Frustration of purpose

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Frustration of purpose is a term used in the law of contract to describe a defense to an action for non-performance based on the occurrence of an unforeseen event which makes performance impossible, illegal or vastly different than what was originally intended. 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 be 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.

The leading case in English law on the subject is the famous 1903 case of Krell v. Henry, which concerned a party who had rented a room for the purpose of watching the coronation procession of Edward VII.

Frustration of purpose is distinguishable from the doctrine of impossibility/impracticability in that frustration of purpose is typically used by the buyer and Impossibility is used by the seller.

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