Also known as: economic frustrations · frustration of purpose · commercial frustration
Written by attorneys · grounded in primary & secondary sources — see below
A label for changed market conditions that render performance of a contract unprofitable for one party. Such conditions do not destroy the principal purpose of the agreement and therefore do not discharge the affected party's duties under the doctrine of frustration of purpose.
Echelon Security leased warehouse space from Emerald Enterprises for five years to store inventory for resale. A sudden drop in demand for the stored goods cut Echelon's resale margins by seventy percent. Echelon stopped paying rent and claimed the lease was discharged. The court held that the loss of expected profits did not frustrate the principal purpose of obtaining storage space, so Echelon remained liable for the rent.
Everlasting Insurance contracted to purchase aluminum from Edgewater Capital at a fixed price for three years. Rising production costs later made the contract unprofitable for Edgewater. Edgewater refused further deliveries and asserted frustration. The court rejected the defense because the principal purpose of supplying aluminum remained achievable even though the deal had become economically unattractive.
Select any source to read its text and confirm it supports the definition.
No. Economic frustration occurs when market shifts merely reduce profitability without destroying the principal purpose of the agreement. Courts deny discharge in such cases because the purpose remains capable of being achieved.
True frustration requires that an unforeseen event substantially frustrates the principal purpose that was a basic assumption of the contract. Economic frustration involves only loss of expected profits and leaves the core purpose intact, so relief is denied.
Yes. Contracts may include material adverse event clauses that expressly identify events triggering discharge. Such clauses allow parties to allocate risks of economic downturns without needing to prove substantial frustration of purpose.
…reformation or modification of the price on the basis of mutual mistake of fact, unilateral mistake of fact, unconscionability, frustration of purpose, and commercial impracticability. A The facts pertinent to count one are few and simple. In 1967 ALCOA and Essex entered into a written contract in which ALCOA promised to convert…