Frustration of purpose

Definition

Frustration of purpose occurs when a contract cannot be fulfilled because an unforeseen event undermines the main reason for entering into the agreement. This legal doctrine acknowledges that sometimes, circumstances change in ways that make it impossible or impractical to achieve the contract's intended purpose, leading to potential discharge from obligations. Understanding this concept helps clarify situations where parties may be relieved from their contractual duties due to changes outside their control.

5 Must Know Facts For Your Next Test

1. Frustration of purpose applies only when the unforeseen event significantly changes the circumstances that were central to the contract.
2. A common example is a rental agreement for an event space that becomes unavailable due to a natural disaster, which would frustrate the purpose of renting the space.
3. The doctrine does not apply if the risk of the unforeseen event was assumed by one of the parties in the contract.
4. This legal concept is often seen as a fairness mechanism, allowing for equitable relief when one party's interests cannot be met anymore.
5. Frustration of purpose can lead to partial or complete discharge of contractual obligations, depending on how significantly the purpose was affected.

Review Questions

• How does frustration of purpose differ from impossibility of performance in contract law?
  • Frustration of purpose and impossibility of performance are related but distinct concepts in contract law. Impossibility of performance occurs when an unforeseen event makes it literally impossible to fulfill the contract, such as the destruction of subject matter. In contrast, frustration of purpose happens when an unforeseen event does not make performance impossible but defeats the primary reason for entering into the contract. Both doctrines relieve parties from obligations, but they address different aspects of contractual challenges.
• In what scenarios can frustration of purpose be invoked as a defense in contract disputes?
  • Frustration of purpose can be invoked in scenarios where an unforeseen event undermines the essential objective behind entering into a contract. For example, if a couple rents a venue for a wedding but then faces a city-wide ban on gatherings due to a pandemic, they may claim frustration of purpose since the primary reason for renting the venue is no longer achievable. It is crucial that this unforeseen event was not anticipated by either party at the time of contracting.
• Evaluate how frustration of purpose can impact future contracts and negotiations between parties.
  • Frustration of purpose can significantly influence how parties approach future contracts and negotiations by encouraging them to include clear terms regarding unforeseen events. By understanding that certain situations could render their agreements ineffective, parties might choose to incorporate force majeure clauses or similar provisions to allocate risks more effectively. Additionally, recognizing how this doctrine operates can lead parties to negotiate terms that allow for flexibility or alternative arrangements if circumstances change, ultimately fostering more resilient contractual relationships.

Related terms

impossibility of performance: A legal doctrine that discharges a party from their contractual obligations when an unforeseen event makes it impossible to fulfill the contract.

mutual mistake: A situation where both parties to a contract are mistaken about a vital fact, which can lead to the contract being voided.

force majeure: A clause in contracts that frees both parties from liability or obligation when an extraordinary event occurs, making performance impossible.