Frustration of
purpose is a term used in the law of contracts
to describe a defense to an action for non-performance
based on the occurance of an unforseen event which makes
performance impossible or commercially impracticable. A
common situation is that the subject matter of the
contract - a house or a car for example - is
unintentionally destroyed.
Generally, the non-performance is not excused. If the
seller retained the risk of loss from damage or
destruction, then the non-performance will likely be
excused. However, if it is the buyer who carries the risk
of loss, performance will not not excused. A seller will
not be excused for nonperformance of an agreement to
deliver a commodity. For example, if A agrees to sell B
100 bushels of corn, and A's own crops are destroyed in
an accident, A is still contractually obliged to sell B
100 bushels of corn because A can still obtain the corn
elsewhere for the sale.
Frustration of purpose also arises as a defense where one
party to the contract dies, if that party was uniquely
necessary to the performance of the contract. Passage of
a subsequent law that makes performance illegal will also
excuse nonperformance under this doctrine. |
