Background
Appellants Aditya Business, Inc., Siddhivinayak Business, Inc., Dipti Choksi, and Jigneshkumar Shah owned and operated a Lonestar convenience store in Gainesville, Texas. In February 2018, they purchased the property and took assignment of a Motor Fuel Supply Agreement (MFSA) with Classic Star Group, LP for Exxon-branded fuel. Choksi and Shah personally guaranteed the agreement. The MFSA obligated appellants to exclusively purchase fuel from the distributor at the specific premises for a term of ten years (or until 6,000,000 gallons were purchased, whichever came later) and provided for an early-termination fee if the agreement was terminated prior to completion.
The MFSA contained critical language stating that appellants would be “deemed to have terminated” the agreement “if the Franchise Dealer closes the Marketing Premises, or for any other reason permanently ceases purchasing Products.” In October 2021, Classic Star assigned its rights to Brad Hall & Associates, Inc. (BHA). In June 2023, before the MFSA’s term expired, the State seized the convenience store property through an eminent domain proceeding for a highway expansion project. Appellants ceased purchasing fuel and refused to pay BHA’s demand for the early-termination fee of $75,293.26.
The Court’s Holding
The court affirmed summary judgment for BHA, holding that the impossibility of performance defense does not apply. The court emphasized that the MFSA’s plain language explicitly anticipated and addressed the exact contingency that occurred: closure of the premises and cessation of fuel purchases. The agreement did not assume these events would not occur; rather, it specifically provided that either event would trigger a deemed termination and obligate appellants to pay the early-termination fee.
Critically, the court found that appellants contractually agreed they would be deemed to have terminated the MFSA if they ceased purchasing fuel “for any reason”—a phrase encompassing circumstances beyond their control, including government seizure. The MFSA contained no force majeure clause, no exceptions to the deemed-termination provision, and no carve-outs for unforeseeable events. The parties had expressly allocated the risk of closure or cessation to appellants. Under Texas law, the principle of impossibility “yields to a contrary agreement by which a party may assume a greater as well as a lesser obligation.” Because appellants had assumed the obligation to pay the early-termination fee even if events beyond their control prevented performance, the impossibility defense was unavailable and their breach was not excused.
The same reasoning defeated appellants’ argument that the guaranties signed by Choksi and Shah were excused. Since the underlying MFSA was not excused, there was a valid default under it, and the guarantors remained liable on their personal guaranties.
Key Takeaways
- Specific contractual language allocating risk between parties defeats the doctrine of impossibility of performance, even when the risk materializes through government action.
- Courts interpret contracts according to their plain language and the parties’ expressed intent, giving effect to risk-allocation provisions the parties clearly agreed to.
- The absence of a force majeure clause or exceptions to a termination provision means the impossibility defense cannot be invoked for unforeseeable contingencies the contract already addressed.
- Personal guaranties remain enforceable when the underlying contract’s performance obligations are not excused by impossibility.
Why It Matters
This decision reinforces the principle that Texas courts will enforce contract terms according to their plain language and will give effect to parties’ risk-allocation choices, even when those choices result in harsh outcomes due to unforeseeable circumstances. Parties who carefully draft contract language allocating risks have a powerful tool against impossibility defenses. The decision is particularly significant for long-term supply agreements where the location or availability of premises or products could be affected by government action, natural events, or other supervening circumstances.
The ruling also carries implications for personal guarantors. Guarantors cannot avoid liability on a guaranty by arguing that performance of the underlying contract became impossible if the contract itself addressed that possibility. Sophisticated parties should expect that contractual provisions allocating risk will be enforced as written, and that blanket impossibility arguments will fail where the contract’s language demonstrates the parties foresaw and accepted the risk in question.