Also known as: supervening frustrations · frustration · doctrine of frustration
Written by attorneys · grounded in primary & secondary sources — see below
A doctrine discharging a party's remaining contractual duties when a supervening event substantially frustrates the principal purpose of the contract without the party's fault. The non-occurrence of the event must have been a basic assumption on which the contract was made.
Sapphire Holdings contracted with Summit Bank to deliver goods by a fixed date using the canal route. A sudden temporary closure made performance impossible for two weeks. Once the canal reopened, Sapphire could still deliver on time without extra burden. The temporary frustration suspended but did not discharge Sapphire's duty.
Sentinel Security repudiated its supply contract with Spectrum Financial. Weeks later an unforeseen embargo made performance impossible. Because the embargo would have discharged the duty anyway, Spectrum's claim for damages from the repudiation was extinguished.
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Aluminum Company of America agreed to supply aluminum at a fixed indexed price to Essex Group. A massive unforeseen rise in production costs destroyed the contract's commercial purpose for Alcoa. The court discharged Alcoa's remaining duties under supervening frustration.
Eastern Air Lines contracted with Gulf Oil for jet fuel at a set price. An oil crisis caused prices to quadruple, defeating the contract's economic purpose for Eastern. The court refused discharge because the price risk had been allocated to Eastern in the agreement.
Transatlantic Financing agreed to carry wheat to India via the Suez Canal. Closure of the canal forced a much longer voyage around Africa. The court held that the added expense did not rise to the level of frustration because the basic purpose of delivery remained possible.
Armendariz signed an employment agreement containing an arbitration provision. Later events made performance of the arbitration clause commercially senseless for one party. The court examined whether the clause's purpose had been frustrated before deciding enforceability.
The party must prove that a supervening event substantially frustrated the contract's principal purpose, that the non-occurrence of the event was a basic assumption of the contract, and that the party was not at fault.
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Temporary frustration suspends performance only while the condition lasts. The duty is discharged only if resuming performance after the condition ends would be materially more burdensome than originally contemplated.
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If frustration would have discharged the repudiated duty before any non-performance, the repudiating party's duty to pay damages is itself discharged.
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No. Loss of profitability from market changes does not constitute frustration when the contract's central commercial purpose remains achievable.
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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…