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Frustrating Purpose in a Contract

 

Supervening Frustration of Purpose

This is when circumstances arise that fundamentally frustrate a party’s reason or purpose for entering a contract. The doctrine is similar to impracticability, but it does not relate to a party’s hardship; rather it focuses on her expectation and purpose in entering the agreement. For a frustrating circumstance to relieve or excuse an obligation under a contract, the party cannot have assumed the risk of the circumstance (in the contract) or be at fault for the occurrence or the non-occurrence of the event or circumstance. Further, the occurrence or non-occurrence must have been a basic assumption on which the contract was made.

⁃    Example: John signs up for piano playing lessons from Tara. John suffers a horrible accident that causes him to lose dexterity in his hands. This is a frustration of purpose that was unforeseeable and substantially frustrates the purpose of learning to play the piano. As such, John will be excused from performance of the contract. Suffering an economic loss is not a frustration of purpose.

⁃    Discussion: How do you feel about allowing an unforeseen event relieving a person’s duty for performing a contract? How fundamental must the assumption be to the purpose of the contract? To what extent must each party understand this to be the fundamental purpose of the agreement?

⁃    Practice Question: Donald bids for and wins a government contract to construct a dam. The contract is subject to legislative approval. He begins preparing by entering into contracts with Lizzie for the purchase of cement. The cement supplier knows that the cement purchase is in preparation for the dam-building project. The legislator ultimately disapproves the dam project, which causes Donald to lose the contract. What is the possible result?

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