The impracticability of performance doctrine is applicable in situations where the contractor’s performance of a contract, although not impossible, is rendered impracticable due to a problem encountered that was unforeseen at the time of formation of the contract. This impracticability of performance may be caused by a variety of unforeseen situations faced by the contractor during performance, including substantial increases in costs, significant problems encountered, or technological changes. Contractors must satisfy at least three conditions for the doctrine of impracticability to be applicable. First, the contractor must demonstrate that an unexpected condition or contingency occurred during the performance of the contract. Secondly, the contractor must show that it did not assume the risk of that contingency either expressly or through trade usage or custom. Finally, the contractor must prove that the unexpected condition or contingency caused the impracticability of performance.
Existence of Unexpected Condition or Contingency
The claim adjudicating forum may consider several factors to determine whether an unexpected condition or contingency exists. For instance, it may consider whether any other similarly situated contractor could have performed the contract. That is, whether the requirements or conditions are subjectively impractical for the contractor bringing the claim or impractical for any contractor in its position. Another factor to consider is the extent of the contractor’s efforts to meet the performance requirements in face of the contingency. Generally, the contractor must demonstrate that it was diligent and exhaustive in its attempts to perform the contract. In cases where the contractor alleges commercial impracticality or unfeasibility, it must prove that the performance costs would be so high that performing the contract would not make commercial sense. Notably, non-substantial increases in contract price will not result in successful commercial impracticability claims.
Assumption of Risk
After establishing the existence of an unexpected condition or contingency, the contractor must show that it did not assume the risk of the occurrence of such a condition. Depending on the specific facts, contractors may find this challenging because the contractor assumes various performance risks when entering a federal contract. For instance, the contractor generally assumes the risk of competence. Consequently, the contractor is presumed to be, at a minimum, just as competent as other contractors in the industry. Similarly, in claims of commercial impracticability, contractors may assume the risk of scarcity of necessary materials or fluctuations in price. Meanwhile, in technical impracticability claims such as those arising due to defective specifications, the contractor generally assumes the risk of non-performance if it had proposed to perform the contract according to its own specifications. This is especially true if a contractor possesses expertise in the field relevant to the contract and it is determined that the government relied on that expertise. To overcome this assumption, contractors must typically demonstrate that they performed according to the specifications provided by the government.
Causation
Finally, to successfully establish a claim based on impracticability, contractors must show that the unforeseen condition or contingency caused the issues that made performance impracticable. This is generally demonstrated by showing the existence of a logical nexus between the unexpected condition or contingency and the contractor’s inability to perform successfully. Contractors can establish causation by proving that had it not been for the unforeseen condition or contingency, they would have performed on the contract as stipulated during contract formation or subsequent modifications. In establishing causation, contractors may also have to show that the contingency was beyond their control and that they did not contribute to the impracticability of performance.
To prove the impracticability of performance, contractors must demonstrate the existence of a contingency or conditions that were not reasonably foreseeable at the time of formation. Additionally, contractors must prove that they did not assume the risk of the contingency and show that the contingency led to the impracticability of performance. Depending on the facts underlying the impracticability claim, contractors may present several types of evidence to support the existence of a contingency. Such evidence may include expert testimony or documentary evidence such as cost estimates, invoices, communications, and performance reports. Once the presence of unforeseen circumstances has been established, contractors must show that they did not assume the risk of the occurrence of that contingency either expressly under the terms of the contract or implicitly, such as by trade usage or custom. Finally, to successfully establish an impracticability claim, contractors must prove that the contingency caused the impracticability of performance. By understanding the elements of an impracticability claim, contractors can be better positioned to obtain recovery when unforeseen circumstances or contingencies hinder their ability to perform.
This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.
