Also known as: discharge by frustration · supervening frustration · frustration · doctrine of frustration
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine discharging a party's remaining contractual duties when an unforeseen event substantially frustrates that party's principal purpose without fault after the contract was made. The discharge occurs unless the contract language or surrounding circumstances indicate the contrary.
Diamond Manufacturing contracted to supply parts to Dillon Energy for a fixed period. A regional power outage halted production for three weeks. Once power returned, Diamond resumed deliveries without delay or added cost. Dillon demanded full discharge of the contract, but the temporary nature of the event left the duty intact.
Davenport Pharmaceuticals agreed to purchase raw materials from Dawson Steel at a set price. Dawson repudiated the deal in writing. Weeks later an embargo made the materials unavailable to anyone. Dawson's duty to pay damages for the repudiation ended because the embargo would have discharged performance anyway.
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Aluminum Company of America contracted to supply aluminum to Essex Group at a fixed indexed price for years. An unforeseen surge in production costs made the index unusable and the deal unprofitable for the supplier. The court examined whether the index failure destroyed the contract's basic purpose.
Eastern Air Lines contracted with Gulf Oil for jet fuel at a posted price. An oil crisis sharply increased Gulf's acquisition costs. Eastern continued to demand performance at the original price. The court assessed whether the cost increase frustrated the contract's central purpose for the seller.
Transatlantic Financing agreed to carry wheat from the United States to India via the Suez Canal. The canal closed after the contract was signed, forcing a longer route around Africa. The carrier sought extra payment. The court determined whether the closure frustrated the voyage's basic purpose.
Employees signed employment agreements containing arbitration provisions with Foundation Health Psychcare Services. They later claimed the agreements were unenforceable. The court considered whether any supervening event had frustrated the purpose of the arbitration clauses themselves.
An unforeseen event must substantially frustrate a party's principal purpose without that party's fault. The non-occurrence of the event must have been a basic assumption of the contract.
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Temporary frustration suspends performance only while the event lasts. It does not discharge the duty unless resuming performance afterward would be materially more burdensome than originally contemplated.
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If a later event would have discharged the repudiated duty by frustration, the repudiating party's duty to pay damages is itself discharged.
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A party whose duty is discharged is entitled to restitution for any benefit conferred by part performance or reliance.
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…the House of Lords (see Lord Denning’s admirable treatment, [1964] 2 Q.B. at 233), “swallowing” the difficulty of applying the frustration doctrine to hypothetical facts, reversed, holding that the contract had to be performed. Especially relevant is the fact that the case expressly overruled Societe Franco Tunisienne…