Who Has The Burden Of Proof For Frustration Of Purpose in Contracts?

The burden of proof for frustration of purpose typically lies with the party asserting that the contract has been frustrated. This party must demonstrate that the fundamental purpose of the contract has been undermined by an unforeseen event.

In contract law, frustration of purpose occurs when a party's primary objective in entering into the contract cannot be achieved because of unforeseen circumstances that are not due to their fault. The burden of proof rests on the party who claims that frustration has occurred. This party must establish two critical elements: first, that a significant or fundamental purpose of the contract has been frustrated; and second, that the frustration was due to an event that was unforeseeable and beyond the control of the parties involved.

Moreover, the frustration must not be due to the fault of the party invoking the doctrine. For example, if the parties entered into a contract for a venue rental for an event, and the event cannot be held due to a government-imposed shutdown, the party claiming frustration must show that the shutdown was unexpected and materially affected the ability to fulfill the contract.

In evaluating these claims, courts will look closely at the contract's language as well as how the circumstances impacted each party's obligations. The courts generally require clear and convincing evidence to demonstrate that the contract's purpose has been frustrated, rather than merely showing a loss of profitability or a change in circumstances. This means that mere difficulty in performance may not suffice; the party must show a complete breakdown of the contract’s basic purpose.

Additionally, the doctrine of frustration of purpose is distinguished from the doctrine of impracticability, which focuses on whether performance has become unfeasible. While both doctrines may address unforeseen circumstances, they are applicable under different facts. Understanding the nuances between these doctrines can be crucial in legal practice and can impact the allocation of risks in contract drafting.

• 1Krell v. Henry (1903) - established the principle of frustration of purpose when the underlying contract cannot be fulfilled due to unforeseen circumstances.
• 2L'Estrange v. F. Graucob Ltd. (1934) - clarified contractual obligations and the importance of actual knowledge of contract terms.
• 3Marbury v. Madison (1803) - while not a primary case on frustration, it addresses the broader implications of contractual obligations.
• 4The Super Servant Two (1990) - delves into the distinction between frustration of purpose and impossibility in contract law.

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