FORT LAUDERDALE BUSINESS LITIGATION: THE DOCTRINE OF IMPOSSIBILITY OF PERFORMANCE OR FRUSTRATION OF PURPOSE AND TIK TOK

Tik Tok has been highly controversial since its inception. Many have raised concerns that the company is owned by a Chinese company, ByteDance because China may use Tik Tok to spy on American Tik Tok users. In April 2024, Congress passed a bill requiring ByteDance to sell Tik Tok to a U.S. company or shut down the app in the U.S. by January 19, 2025. Tik Tok filed a federal lawsuit to enjoin the bill from going into effect. This lawsuit has since reached the Supreme Court, which held oral arguments on January 10, 2025. If the Supreme Court upholds the law and the Tik Tok ban goes into effect, what will happen to video creators and marketing companies that have contracts with various brands requiring Tik Tok advertising? How will these video creators and marketing companies comply with the contract? Impossibility of performance and frustration of purpose is a rarely used contract principle that may hold the answer. The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

“Under the doctrine of impossibility of performance or frustration of purpose, a party is discharged from performing a contractual obligation which is impossible to perform and the party neither assumed the risk of impossibility nor could have acted to prevent the event rendering the performance impossible.” Marathon Sunsets, Inc. v. Coldiron, 189 So. 3d 235 (Fla. 3d DCA 2016). “Frustration of purpose refers to that condition surrounding the contracting parties where one of the parties finds that the purposes for which [it] bargained, and which purposes were known to the other party, have been frustrated because of the failure of consideration, or impossibility of performance by the other party.” State v. Dempsey, 916 So. 2d 856 (Fla. 2d DCA 2005). These defenses are not, however, available if knowledge regarding the impossibility of performance were available to the promisor or if the situation could have been reasonably foreseen before entering the contract. Shore Inv. Co. v. Hotel Trinidad, Inc., 29 So. 2d 696 (1947); Home Design Center–Joint Venture v. County Appliances of Naples, Inc., 563 So. 2d 767 (Fla. 3d DCA 1990).

Government action could form the basis of an impossibility of performance or frustration of purpose defense. For example, in Leon County v. Gluesenkamp, 873 So. 2d 460 (Fla. 1st DCA 2004), the court held that a party established a defense to a breach of contract claim when a court-ordered injunction (from another case) prevented the party from performing its part of a contract. Likewise, in Hilton Oil Transp. v. Oil Transp. Co., S.A., 659 So. 2d 1141 (Fla. 3d DCA 1995), the court implied that a seizure of a tug boat by the Honduras government could form the basis of an impossibility of performance defense because “[i]t is obvious that war time seizures are unforeseeable and the parties to the charter hires have absolutely no control over such seizures and are thus at the total mercy of the government.”

The new law banning Tik Tok might allow application of the impossibility of performance or frustration defense. The defense could be viable if Tik Tok is not permitted to operate in the U.S. and the prohibition against Tik Tok made performance under the relevant contract impossible. However, feasibility of the defense will largely depend on whether the Tik Tok ban was foreseeable. One could argue the circumstance was foreseeable for any contract entered after Congress approved the Tik Tok ban. One could also argue a Tik Tok ban was foreseeable before the ban was passed when Congress began publicly debating the ban. This could prevent application of the impossibility of performance or frustration defense for contracts entered as late as 2020 because this is when the U.S. President announced an intent to ban Tik Tok. See https://www.bloomberg.com/news/articles/2020-07-31/trump-to-order-china-s-bytedance-to-sell-tiktok-u-s-operations. It will be interesting to see whether the Supreme Court upholds the Tik Tok ban and how broad courts apply the an impossibility of performance or frustration of purpose defense.

The Fort Lauderdale business litigation attorneys of the Mavrick Law Firm represent businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.