Frustration of purpose occurs when an unforeseen event undermines a party's principal purpose for entering into a contract such that the performance of the contract is radically different from performance of the contract that was originally contemplated by both parties, and both parties knew of the principal purpose at the time the contract was made. The concept is also called commercial frustration. For example, if Joe gets a mortgage for a new home, suppose after three years, the home is destroyed, through no fault of Joe's. Without a hell or high water clauseJoe might be exempt from the remainder of the mortgage, as the principal purpose of the contract, to have a home to live in, has been compromised.
What is a frustrated contract? Share and print this article Share Print A frustrated contract is a contract that, subsequent to its formation, and without fault of either party, is incapable of being performed due to an unforeseen event or eventsresulting in the obligations under the contract being radically different from those contemplated by the parties to the contract.
The legal consequence of a contract which is found to have been frustrated is that the contract is automatically terminated at the point of frustration. The contract is not void ab initio "from the beginning" ; only future obligations are discharged.
At common law, obligations which fell due for performance before the frustrating event are still in operation. When will a contract be frustrated? Delay can lead to the discharge of a contract where the commercial purpose of the contract has been frustrated.
Further, commercial parties will not be expected to wait until the end of a long delay to find out whether in fact they are bound by a contract or not.
A party to a commercial contract is entitled to act on reasonable commercial probabilities and may treat a contract as discharged where an event has caused a delay, even before the delay actually frustrates the contract. Difficulty establishing a frustrated contract Establishing frustration, however, can be difficult as it does not apply to hardship.
Hardship, even if severe, does not constitute frustration. The fact that the method for performance contemplated by a contract has been affected, or the burden of performance has been increased, by an event or events occurring without fault, does not amount to frustration unless performance in accordance with the contract has become commercially impossible, that is, impracticable in a legal sense.
This comes back to the issue of the contract becoming radically different from anything contemplated by the parties. The doctrine of frustration is applied within very narrow limits. For a party to succeed in claiming frustration, they must show that, in the relevant contract, the parties never agreed to be bound in the fundamentally different situation that had unexpectedly emerged.
It is not because the court thinks in its discretion that it is just and reasonable to qualify the terms of the contract. Rather, it is because on its true construction it does not apply in that situation.
A bad bargain A contract will not be found to be frustrated where one party strikes a bad bargain or faces hardship, inconvenience or material loss.
Certain risks are deemed inherent to contracting. For example, delay in a construction contract due to a shortage of skilled labour was found not to have frustrated the contract because the delay did not result in a new state of affairs that the parties could not have reasonably foreseen see Davis Contractors Limited v Fareham Urban District Council  AC Event foreseen Frustration will also not be found where the event in question has been foreseen by the parties or could reasonably have thought to have been foreseen.
Where there is an express provision in the contract that deals with the consequences of a particular event, the parties cannot then claim that that same event has frustrated their venture.
If parties to a contract can seriously foresee the occurrence of an event or events but make no provision for it in the contract, and then seek to rely upon the event as frustrating the contract, it may be inferred that the parties accepted the risk of the occurrence of the event and the contract not being found to have been frustrated.Frustration is an English contract law doctrine that acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible, or radically changes the party's principal purpose for entering into the contract.
The classic definition of frustration of contract is a situation where, through no fault of either party, the contract the parties entered into becomes impossible to fulfill.
However, the decision was appealed to the Divisional Court of Ontario, and the casino succeeded in its argument the doctrine of frustration of contract should have. Definition of frustration of contract: Legal termination of a contract due to unforeseen circumstances that (1) prevent achievement of its objectives, (2) render its performance illegal, or (3) make it practically impossible to execute.
The Argument of Frustration in Contract Law Art. Every person obliged to give something is also obliged to take care of it with the proper diligence of a good father of a family, unless the law or the stipulation of the parties requires another standard of care.
The argument of frustration in contract law can be a difficult precedent to establish.
Not to be confused with a contractual mistake, frustration occurs when performance is made impossible or . The argument of frustration in contract law can be a difficult precedent to establish.
Not to be confused with a contractual mistake, frustration occurs when performance is made impossible or .