1. George Mason School of Law
Contracts II
Frustration
F.H. Buckley

2. Frustration vs. Impracticability
Frustration is the older doctrine, impracticability the newer one
How to tell them apart—or does it matter?

3. Frustration vs. Impracticability
Both might be invoked for events before or after formation

4. Frustration: Before or After
Restatement 266(2): Where, at the time a contract is made, a party’s principal purpose is substantially frustrated
Restatement 265: “Where, after a contract is made, a party’s principal purpose is substantially frustrated

5. Impracticability: Before or After
Restatement 266(1): Where, at the time a contract is made, a party’s performance under it is impracticable
Restatement 261: “Where, after a contract is made, a party’s performance is made impracticable

6. The Restatement understanding
Formation of Contract
Impracticability
Frustration
Mistake
Impracticability
Frustration
Time

7. Frustration vs. Impracticability
Is there a difference in scope?

8. Examples of Impracticability
Death or Incapacity of a person: 262
Res extincta etc.: 263
Govt reg: 264

9. Examples of Frustration
Restatement § 265
Illustration 3: Res extincta: Hotel destroyed
Illustration 4: Govt reg

10. Impracticability: An economic focus
Teitelbam in Alcoa: “focus on greatly increased costs”
Traynor in Lloyd v Murphy: expected value of performance is destroyed

11. Frustration: A psychological focus?
Teitelbaum: “focuses on a party’s severe disappointment caused by circumstances that frustrate his purpose in entering into the contract”
Traynor: extreme hardship, value of performance destroyed

12. Impracticability vs. Frustration Who are the parties?
Frustration: focus is on consumer of goods or services
Impracticabilty: focus is on provider of goods or services, where performance is impossible or vastly more expenses

13. Impracticability vs. Frustration Who are the parties?
Frustration focuses on consumers?
Taylor v. Caldwell (Surrey Gardens)
Krell v. Henry

14. Impracticability vs. Frustration Who are the parties?
Impracticabilty focuses on providers?
Howell v. Coupland
Aluminum v. Essex

15. Frustration: Krell v. Henry 760

16. Frustration: Krell v. Henry
56 Pall Mall

17. Frustration: Krell v. Henry
What was the amount of the license?

18. Frustration: Krell v. Henry
What was the amount of the license?
About $400 for two days.

19. Frustration: Krell v. Henry
Was performance of the license impossible, in the sense of Taylor v. Caldwell?

20. Frustration: Krell v. Henry
Was performance of the license impossible, in the sense of Taylor v. Caldwell?
Was the purpose to take the room for two days, or to take the room to see the Coronation procession?

21. Frustration: Krell v. Henry
Suppose the agreement had been for a one-month lease and not a two day license?

22. Frustration: Krell v. Henry
Suppose the agreement had been for a one-month lease and not a two day license?
Is Paradine still good law?

23. Frustration: Krell v. Henry
I am a promoter and hire a hall for a musical show. On the date of the show a prominent politician dies and I cancel the show. Do I have to pay for the hall?

24. Frustration: Krell v. Henry
I hire a limo to take me to Baltimore, telling the driver I want to see the Orioles’ opening day. That morning I learn that the game is rained out. I cancel the limo.

25. Frustration: Krell v. Henry
I purchase tickets from a ticket-seller for a New York play, now in try-outs in New Haven. Subsequently, it is conceded, the play is discovered to be a bomb…

26. Frustration: Krell v. Henry
A builder undertakes to build a house but discovers that the land is unsuitable for a building.
Stees and “Work before pay”

27. Frustration: Krell v. Henry
A builder undertakes to build a house but discovers that the land is unsuitable for a building.
Cf. Restatement 263, illus. 4

28. Frustration: Krell v. Henry
Who should bear the risk of the King’s illness?

29. Frustration: Krell v. Henry
Who should bear the risk?
Who was in the best position to predict that the King would come down with appendicitis?

30. Frustration: Krell v. Henry
Who should bear the risk?
What’s wrong with applying Paradine and assigning the risk to the spectator?

31. Frustration: Krell v. Henry
Who should bear the risk?
What’s wrong with applying Paradine and assigning the risk to the spectator?
Why might the spectator argue that this would amount to a windfall for the owner?

32. Lloyd v. Murphy 763
Wilshire Bvld. at Santa Monica, 1940

33. Lloyd v. Murphy
Wilshire Bvld.
at Almont, 1940

34. Lloyd v. Murphy American Academy of Motion Pictures,
Wilshire and Almont,
Beverly Hills CA

35. Lloyd v. Murphy
Does it matter that this was a lease?

36. Lloyd v. Murphy Does it matter that this was a lease?
Williston at 765
“No case…” p.767

37. Lloyd v. Murphy
“The consequences of applying the doctrine of frustration to a leasehold involving less than a total or nearly total destruction of the value… would be undesirable”
“Litigation would be encouraged…”

38. Lloyd v. Murphy
Was the restriction to new car sales a nearly total destruction of the purpose?

39. Lloyd v. Murphy
Was the restriction to new car sales nearly total destruction of the purpose?
Given the waiver…
“It was just the location…”

40. Lloyd v. Murphy
Who is in the best position to assume the risk?

41. Lloyd v. Murphy
Should the defendants on August 4, 1941 have anticipated Pearl Harbor?

42. Lloyd v. Murphy
Should the defendants on August 4, 1941 have anticipated Pearl Harbor?
“It cannot be said the risk of war was so remote a contingency”
Surprise attack? What surprise?

43. Lloyd v. Murphy
Should the defendants on August 4, 1941 have anticipated Pearl Harbor?
“It cannot be said the risk of war was so remote a contingency“
1940 National Defense Act and Detroit’s response

44. Common Purpose Requirement
Edwards p. 771
Why might this make sense?

45. Common Purpose Requirement
Krug International at 771

46. Common Purpose Requirement
An information-forcing rule?

47. Change in Government Regulations
Restatement § 264

48. Change in Government Regulations: Atlas 724
Atlas Corp. uranium “tailings” pile

49. Changes in Government Regulations
Goshie Farms p. 768

50. Substantiality Requirement
Cf. Restatement 152 on mistake
“material effect on the agreed exchanges”
Should this be implied in frustration cases?
Haas p. 770