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.
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