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In the law of contracts, the destruction of the value of the performance that has been bargained for by the promisor as a result of a supervening event.
Frustration of purpose has the effect of discharging the promisor from his or her obligation to perform, in spite of the fact that performance by the promisee is possible, since the purpose for which the contract was entered into has been destroyed. For example, an individual reserves a hall for a wedding. In the event that the wedding is called off, the value of the agreement would be destroyed. Even though the promisee could still literally perform the obligation by reserving and providing the hall for the wedding, the purpose for which the contract was entered into was defeated. Apart from a nonrefundable deposit fee, the promisor is ordinarily discharged from any contractual duty to rent the hall.
In order for frustration to be used as a defense for nonperformance, the value of the anticipated counter performance must have been substantially destroyed and the frustrating occurrence must have been beyond the contemplation of the parties at the time the agreement was made.
frustrationthe doctrine in the law of contract that allows certain events arising after the formation of a contract to release both parties from future performance of their contractual obligations. The events must relate to the frustration of the common object of the contract. It has been judicially defined as follows: ‘Frustration of a contract takes place where there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or the onerousness) of the outstanding contractual rights and/or obligations from what the parties could have reasonably contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case, the law declares both parties to be discharged from further performance. 'Three examples are:
- (1) impossibility of performance, whether by the accidental burning of a building or the illness of a singer;
- (2) where the common object known by both parties and obvious from the contract is frustrated;
- (3) supervening illegality will frustrate the contract.
In England, to regulate the difficulties involved in some situations English law has been developed by the Law Reform (Frustrated Contracts) Act 1943. The Act provides among other things:
- (1) money due but not paid before frustration ceases to be payable and money paid has to be repaid;
- (2) a person to whom a prepayment has been made can be allowed a sum in respect of his expenses by the court. The sum must not exceed the prepayment nor the amount actually expended.
The Act even permits a sum in respect of valuable benefits in kind rendered before the frustrating event to be recovered. A total failure of consideration is not required. Scots law achieved and achieves similar results at common law through its law of contract and much more developed law of unjust enrichment (see RESTITUTION).