The legal concept of “frustration of purpose” has been around for centuries, but its relevance in the modern business world should not be overlooked.
It is important for businesses to have an understanding of the concept of frustration of purpose so they are able to anticipate potential legal implications or risks.
What Is Frustration of Purpose?
In general, frustration of purpose is the legal concept that if something important needed to fulfill the purpose of a contract is unable to be accomplished, the contract will be voidable. This applies to a contract that has had its purpose made impossible due to events outside of both contracting parties’ control.
For example, if a business signed a contract to purchase a machine from a supplier in order to manufacture products, and the supplier was unable to produce the machine due to unforeseen circumstances such as a natural disaster, then the contract may be declared void and the purchasing business may not be bound by the original contractual obligations.
Why Is Frustration of Purpose Relevant to Businesses?
It is prudent for businesses to be aware of the concept of frustration of purpose because it can have a significant practical impact, such as withdrawing liability for a breach of contract or relieving one or both parties of their contractual obligations. That said, frustration of purpose is a complex legal concept which may be difficult for businesses to navigate in a claim.
Therefore, it is important for businesses to be familiar with the legal implications of frustration of purpose, and to obtain legal advice before entering a contract to ensure their rights are protected.