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Wash. State Hop Producers Liquidation Tr. v. Goschie Farms - 112 Wash. 2d 694, 773 P.2d 70 (1989)

Rule:

The doctrine of discharge by supervening frustration is as follows: where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.

Facts:

Until July 1985, hop producers were required to obtain allotments from the government to market their hops, known as hop base. Prior to the termination of the allotment system, Washington State Hop Producers, Inc., Liquidation Trust (Trust) sought enforcement of contracts requiring respondents (Growers) to pay for allotments required by federal regulatory order to market hops (hop base). Termination of the order was announced after the Growers submitted their bids, but before the time set by the Trust for its performance. The Yakima County Superior Court entered summary judgment in favor of respondent Growers ordering rescission and restitution requiring the growers to pay for allotments required by a regulatory order to market hops. On appeal, the Court of Appeals sustained the order holding that the purpose of the allotment contracts had been substantially frustrated. The Trust appealed.

Issue:

In an action by a trust of hop producers seeking enforcement of contracts requiring the growers to pay for allotments required by a regulatory order to market hops, did the Court of Appeals correctly apply the doctrine of supervening frustration?

Answer:

Yes

Conclusion:

The Supreme Court of Washington affirmed the judgment for the growers under the doctrine of supervening frustration, as set forth in the Restatement (Second) of Contracts. The Court stated that the basis purpose of the contracts -- to purchase a hop allotment base --was frustrated by the termination of the allotment system because hop base existed only by virtue of that system. Thus, the continued need to own or control hop base in order to sell hops was an assumption central to the subject matter of the contract, and without this assumption no contract would have been made. The Court affirmed the award of prejudgment interest on the sums the growers paid to the trust during the litigation. 

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