Future Business Leaders of America (FBLA) Business Law Practice Exam

Under which circumstance would the impossibility of performance apply?

1. The employee quits voluntarily

2. The contract is terminated by mutual agreement

3. Destruction of the subject matter of the contract

4. The parties change their minds about the terms

The correct answer is: Destruction of the subject matter of the contract

The impossibility of performance occurs when unforeseen circumstances prevent one party from fulfilling their contractual obligations. In this scenario, the destruction of the subject matter of the contract aligns perfectly with this principle. When the subject matter is destroyed, it makes it impossible for the contract to be performed as originally intended. For example, if a contract was made for the sale of a specific piece of property and that property is destroyed, then the contract cannot be completed because the object of the contract is no longer existent. In contrast, the other scenarios do not qualify as impossibility of performance. If an employee quits voluntarily, this simply results in a breach of contract or termination of employment but does not render performance impossible. Similarly, when a contract is terminated by mutual agreement, both parties have decided to cease the obligations, which doesn't imply impossibility but rather a consented ending to their prior agreements. Lastly, if the parties change their minds about the terms of the contract, this reflects a situation of negotiation or modification rather than impossibility. Thus, the destruction of the subject matter is the only instance here that fits the definition of impossibility of performance.