/frus-TRAY-shun of kun-TRAK-chuh-wul PUR-pus/·doctrine
Also known as:frustration of purpose · contractual frustration · commercial 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 the party's principal purpose without its fault and the non-occurrence of that event was a basic assumption on which the contract was made. The doctrine applies only when the frustration is substantial rather than incidental and the contract language or circumstances do not indicate a contrary risk allocation. Temporary frustration suspends performance during the event but does not discharge the duty unless resumption would be materially more burdensome.
Sources & Authorities· 2 primary sources
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Cases
Restatements
Casebooks
How it applies
Common Examples
2
Temporary Hotel Closure Suspends Lease
Francesca Fiore leased rooftop space from Frontier Capital for three years to operate a high-end restaurant relying on evening crowds from an adjacent theater. Six months into the term an electrical fire closed the theater for four weeks of repairs. Fiore suspended operations and withheld rent during the closure. Once the theater reopened the lease resumed on its original terms because the interruption was temporary and resumption imposed no materially greater burden than the parties originally contemplated.
Market Shift Does Not Discharge Supply Contract
Ferrum Metals contracted with Falcon Dynamics to supply specialty steel at a fixed price tied to an anticipated long-term construction project. After the project was canceled due to financing problems Falcon sought discharge claiming frustration of purpose. The court rejected the defense because the contract's principal purpose of supplying steel remained achievable and the loss of one buyer did not substantially frustrate the shared objective.
Aluminum Company of America v. Essex Group, Inc.499 F. Supp. 53 (W.D. Pa. 1980)
Common questions
Frequently Asked
4
What elements must a party prove to establish frustration of contractual purpose?+
The party must show that its principal purpose was substantially frustrated by an unforeseen event without its fault and that the non-occurrence of the event was a basic assumption on which the contract was made. The contract language or surrounding circumstances must not indicate that the party assumed the risk of the event.
Supporting sources
Does temporary frustration discharge the contract or merely suspend performance?+
Temporary frustration suspends the duty to perform only while the frustrating condition exists. The duty resumes once the condition ends unless performance would then be materially more burdensome than originally contemplated.
How does frustration of purpose differ from impossibility or impracticability?+
Frustration of purpose excuses performance when the contract's central reason is destroyed even though literal performance remains possible. Impossibility or impracticability requires that performance itself has become physically or commercially infeasible.
Supporting sources
Can a party invoke frustration when the contract contains a broad risk-allocation clause?+
A broad clause allocating regulatory or market risks to one party may indicate that the parties intended performance despite the frustrating event and thereby preclude discharge.
Supporting sources
was first recognized as an excuse for nonperformance of a
contractual
duty by the courts of England ( Krell v. Henry [1903] 2 K.B. 740 [C.A.]; Blakely v. Muller , 19 T.L.R. 186…
frustration of purpose
,” which is sometimes called “
commercial frustration
” or, in a more limited form, “economic
frustration
.” The contract expressly allowed NIPSCO to reduce the amount of coal it took, but only…
frustration of purpose
, an implied covenant limiting the duration of the contract and a defense relating to whether Section 2 of the agreement permitted IH to cease production of all its product lines. The…
ContractsPerformance, breach, and discharge · Impossibility, impracticability, and frustration of purposeUBEFoundational