George Mason School of Law
Contracts II
Frustration
F.H. Buckley
[email protected]
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Next day
 The Contractual Measure of Damages
Scott 93-107, 863-80
Rest. §§ 344, 346-48, 352-53
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Blurring the timing question
 After the contract is made
 Restatement § 261: Impracticability
 Restatement § 265: Frustration
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Blurring the timing question
 Before the contract is made
 Restatement § 266(1): Impracticability
 Restatement § 266(2): Frustration
 Restatement § 152-53: Mistake
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The Restatement understanding
Formation of Contract
Mistake
Impracticability
Frustration
Impracticability
Frustration
Time
Cf. Restatement § 152, comment b
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Frustration vs. Impracticability
 So what’s the difference?
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Impracticability
 Restatement § 261
 Death or Incapacity of a person: 262
 Res extincta etc.: 263
 Govt reg: 264
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Impracticability:
An economic focus
 Teitelbam at 773: “focus on greatly
increased costs”
 Traynor at 787: expected value of
performance is destroyed
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Frustration
 Frustration: Restatement § 265
 Illustration 3: Res extincta: Hotel destroyed
 Illustration 4: Govt reg
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Frustration:
A psychological focus?
 Teitelbaum at 773: “focuses on a
party’s severe disappointment caused
by circumstances that frustrate his
purpose in entering into the contract”
 Traynor at 787: performance is vitally
different from what was expected
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Impracticability vs. Frustration
Who are the parties?
 Impracticabilty: focus is on provider
of goods or services, where
performance is impossible or vastly
more expenses
 Frustration: focus is on buyer of
goods or services
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Frustration: Krell v. Henry 781
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Frustration: Krell v. Henry 781
56 Pall Mall
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Frustration: Krell v. Henry
 What was the amount of the license?
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Frustration: Krell v. Henry
 What was the amount of the license?
 About $400 for two days.
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Frustration: Krell v. Henry
 Was performance of the license
impossible, in the sense of Taylor v.
Caldwell?
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Frustration: Krell v. Henry
 Was performance of the license
impossible, in the sense of Taylor v.
Caldwell?
 Was the purpose to take the room for
two days, or to take the room to see the
Coronation procession?
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Frustration: Krell v. Henry
 Was performance of the license
impossible, in the sense of Taylor v.
Caldwell?
 Is this a suitable case “to flush The
Moorcock”?
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Frustration: Krell v. Henry
 Suppose the agreement had been for
a one-month lease and not a two day
licence?
 Is Paradine still good law?
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Frustration: Krell v. Henry
 I purchase tickets from a ticket-seller
for a play, now in try-outs in New
Haven. Subsequently, it is conceded,
the play is discovered to be a bomb…
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Frustration: Krell v. Henry
 I am a promoter and hire a hall for a
musical show. On the date of the
show a prominent politician dies and I
cancel the show. Do I have to pay for
the hall?
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Frustration: Krell v. Henry
 I hire a limo to take me to opening
day in Baltimore. That morning I
learn that the game is rained out. I
cancel the limo.
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Frustration: Krell v. Henry
 A builder undertakes to build a house
but discovers that the land is
unsuitable for a building.
 Stees and “Work before pay”
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Frustration: Krell v. Henry
 A builder undertakes to build a house
but discovers that the land is
unsuitable for a building.
 Cf. Restatement 263, illus. 3 and 4
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Frustration: Krell v. Henry
 Is the reliance on parol evidence
problematical in frustration cases?
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Frustration: Krell v. Henry
 Is the reliance on parol evidence
problematical in frustration cases?
 Suppose that the written contract had
stipulated that the premises were let for
the purpose of “viewing parades.”
 Could one admit parol evidence to show
that it was for a particular parade?
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Frustration: Krell v. Henry
 Did the Π assume or anticipate the
risk?
 Who should bear the risk?
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Frustration: Krell v. Henry
 Who should bear the risk?
 Who was in the best position to predict
that the King would come down with
appendicitis?
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Frustration: Krell v. Henry
 Who should bear the risk?
 If no one, why is frustration better than
flipping a coin?
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Frustration: Krell v. Henry
 Who should bear the risk?
 If the parties had thought of it, why
might they have preferred to make the
contract conditional on the coronation
rather than assigning the risk after
flipping a coin?
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Frustration: Krell v. Henry
 Who should bear the risk?
 Why wouldn’t the property owner want
to take the risk?
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Frustration: Krell v. Henry
 Who should bear the risk?
 And what’s wrong with assigning the risk
to the spectator?
 Note that the owner did not incur reliance
expenses.
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Lloyd v. Murphy 785
American Academy
of Motion Pictures,
Wilshire and Almont,
Beverly Hills CA
10 blocks from
Rodeo Drive
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Lloyd v. Murphy
 Is this a simple application of
Paradine?
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Lloyd v. Murphy
 Is this a simple application of
Paradine?
 “The consequences of applying the
doctrine of frustration to a leasehold
involving less than a total or nearly total
destruction of the value…”
 “Litigation would be encouraged…”
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Lloyd v. Murphy
 Does it matter that this was a lease?
 “No case…” p.789
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Lloyd v. Murphy
 Was the restriction to new car sales a
nearly total destruction of the
purpose?
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Lloyd v. Murphy
 Was the restriction to new car sales
nearly total destruction of the
purpose?
 Given the waiver…
 “It was just the location…”
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Lloyd v. Murphy
 Who is in the best position to assume
the risk?
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Lloyd v. Murphy
 Should the defendants on August 4,
1941 have anticipated Pearl Harbor?
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“Why didn’t I think of that!”
Lloyd v. Murphy
 Should the defendants on August 4,
1941 have anticipated Pearl Harbor?
 “It cannot be said the risk
of war was so remote
a contingency”
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Common Purpose Requirement
 Edwards p. 791
 Why might this make sense?
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Common Purpose Requirement
 Krug International at 791
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Common Purpose Requirement
 Is this consistent with Mayer at 789
 Does it matter if the seller knew of the
plaintiff’s tax plans?
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Common Purpose Requirement
 Edwards p. 791
 Can you apply this to Krell v. Henry?
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Change in Government Regulations
 Restatement § 264
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Change in Government Regulations:
Atlas 745
Atlas Corp. uranium “tailings” pile
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Changes in Government Regulations
 Consumers Power 790
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Changes in Government Regulations
 Goshie Farms p. 790
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Substantiality Requirement
 Cf. Restatement 152 on mistake
 “material effect on the agreed
exchanges”
 Should this be implied in frustration
cases?
 Haas p. 791
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Substantiality Requirement
 What purpose does a substantiality
requirement serve?
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Alabama Football
 Qu. Future obligations
 Qu. The bonus
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