IMPRACTICABILITY AND FRUSTRATION OF PURPOSE
If, after a contract is formed, circumstances arise which make a party's performance impossible or impracticable, his duty to render that performance is discharged. In order to prove impracticability:
Applying the same criteria, UCC § 2-615 provides that a seller's delayed delivery or non-delivery of goods based on impracticability is not a breach. The proposed revision expands the availability of the impracticability excuse to "performance" and "non-performance" of any and all sellers' contractual duties.
Events that may make performance of the contract impossible include:
Increased cost alone does not excuse performance but an alternative performance that requires an unreasonable expenditure of resources may make performance of the contract impracticable.
If the circumstances giving rise to the impracticability affect only part of the performance, and the promisor can render substantial performance of his obligations, he must do so, as well as make reasonable substitute performance if available. Performance will be discharged only if the partial impracticability makes the remaining performance substantially more burdensome.
In goods contracts, if the impracticability affects only a part of the seller's capacity to perform, the seller must allocate production and deliveries among its customers. [UCC § 2-615(b)]
If, after the contract is formed, circumstances arise which substantially frustrate a party's purpose in entering into the contract, the party's remaining duties are discharged, provided:
1) the party seeking discharge was not at fault;
2) the nonoccurrence of such event was a basic assumption on which the contract was made; and
3) the language or the circumstances do not prohibit excuse based on frustration of purpose. [Restatement § 265]
This principle does relieve a party for mere "economic" or "commercial" frustration, where all that is frustrated is the party's ability to make a profit but not the actual purpose of the contract.
If the impracticability or frustration of purpose exists at the time the contract was made, no duty to perform arises where:
1) the party raising the excuse, without fault, had no reason to know of the facts giving rise to the impracticability or frustration; and
2) the non-existence of such facts is a basic assumption on which the contract was made. [Restatement § 266]
Where a party is unable to perform due to a temporary impracticability, e.g., illness, the other party may be able to suspend performance of the contract, and if there is a reasonable probability that substantial performance will not occur, cancel the contract. When the temporary impracticability ceases, if the delay will make the performance substantially more burdensome, the obligation may be discharged.