in shareholders agreement it says person X would do something by Jan 1. the contract wasnt signed and ascended until feb 1 at which time the person still hadnt done the thing. is person X in breach or can they argue that it was impossible to comply when everyone signed and it was common knowledge that they hadnt done the thing...so it cant count as a material breach

1 Answer 1


Assuming the "shareholder's agreement" is intended to be a contract ...

Not all agreements between shareholders are intended to be legally binding contracts. For example, an agreement to meet for drinks after work on Fridays. However, it sounds like this isn't one of those.

Do you have a contract?

It's possible that the doing of the "something" by person X was a condition precedent, if so, the fact that it wasn't done means the shareholder's agreement is void - doesn't exist, never existed.

Alternatively, if person X misrepresented the status of the "something" (which could include remaining silent about it) then other parties to the contract who were materially induced to enter the contract by that misrepresentation could disclaim the contract - that is, it would be void for that reason. There are different consequences if the misrepresentation was innocent, negligent or fraudulent but that's not germane.

Can you be in breach from the beginning of a contract?


As described, it was a term of the contract that person X was to have done "something" by 1 January and they hadn't. As such, the instant they signed the contract they were in breach of it and the other parties to the contract would have cause to take action against them.

However, if, as stated, they knew that person X had not done what they were required to do (which may need to be proved if they deny it) the court would need to determine the parties' intentions regarding the breach.

In an ideal world, the parties would have detailed what they wanted to do about the breach but it doesn't seem like they did this. There might be differing views on what the parties intended and that evidence will ultimately decide the matter.

If there is absolutely nothing to go on, a likely outcome is that the court might decide that the intention was for the breach to be remedied in a reasonable time and, if it wasn't, the other parties could then take action.

Is it a material breach?

A material breach is one that allows the aggrieved party to terminate the contract as well as sue for damages. What they choose to do is up to them: they can terminate and end the contract or they can affirm and keep the contract going. In either case, they can seek damages.

If they affirm they can ask the court for an order of specific performance on person X to do "something" by a specific time: if X doesn't she is then in contempt of court. However, if damages are an adequate remedy (they usually are) the court will not grant such an order.

A minor breach just entitles them to damages but the contract remains on foot.

Since we don't know what "something" is, it's impossible to say if this is a material or a minor breach.

Can you contract to do the impossible?

Yes - although knowingly doing so would be extremely unwise.

A contract that is legally or physically impossible is void, however, a contract that is impossible due to inability or circumstances is not. Plenty of people who have been impacted by the pandemic or government responses to it are finding this out. See What effect does an event like the current Covid-19 pandemic have on contractural obligations?

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