In February, 1990 Kuhn Farm Machinery contracted with Scottsdale Plaza Resort to
ID: 2767920 • Letter: I
Question
In February, 1990 Kuhn Farm Machinery contracted with Scottsdale Plaza Resort to hold its annual convention at its facility in Arizona. It expected 200 persons in attendance with approximately 125 coming from Europe. The convention was to be held during March, 1991. In August, 1990 the U.S. went to war with Iraq. Because of threats of terrorist attacks, the European attendees decided not to attend. Because of the decline in attendance, Kuhn decided to cancel the convention. When it was sued by the resort, it raised the defense of frustration of purpose. Is the contract discharged? Explain.
Explanation / Answer
Answer
Frustration of purpose pertains to the law of contracts, and takes place when unexpected circumstances undermine the purpose of the contract. In order for the principle of frustration of purpose to apply, both parties must have been aware of the primary purpose for the contract to begin with. Frustration of purpose means “A defense used for failing to fulfil duties outlined in a contract when something occurs that hinders or obstructs the reason or purpose of the contract.”
Frustration of Purpose exists if the reason for, rather than a duty of, a contract becomes nullified due to no fault of either party. Frustration of purpose, or “frustration of contract,” specifically involves the reason for the contract.
Example: L leases a storefront shop from B in order to sell exotic snakes to the public. The lease term is set for five years. After two years into the business venture, laws are passed making it illegal to sell exotic snakes within the United States. L might then be excused from the final three years of the lease, as B knew the specific purpose of the lease was to sell exotic snakes. With the ban on the snakes, L no longer has a reason to continue with the lease unless desires to do so. On the other hand, B may also be able to end the contract and lease the property to another business.
So in present case, In February, 1990 Kuhn Farm Machinery contracted with Scottsdale Plaza Resort to hold its annual convention at its facility in Arizona. It expected 200 persons in attendance with approximately 125 coming from Europe.
The convention was to be held during March, 1991. In August, 1990 the U.S. went to war with Iraq. Because of threats of terrorist attacks, the European attendees decided not to attend. Because of the decline in attendance, Kuhn decided to cancel the convention.
But here Kuhn Farm Machinery can still hold its annual convention with lower attendance. Secondly Scottsdale Plaza Resort may not be aware about fact of large attendance from Europe. So raising of the defence of frustration of purpose by Kuhn Farm Machinery is not justified and the contract is not discharged.