In what situation might an impossibility of performance terminate a contract?

An impossibility of performance can terminate a contract when unforeseen circumstances prevent completion. This occurs when an event outside the control of the parties makes it impossible to fulfill the terms of the contract. Examples could include natural disasters, changes in law, or the destruction of the subject matter of the contract. These unforeseen circumstances create a situation where one or both parties can no longer perform their obligations as originally agreed.

In contrast, a party merely changing their mind does not qualify as impossibility because they still have the capacity to perform, even if they choose not to. Similarly, mutually agreeing to renegotiate does not eliminate performance but rather alters the agreement, while granting an extension allows for more time to perform rather than removing the obligation entirely. Thus, the key factor in the correct answer is that the unforeseen circumstances genuinely preclude the ability to carry out the contract, leading to its termination.