The COVID-19 crisis and accompanying stock market crash has many purchasers wondering whether there is a legal argument that would allow them to change the terms of their ratified contract or void it altogether, absent an addendum to the contract addressing the pandemic. If such an argument exists, it would come in the form of the Impossibility contract defense.
The Impossibility defense states that a contract is voidable in the event of a failure or nonexistence of a state of affairs, the existence of which was contemplated by both parties as the basis of their contract. Housing Authority v. East Tennessee Light, etc., Co., 183 Va. 64 (1944). In real estate, this typically translates to events which either destroy the house itself, the means of constructing the home, or the means of purchasing/selling it absent a clause in the contract which contemplates such.
All (good) contracts contain a “force majeure” clause (French for “superior force”) identifying which party bears the burden in the event of an act of God. Virginia courts have defined an “act of God” as “all misfortunes and accidents arising from inevitable necessity which human prudence could not foresee or prevent”. Sanders v. Coleman, 97 Va. 690 (1899). (In this particular case, the court deemed that a man’s issues with his urinary organs rendered marriage impossible to perform. A highly recommended read.). Fires, earthquakes, and the like, may render a contract impossible to perform, and in the case of Sanders, “illness, being beyond the power of man to control or prevent, is the act of God.”
Section 19 of the NVAR Residential Sales Contract, for instance, states that the seller bears the burden of a risk of damage or loss due to an act of God until execution and delivery of the deed.
The question then becomes whether this pandemic, an act of God, renders the contract impossible to perform, either because a quarantine would prevent buyers from moving out of their current house, or because settlement would be impossible. Though citizens are encouraged to stay home and practice social distancing, at the moment there is no state or federally ordered quarantine which would legally prevent a purchaser from moving out of their current home, or executing documents at settlement. (Other parts of the world, like Italy, are subject to a government-imposed quarantine). At the moment, the pandemic does not render the contract factually or legally impossible to perform.