Imagine for a second that you just signed a Lease Agreement and, through a circumstance beyond your control (like a fire), the property is destroyed. Do you keep paying monthly rent for a unit you can’t occupy? Thankfully, as long as neither you nor your landlord are at fault for breach of contract, you may be able to cancel your Lease Agreement through frustration of contract.
Frustration of contract deals with dismissing a contract legally when the terms of the contract can no longer be fulfilled. In this post, find out how knowing this legal tidbit can help you in future whenever you enter into a contract.
What is a Contract?
Before we dive into the details of frustration of contract, it’s important to know what a contract is and how it is formed. A contract, sometimes called an agreement, is essentially a court-enforceable exchange of promises used for a variety of reasons.
For instance, an Employment Contract is used to detail the terms of a person’s employment and a Residential Lease Agreement is used to rent an apartment, house, or other type of rental unit.
There are a few elements that make a contract valid including offer, acceptance, and consideration. Contracts lacking these elements are invalid.
Frustration can occur only after a contract is properly formed. This leads us to the point of this post: what does frustration of contract exactly mean?
What is Frustration of Contract?
Frustration is an important term in contract law; one that could help you greatly in the event of sudden, unexpected situation.
Frustration of contract, sometimes called the doctrine of frustration, is a legal principle that means, with no one at fault, the terms of the contract can no longer be performed, rendering the contract void.
In other words, whatever event occurred has changed the contract so significantly that it is not even the same as when the parties entered into it, and so the contract is cancelled without any repercussion to those who signed.
Keep in mind, however, you cannot claim frustration with certain insurance policies or if the situation was foreseen. For instance, if you were told by a doctor you may become blind before you signed an Employment Contract to work as a truck driver, then frustration wouldn’t apply once you lost your vision because you were aware that your vision would possibly deteriorate before entering into the contract.
How Can a Contract Be Discharged by Frustration?
Whenever an outside force has radically and abruptly changed your contract, your contract could be considered “frustrated”. There are three common reasons for frustration: incapability, impossibility, and illegality.
Incapability is when an unexpected event has made you incapable of executing the contract.
For example, if you signed a Service Agreement to fix someone’s roof but become unexpectedly paralyzed through no fault of your own, you are now likely incapable of fixing the roof (i.e. performing your end of the contract).
Impossibility is when the unexpected event has made the contract impossible to perform, such as if the subject of the contract no longer exists.
For example, if the apartment building for the unit you just leased burned to the ground (and neither you nor the landlord were at fault), the contract would be impossible to perform and therefore be frustrated.
It is important to mention that some states may consider impossibility as its own doctrine that is separate from, but closely related to, frustration. However, the end result, namely a discharge of the contract, remains the same.
Illegality is when the unexpected event has made the contract illegal to perform.
A good example of this is if new legislation makes a substantial point of your contract illegal.
What Do I Do When My Contract is Frustrated?
Knowing how to recognize frustration of contract is a good first step. However, this concept, and contract law as a whole, is complex.
Even if you think you’ve hit the point of frustration with one of your contracts, taking matters into your own hands could leave you liable for breach of contract, especially if the court disagrees with your assessment of frustration.
Therefore, if you think your contract has reached frustration, the best course of action is to contact a local attorney to discuss the matter. Together, you can determine whether frustration has occurred or not and what you can do about it.
Although frustration of contract is uncommon, it still happens, and it’s good to know that certain, unforeseen circumstances that prevent the performance of your contract can allow you to discharge it.
