Frustration of Purpose: Everything You Need to Know
A frustration of purpose occurs when an unforeseen circumstance arises and a party to a contract is unable to fulfill his or her obligations.4 min read
A frustration of purpose occurs when an unforeseen circumstance arises and a party to a contract is unable to fulfill his or her obligations. An individual with an obligation under an agreement could be excused from the contract for various reasons. When excusing yourself from an agreement, you must prove the following:
- Frustration of purpose
While an agreement may allow for getting out of an agreement, it is more often stated, but it is not usually understood. When a party to an agreement either breaches or terminates a contract for one of the aforementioned reasons, the opposite party may have no legal standing to file a civil suit that seeks damages.
Purpose of Contract
If an essential goal of a contract is hampered, the duty of each party’s goals and performance gets relieved, even if a performance does not fall under impossibility. Be aware of the following attributes:
- A party’s primary reason in making the contract has been heavily hampered by an unforeseen circumstance.
- Non-occurrence of an event was an essential assumption in which the agreement was forged.
- The party never expressly assumed risk of such an occurrence.
To apply a principle of frustration, all parties must be aware of the purpose of the agreement in place. A defense that’s used in failing to complete the functions outlined in an agreement happen when an abrupt circumstance prevents that person from fulfilling his or her obligations. Frustration of purpose is in place for this reason. Instead of a duty, the agreement is rendered nullified because of circumstances beyond the control of any party.
Unlike impracticability and impossibility, which both involve duties, a frustration of purpose pertains to the reasons for the agreement.
- Example: Sam leases a shop from Jim to sell exotic animals, and the lease is a term of five years. After a year into the business, a law was passed outlawing the sale of exotic animals in the U.S. Sam may be excused from the remaining two years of the agreement because Jim was aware of Sam’s sole aim to offer exotic animals for sale. Because of the ban, Sam no longer has a purpose in operating the business, unless he wishes to find another venture. On the flip side, Jim may also end the agreement and offer the property to another renter.
- Example: John Smith enters into an agreement to buy commercial land for renting purposes. During the pending sale, the building becomes condemned and labeled as unsafe by officials. Mr. Smith can back away from the agreement with no obligation.
In most cases, however, non-performance with an agreement is no excuse.
If a seller assumes the risk of loss from destruction or damage, then non-performance would be a more likely excuse. With that, if the buyer carries the risk of loss, performance would not be excused.
- Example: If Bob agrees to sell Will 200 bushels of corn, and Bob’s crops get destroyed, Bob must stil sell the corn to Will. He may need to get the corn elsewhere to complete the sale.
Impossibility refers to a certain duty under an agreement that has become impossible to complete under reasonable instances.
- Example: Jim pays Allen $3,000 to paint his home in April, but the house gets destroyed in a fire in March before final payment is made. This would legally excuse Jim from the agreement because it is not possible for the home to get a paint job, since it no longer exists. Allen cannot seek damages in court since the issue falls under a doctrine of impossibility.
Another example would be if Jim, who owns three apple orchards, enters into an agreement with a business that promises to offer them one thousand bushes annually. The agreement determines that all apples will be Granny Smith variety from the northern part of the fields. Due to a hard winter, however, the trees failed to produce. Because of the weather, Jim is excused from the contract because the winter was beyond his control.
Impracticability occurs when a certain duty in a contract has become too expensive or difficult to execute. The court uses such determinations in the following instances:
- Occurrences where an unforeseen condition or circumstance takes place.
- Unforeseen instance must render an assignment difficult or too expensive to finish.
- Extreme expenses or difficulties were not anticipated by any party to the agreement.
For instance, Jim’s business signs a contract to remove all gravel from a certain area. However, the survey reveals that much of the gravel is underwater and would be more costly on Jim’s part to remove. Therefore, the business can claim impracticability because the cost to remove the gravel will be far greater than what was initially discussed.
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