A frustration defense excuses a party from breaching a contract when the contract has lost all value to one of the parties. If the contract has lost all value, then the purpose of the contract has been frustrated. The loss of value must be due to changes in circumstances outside the control of either party.
The frustration defense is often brought up but courts will not grant the defense unless it is absolutely necessary. A frustration defense can only be used if the contract has lost all of its value. A frustration defense will fail if a contract has only lost some value or has not met profit expectations. If you get into a contract that is not as profitable as you thought, the frustration defense will not bail you out.
Here are a few examples of when a frustration defense might work:
- Purpose of contract frustrated – For example, let’s say you bought a summer home so that you can fish on the lake. Then a massive mudslide occurs and you can not fish in the lake for 10 years. A frustration defense can nullify the contract to purchase the house, but only if you told the seller your purpose for buying the home was to fish.
- Necessary for performance – If a person or thing necessary for the performance of the contract becomes unavailable, a frustration defense can be used. For example, let’s say you contracted to buy a healthy racehorse which ends up breaking its leg. Without the racehorse in prime condition, the purpose of the contract is frustrated.
The frustration defense must be applied correctly to a situation in order for the defense to work. Talk to an contract attorney about your situation to determine if the frustration defense is a possible defense. Even if it is not, an experienced business attorney can devise other defenses to support your position.