What is Frustration of Contract? Definition
Have you ever been in a situation where you had to back out of a contract? Maybe you signed an agreement to purchase a car but then found out the dealership was selling you a lemon. In this case, you would be said to have experienced “frustration of contract.” In general, frustration of contract occurs when an unforeseen event makes it impossible for one or more parties to fulfill their obligations under the contract. This can happen for any number of reasons, from war to weather. If you’re interested in learning more about frustration of contract, read on for a complete definition and overview of the legal concept.
What is a contract?
A contract is an agreement between two or more parties that creates obligations that are enforceable by law. A contract can be either written or oral, and it can be made orally, through the use of symbols, or through electronic means. The essential elements of a contract are offer and acceptance, consideration, capacity, and legality.
What is frustration of contract?
When a contract is frustrated, it means that it can no longer be performed according to its original terms. This can happen for a number of reasons, including changes in the law, circumstances beyond the parties’ control, or even death or injury of one of the parties. When a contract is frustrated, the courts will usually release both parties from their obligations under the contract.
What are the elements of frustration of contract?
There are four elements to frustration of contract:
1. An external event that is beyond the control of the parties to the contract;
2. The event must make performance of the contract impossible, or at least radically different from what was originally envisaged;
3. The event must not have been foreseeable by the parties at the time they entered into the contract; and
4. The event must not have been caused by either party to the contract.
What are the remedies for frustration of contract?
When a contract is frustrated, it is discharged. This means that the parties are no longer bound by its terms and are released from their obligations. The contract is void and of no effect.
There are three remedies for frustration of contract:
1. Rescission – this is where the contract is cancelled and the parties are returned to the position they were in before the contract was made. This is usually only available if both parties agree to it or if the court orders it.
2. Restitution – this is where one party is compensated for any losses they have incurred as a result of the other party’s breach of contract. This could include things like reimbursement for expenses, damages, or lost profits.
3. Quantum meruit – this is where one party is compensated for the value of work they have already done under the contract, even though the contract itself has been discharged.
Conclusion
Although frustration of contract can be difficult to understand and define, it is a legal term with very real implications. In short, frustration of contract occurs when an unanticipated event makes it impossible for one or more parties to a contract to fulfill their obligations under the terms of the agreement. If you find yourself in a situation where you believe your contract has been frustrated, it’s important to seek out legal counsel so that you can fully understand your rights and options.