplished. The excuse of impracticability, which we talked about in the last video, applies when performance is still possible, but only at an unreasonable cost. While not identical, these are certainly similar and intertwined concepts. In Taylor v. Caldwell, the defendant Caldwell agreed to license a music hall to plaintiff Taylor so that Taylor could host concerts and major events at the venue. Before these concerts were held and before the plaintiff had paid the defendant, the music hall burned down without the fault of either party. Taylor v. Caldwell is famous for helping to establish the common law defense of impossibility. The main issue presented is this given that the agreement failed to anticipate the destruction of the music hall was defendant hall owner, the hall owner still obligated to perform or pay damages, he couldn't perform so it comes down to is it still obligated to pay damages? The court held that no, the defendant is not on the hook for the contract after the music hall fire. Reasoning that the parties cannot reasonably be expected to anticipate every unlikely occurrence, the court announces that the contract contained an implied or default condition excusing the parties from performance if the hall ceased to exist. The court treated the existence of the music hall as an implicit condition. Let's try a quiz. For the existence of the musical to be an implicit condition, does it matter if the parties actually contemplated it? In other words, did the parties need to have the implicit condition in their minds at the time of forming the contract? Well, no, it usually doesn't matter whether the parties actually had this implicit condition in mind. The inquiry usually focuses on what reasonable people would have intended rather than what the parties actually thought about. The implied condition that the music hall would still exist is implied by force of law and not because the parties had it in mind. Recall that the efficient risk bearer analysis, suggests that a risk should be allocated to the party who's best able to bear the risk. How does the Taylor v. Caldwell case square with this concern of economic efficiency? Well the rule that the continued existence of the thing necessary for performance is an implied condition ignores whether the defendant promisor may be the better bearer of the risk of the thing perishing. For instance, if the hall owner is in the best position to prevent a fire to the music hall, say by having regular patrols or reducing smoking nearby, then it might make sense from efficient risk bearer analysis to have the hall owner bear the risk of the hall burning down. However, remember that this case is a case where the fire happened "without fault of either party." So, perhaps there is no superior risk bearer in this particular case. At any rate, Justice Blackburn was definitely more influenced by the civil law than by considerations of economic efficiency when he decided this case. Taylor v. Caldwell establishes the common law roots of an impracticability defense and it remains important in modern contracts. Section 261 of the Second Restatement allows impracticability defense to discharge a party's duty to perform and section 263, specifically discusses cases wherein objects existence is necessary for performance. If the existence of a physical object is necessary for performance, then it is viewed as a basic assumption and an implicit condition upon which the contract is made. If the physical object does not exist, then performances impracticable and the duty to perform is discharged. If the Taylor case was decided today, then whether the particular music hall is necessary for performance is an important inquiry. If the court finds that the burnt hall was necessary for the performance and that other halls weren't reasonable substitutes, then the fire would discharge the owners duty to provide a hall. Another major category of impracticability is the death or incapacity of an essential person. As with Restatement Section 263, the key question is to determine whether the particular person is necessary for the performance of a duty. The question of who is necessary may be determined by the agreement or if the agreement is silent an assessment of whether the performance was a personal matter requiring personal experience, ability, skill and judgment. Under this test, the death of an artist employed to paint a portrait would discharge the contract. But the death of the subject of the portrait would not discharge a duty to pay the agreed price. Another way to determine who is necessary is to ask whether the person who dies or was incapacitated could have delegated his or her duty to a third party without the other parties consent. The question is whether the other party has a substantial interest in having the contract performed by this particular person. If so the contract is discharged, for instance the death of a contractor might not excuse a contract to do construction work, but death of an attorney likely would discharge a contract with a law firm. But since people rather than corporations die or become incapacitated, the question remains whether the performance to be rendered was so personal in nature that it could not have been discharged. In Taylor v. Caldwell, was this a case of supervening or existing impracticability? Well this is a case of supervening impracticability, meaning the events giving rise to the impracticability occurred after the formation of the contract. The difference between supervening and existing impracticability is an important one for analyzing economic efficiency. The difference lies in the opportunity for one or both parties to know at the time of contracting whether the risk event has occurred. For existing impracticability, the promisor may know or have reason to know that the risk has already materialized so it's difficult to conclude that the promisor did not assume it. Put another way when existing impracticability is involved, it's easier to determine which party was in the best position when information costs are considered to ascertain the exact state of things. If the promisor has that information, he or she may now be the superior risk bearer. In summary, Taylor v. Caldwell is a common law case that introduces the doctrine of impossibility, which excuses performance when the duty becomes impossible. In particular, the existence of the thing necessary for a performance is seen as an implied condition to the contract. This also applies to the existence of a person necessary to a contract.
