Frustration of Purpose
Frustration of purpose pertains to the law of contracts, and takes place when unexpected circumstances undermine the purpose of the contract. In order for the principle of frustration of purpose to apply, both parties must have been aware of the primary purpose for the contract to begin with. To explore this concept, consider the following frustration of purpose definition.
- A defense used for failing to fulfill duties outlined in a contract when something occurs that hinders or obstructs the reason or purpose of the contract.
Impossibility, Impracticability, and Frustration of Purpose
A person who has an obligation under a contract may potentially be relieved of the obligation for certain legally valid reasons. When breaching or extricating oneself from a contract, the party must prove either (1) impossibility, (2) impracticability, or (3) frustration of purpose.
While a contract may specifically state these reasons for terminating a contract, it is more often not stated but understood. When a party to the contract terminates or “breaches” the contract for one of these reasons, the other party may have no legal grounds to file a civil lawsuit seeking damages.
Impossibility means that some specific duty under the contract has become impossible to fulfill under any reasonable circumstances. For example, John pays Bob $5,000 to paint his house in January, but the house burns down in December before the payment is made. This excuses John from the contract legally since it is no longer possible for the house to be painted. Bob has no recourse to seek damages in a legal lawsuit because this issue falls under the doctrine of impossibility.
Another example of impossibility might be if Bob, who owns several apple orchards, enters into a contract with a company promising to provide them with two-thousand bushels of apples each year. The contract specifies that all of the apples will be Granny Smith apples from his northern fields. Due to a very harsh winter, the Granny Smith apple crop was destroyed. Because of the effects of an unexpectedly harsh weather, Bob is no longer obligated to provide the company with the apples, as circumstances beyond his control made delivery impossible.
Impracticability excuses a party from a specific duty outlined in a contract when that duty has become unreasonably difficult or too expensive to perform. The courts use certain conditions when considering impracticability, including:
- An occurrence of an unforeseen circumstance or condition
- The unforeseen condition must render the duty unreasonably difficult or expensive to perform
- The extreme expense or difficulty could not have been anticipated by either party to the contract
For example, John’s company signs a contract with the city to remove all of the gravel in a specific area. After surveying the area, the company quickly learns that a large portion of the gravel is underwater and removing it will cost the company 20 times more than was originally agreed to. The company could claim impracticability since the cost to remove the gravel underwater will be far too great.
Frustration of Purpose
Frustration of Purpose exists if the reason for, rather than a duty of, a contract becomes nullified due to no fault of either party. Unlike impossibility and impracticability, both of which involve duties, frustration of purpose, or “frustration of contract,” specifically involves the reason for the contract.
For example, Louise leases a storefront shop from Bob in order to sell exotic snakes to the public. The lease term is set for five years. After two years into the business venture, laws are passed making it illegal to sell exotic snakes within the United States. Louise might then be excused from the final three years of the lease, as Bob knew the specific purpose of the lease was to sell exotic snakes. With the ban on the snakes, Louise no longer has a reason to continue with the lease unless she desires to do so. On the other hand, Bob may also be able to end the contract and lease the property to another business.
Other Common Grounds for Terminating a Contract
In addition to impossibility, impracticability, and frustration of purpose, other legal grounds for terminating a contract might include:
- Fraud – a deceptive or fraudulent contract is not legal and will not be upheld in the court.
- Mistake – if a mistake is made within the contract, it may be dismissed.
- Misrepresentation – like fraudulent contracts, agreements cannot be based on misrepresentation. For instance, one party cannot fail to state all terms within the contract.
- Breach of Contract – in the event one party breaches his duties under a contract, the other party may be able to terminate the contract altogether.
Related Legal Terms and Issues
- Agent – a person who acts on behalf of another person or an entity.
- Agency – a business or organization that has been established to provide goods or services.
- Civil Lawsuit – a court action in which one party sues another for a civil wrong, such as breach of contract.
- Discharge – to relieve of a burden or responsibility, as in a contract.
- Fraud – an act undertaken for the purpose of intentionally deceiving another person or entity for personal gain.
- Objective – a goal, or something that a person’s actions and efforts are intended to accomplish.