Updated October 30, 2020:

A frustration of purpose example would include an emergency that prevents a person from executing a job in a contract. The frustration of purpose deals with contract law and occurs when unforeseen circumstances undercut the sole aim of a contract. It’s a term reserved for the defense of non-performance based on unexpected occurrences, making the performance of any duty commercially impossible.

This area pertains to the reasons for the contract and is used to describe why the contract would be void. It is also known as commercial frustration, as unforeseen events take place and make the execution of a contract impossible. This would entitle frustrated parties to cancel the agreement without violating the agreement and paying any damages.

Example: Jack Smith enters into a contract to purchase a commercial building to rent to another party. While the business transaction is pending, the building in question gets condemned by city officials due to dilapidated conditions. Mr. Smith can rescind the agreement with no obligation.

Another instance would include Sally leasing a store from Andy to sell exotic animals. The lease is for three years. After two years, a law gets passed making it illegal to sell exotic animals in the U.S. Sally can be excused from the last year of the lease because Andy was aware of the specific intent behind the lease, which was to sell exotic animals. With such a ban on exotic animals, she does not have a reason to continue with the business, unless she chooses to proceed. On the flip side, Andy may also end the agreement and lease the land to another party.

Impractical Circumstances

The excuses from a party regarding a certain function outlined in a contract is called an impractical excuse. The courts rely on various conditions when assessing impracticability, such as:

  • An instance of unforeseen condition or circumstance
  • An unforeseen occurrence that must render an obligation expensive or difficult to achieve
  • Extreme difficulties or expenses that arose unexpectedly be either side of the agreement

For instance, Jim’s business enters into an agreement with city officials to remove all gravel from a certain area. After assessing the area, the business learns that a large part of the gravel is submerged in water, and the cost of removal amounts to 10 times the initial assessment. The business could cite impracticability since the cost of removal would exceed the initial cost.

The commercial impracticability aspect takes place when contract performance by a party is too costly or difficult to execute. The primary difference between impossibility and impracticability is that impracticability is physically impossible to execute. With that, the performance results in undue hardship by the party performing the action.

Impracticability excuses performances where an excused party has no control over a situation or is not at fault for an occurrence during the business transaction. Overall, impracticability is only reserved in extreme cases.

  • Example: You enter into a contract with someone performing services or selling goods. The cost associated with the agreement increases due to regulatory burdens and government taxes, etc. When entering into the agreement, you did not consider such factors. If executing the agreement results in undue financial burdens, you can exit the agreement by citing the commercial impracticability in executing the contract.

Impossibility Factors

Impossibility happens regarding a certain duty that’s under contract is impossible to complete because of sudden circumstances.

  • Example: Rick pays Ben $10,000 to paint his house in March, but a fire destroys the property in February before payment is used. This would excuse Rick from the agreement because the house cannot be painted. Therefore, Ben has no recourse in seeking damages in a courtroom due to the issue of impossibility.

Another instance is if Rick, who owns several apple farms, enters into a contract with a business and promises to provide two hundred bushels of apples annually. The agreement notes that all apples must be Granny Smith apples and come from the southern part of the field. Due to a harsh winter, however, the apples failed to grow. Due to the effects of the harsh weather, Rick does not have to provide the apples due to circumstances that fell beyond his control.

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