Frustration of purpose: Overview, definition and example
What is frustration of purpose?
Frustration of purpose occurs when an unexpected event or circumstance makes it impossible to fulfill the original purpose of a contract, even though the contract itself may still be technically possible to perform. This doctrine allows a party to be released from their responsibilities under the contract when the underlying reason for entering the contract no longer exists due to circumstances beyond their control.
Why is frustration of purpose important?
Frustration of purpose is important because it provides fairness in situations where fulfilling a contract is no longer meaningful or possible due to unforeseen events. It helps protect parties from having to perform under a contract that no longer serves the original intended purpose. This concept is especially relevant in cases where one party may find it unfair or illogical to proceed due to changed circumstances.
Understanding frustration of purpose through an example
Imagine you rent a venue for a wedding, with the purpose of hosting a large celebration. If, before the wedding, the venue is destroyed by a natural disaster, the contract may be considered frustrated because the main purpose of the agreement—the use of the venue—can no longer be fulfilled. In this case, the renter could be released from the contract due to frustration of purpose, even though the rental contract could technically still be performed (such as paying the agreed fee for the venue).
Another example could involve a concert promoter who rents a stadium for a specific artist's performance. If the artist cancels the performance due to unforeseen reasons like illness or natural disaster, and the event cannot happen at all, the contract might be deemed frustrated, as the purpose of the agreement (hosting the artist’s concert) no longer exists.
An example of a frustration of purpose clause
Here’s how a frustration of purpose clause might look in a contract:
"If either party is unable to perform their obligations under this Agreement due to an event that renders the purpose of the contract impossible or substantially frustrated, such as a natural disaster, government action, or other unforeseen circumstance, the affected party may terminate this Agreement without penalty."
Conclusion
Frustration of purpose protects parties from being bound to contracts when the core purpose behind the agreement can no longer be achieved due to unforeseen and uncontrollable circumstances. It ensures that neither party is unfairly forced to perform under circumstances that no longer make sense. Understanding this concept can help businesses navigate situations where unexpected events affect the fulfillment of their contractual obligations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.