Also known as: frustration of purpose · frustrated purpose · doctrine of frustration · commercial frustration
Written by attorneys · grounded in primary & secondary sources — see below
A contractual doctrine discharging a party's remaining duties when an unforeseen event substantially frustrates the party's principal purpose without fault, provided the non-occurrence of the event was a basic assumption of the contract. The doctrine applies only when the frustration is substantial and the contract language or circumstances do not indicate a contrary risk allocation.
Flagship Logistics leased warehouse space from Fulton Shipping to store goods for delivery to a port terminal two miles away. A bridge collapse blocked the direct route for six weeks. Flagship suspended operations during the closure but resumed once the bridge reopened. Because the frustration lasted only temporarily and resumption imposed no materially greater burden, Fulton Shipping could not treat the lease as discharged.
Eastern Air Lines contracted with Gulf Oil to purchase jet fuel at a fixed price for several years. World events caused fuel prices to rise sharply, making the contract unprofitable for Gulf. The airline continued to need fuel and the contract's core purpose of securing supply remained achievable. The court held that increased cost alone did not frustrate the purpose enough to discharge Gulf's duty.
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Aluminum Company of America agreed to supply molten aluminum to Essex Group under a long-term contract whose price was tied to a published index. Unexpected changes in production costs and index methodology made the formula produce prices far below ALCOA's actual costs. ALCOA sought judicial modification of the pricing term. The court examined whether the index deviation had destroyed the contract's central commercial purpose before granting relief.
The party must show that its principal purpose was substantially frustrated by an unforeseen event occurring without its fault, that the non-occurrence of the event was a basic assumption of the contract, and that the contract language or circumstances do not indicate the contrary.
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No. Temporary frustration suspends the duty to perform only while the event lasts. The duty resumes afterward unless resumption would be materially more burdensome than originally contemplated.
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Yes. A party whose duty is discharged by frustration of purpose may obtain restitution for any benefit conferred on the other party through part performance or reliance.
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No. Adverse market conditions that merely reduce profits do not frustrate the contract's principal purpose when the core commercial objective remains achievable.
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…non-existence of the “fact”, Id. § 286, causing the impracticability be a basic assumption on which the contract is made. The doctrine of frustration of purpose similarly rests on the same “non-occurrence” or “non-existence”, “basic assumption” equation. Id. §§ 285,[^maj-12] 286.[^maj-13] The three doctrines further overlap in time.…