In some instances, events occurring after parties have entered into a contract make performance of one’s contractual obligations difficult or impossible to perform. For example, many Texas businesses now have to assess how Hurricane Rita affected their contracts with suppliers, contractors and others. The following provides a brief overview of the general principles of law Texas courts will consider in determining whether a party’s contractual obligation by reason of a supervening event is impossible to perform, and therefore, excused.

The starting point is to examine the contract to determine whether or not the contract contains a provision detailing how the parties’ rights and obligations may be affected by a supervening event, such as a hurricane or flood, to determine whether such an event excuses a party’s performance under the contract. Many contracts contain a force majeure clause, which typically defines specific event(s) which may excuse one’s performance under a contract. If the contract speaks to the given event, it will govern the cor-responding rights and obligations of the contracting parties. In the absence of such a provision, Texas courts have applied the following principles to determine whether a supervening event operates to excuse a party’s contractual obligation to perform.

If a party’s “obligation to perform is absolute, impossibility of performance occurring after the contract was made is not an excuse for nonperformance if the impossibility might have reasonably been anticipated and guarded against in the contract.” Metrocon Const. Co., Inc. v. Gregory Const. Co., Inc., 663 S.W.2d 460 (Tex. App. — Dallas 1983, writ ref. n.r.e.). Therefore, while contracting parties may disagree over whether severe storms, such as hurricanes, or floods were anticipated at the time the contract was executed, it can be argued that an act of God does not relieve the parties of their contractual obligations unless the contract expressly provides otherwise. GT & MC, Inc. v. Texas City Ref., Inc., 822 S.W.2d 252, 257 (Tex. App. — Houston [1st Dist.] 1991, writ denied).

Thus, if the supervening event could have reasonably been anti-cipated and the risk accounted for in the contract, a party may be held liable for breach of contract even though its performance is rendered impossible as a result of a supervening event occurring after execution of the contract.

Furthermore, a contract is not impossible to perform simply because it is more expensive or less profitable to perform. Huffines v. Swor Sand & Gravel Co., Inc., 750 S.W.2d 38 (Tex. App. — Fort Worth 1988, no writ). In Metrocon, subcontractor agreed to build a masonry wall for contractor. After construction, the masonry wall was blown down by high winds. The contractor sought to recover the funds it overpayed the subcontractor to rebuild the walls. The subcontractor argued his performance was excused because the high winds, i.e., an act of God, rendered his performance burdensome. Metrocon, 663 S.W.2d at 462. However, while the wind damage made the contract more burdensome to perform than originally anticipated, the subcontractor “was not prohibited from performing the contract by the act of God.” Id. In light of the foregoing, Texas businesses should review any contracts that may have been impacted by Hurricane Rita to assess what their respective rights and obligations are in light of the hurricane. To the extent the contract does not contain a force majeure clause or other provision addressing such an event, consideration should be given to incorporating such a clause into any future contracts in an effort to define the parties’ contractual rights and obligations in the event performance of another’s contractual duties is prevented by causes beyond its control.

For more information, contact dfertitta@coatsrose.com or 713-653-5715.