What is frustration of purpose?

Frustration of purpose is a legal concept in contract law that applies when something beyond the parties’ control prevents them from fulfilling their contractual obligations. In Nebraska, this doctrine can be used to excuse parties from their obligations under the contract when an intervening event renders performance either impossible or drastically different than what had been bargained for. For example, if a party enters into a contract to rent a conference hall for an event, and then a pandemic hits and the hall is shut down by the government, the party who had agreed to rent the hall may be relieved from having to perform the rent obligation. In other words, the pandemic frustrated the purpose of the contract and the party is no longer liable for performance. The court will also look at questions such as whether the risks of the event were foreseeable at the time of the contract and if the parties had an opportunity to protect themselves against the risk. In addition, the court will consider whether the parties had an alternative performance which would meet the same purpose as the original contract. Generally, the court will only apply this doctrine as a last resort—it is not meant to give parties an exit option whenever something goes wrong. Frustration of purpose is a narrow concept that applies when a change in circumstances makes performance impossible or radically different than what was agreed upon when the contract was made.

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