In the law of contracts, frustration of purpose is a defense to enforcement of the contract. Frustration of purpose occurs when an unforeseen event undermines a party's principal purpose for entering into a contract, and both parties knew of this principal purpose at the time the contract was made. Despite frequently arising as a result of government action, any third party (or even nature) can frustrate a contracting party's primary purpose for entering into the contract. This concept is also called commercial frustration.
For example, if Joe gets a mortgage for a new home, and, after three years, the house is destroyed, for whatever reason, at no fault of Joe's. Without a hell or high water clause, Joe might be exempt from the remainder of the mortgage, as the principal purpose of the contract (to have a house to live in) has been compromised. However, he might still have a foreclosure on his credit rating.
Frustration of purpose is often confused with the closely related doctrine of impossibility. The distinction between the two is that impossibility concerns the duties specified in the contract, whereas frustration of purpose concerns the reason a party entered into the contract. For example, suppose entrepreneur Emily leases space from landlord Larry so she can open a restaurant that only serves Tibetan Speckled Lizard meat. If the city rezones the property to forbid commercial uses, or if the property is destroyed by a tornado, then both Larry and Emily are excused from performing the contract by impossibility.
However, if the Tibetan Speckled Lizard suddenly goes extinct, then Emily may be excused from performing the contract because Larry knew her primary purpose for entering into the lease was to serve Tibetan Speckled Lizard, and that purpose has been frustrated. In the second scenario, the parties could still carry out their obligations under the lease, but one of them no longer has a reason to.
The Restatement of Contracts, Second § 265 defines frustration of purpose:
| “ | Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or circumstances indicate the contrary. | ” |
A circumstance is not deemed to be a "basic assumption on which the contract is made" unless the change in circumstances could not have been reasonably foreseen at the time the contract was made. As a result, it is rarely invoked successfully. Successful invocations usually come in waves during times of substantial tumult, such as after the passage of Prohibition, when bars and taverns no longer had a reason for their leases, or during major wars, when demand for many consumer goods and services drops far below normal.
If successfully invoked, the contract is terminated, and the parties are left as they are at the time of the litigation.
Read more about Frustration Of Purpose: In English Law
Famous quotes containing the words frustration of, frustration and/or purpose:
“To achieve the larger goal of teaching her children consideration of others, a mother can tolerate some frustration of her own wishes, she can delay having what she wants, she can be flexible enough to compromise. And this is exactly what her child must also learn: that it is possible to survive frustration, it is possible to wait for what he wants, it is possible to compromise without capitulating.”
—Elaine Heffner (20th century)
“We read poetry because the poets, like ourselves, have been haunted by the inescapable tyranny of time and death; have suffered the pain of loss, and the more wearing, continuous pain of frustration and failure; and have had moods of unlooked-for release and peace. They have known and watched in themselves and others.”
—Elizabeth Drew (1887–1965)
“It is not the purpose of literature to purvey news. For news consult the Almanac de Gotha.”
—Herman Melville (1819–1891)