December 9, 2024 • 17 mins
Welcome back to the Bar Exam Toolbox podcast! In this episode from our "Listen and Learn" series, we're exploring the situations in which a party to a contract is claiming that their contractual obligations should be discharged as a result of supervening events that occurred after the formation of the contract. The three excuses for non-performance of a contract we'll look at are: impossibility, impracticability, and frustration of purpose.
In this episode, we discuss:
- The rules for the impossibility, impracticability, and frustration of purpose excuses for non-performance of a contract
- Two essay questions from previous California bar exams
Resources:
- "Listen and Learn" series (https://barexamtoolbox.com/bar-exam-toolbox-podcast-archive-by-topic/bar-exam-toolbox-podcast-explaining-individual-mee-and-california-bar-essay-questions/#listen-learn)
- California Bar Examination – Essay Questions and Selected Answers, February 2009 (https://juraxbar.com/wp-content/uploads/2016/04/February-2009-CBX.pdf)
- California Bar Examination – Essay Questions and Selected Answers, July 2006 (https://nwculaw.edu/pdf/bar/July%202006%20Essays%20and%20Sample%20Answers.pdf)
- Taylor v. Caldwell (https://www.casebriefs.com/blog/law/commercial-law/commercial-law-keyed-to-lopucki/performance/taylor-v-caldwell-2/)
- Krell v. Henry (https://www.casebriefs.com/blog/law/commercial-law/commercial-law-keyed-to-lopucki/performance/krell-v-henry-2/)
- Podcast Episode 164: Listen and Learn – Contract Defenses (https://barexamtoolbox.com/podcast-episode-164-listen-and-learn-contract-defenses/)
- Podcast Episode 226: Listen and Learn – More Contract Defenses (https://barexamtoolbox.com/podcast-episode-226-listen-and-learn-more-contract-defenses/)
Download the Transcript
(https://barexamtoolbox.com/episode-292-listen-and-learn-excuses-for-non-performance-of-a-contract/)
If you enjoy the podcast, we'd love a nice review and/or rating on Apple Podcasts (https://itunes.apple.com/us/podcast/bar-exam-toolbox-podcast-pass-bar-exam-less-stress/id1370651486) or your favorite listening app. And feel free to reach out to us directly. You can always reach us via the contact form on the Bar Exam Toolbox website (https://barexamtoolbox.com/contact-us/). Finally, if you don't want to miss anything, you can sign up for podcast updates (<
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Lee Burgess (00:01):
Welcome to the Bar Exam Toolbox podcast.
Today, we are going to be talkingabout three commonly tested excuses
for non-performance of a contract: impossibility, impracticability, (00:07):
undefined
and frustration of purpose.
Your Bar Exam Toolbox hosts are AlisonMonahan and Lee Burgess, that's me.
We're here to demystify the barexam experience, so you can study
effectively, stay sane, and hopefullypass and move on with your life.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox, and the
career-related website CareerDicta.
(00:28):
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, please leavea review on your favorite listening
app, and check out our sister podcast,the Law School Toolbox podcast.
If you have any questions, don'thesitate to reach out to us.
You can reach us via the contactform on BarExamToolbox.com,
and we'd love to hear from you.
And with that, let's get started.
(00:54):
Today, we are going to be talkingabout three commonly tested excuses
undefined
and frustration of purpose.
Unlike defenses to formation, such asmistake or unconscionability, a party
asserting an excuse is not claiming thatthey are not contractually obligated
to perform; rather, they are claimingthat their contractual obligations
(01:16):
should be discharged as a resultof supervening events that occurred
after the formation of the contract.
So, let's review the rules for theseexcuses, starting with impossibility.
Performance is discharged when it isobjectively impossible to perform a
contract because of, [1] death or physicalincapacity of the person necessary
(01:38):
to effectuate the contract; [2] ananticipated destruction of the subject
matter necessary to fulfill the contract;or [3] a new law or regulation that was
unanticipated makes performance extremelyand unreasonably difficult or expensive.
To illustrate, let's look at thelandmark 1863 English case of Taylor v.
(02:01):
Caldwell.
As you may recall, in Taylor, theplaintiffs contracted with the defendants
to use a music hall for concerts andother events over the course of four days.
A week before the first concert,through no fault of either party,
the hall was destroyed by fire.
The court held that because thefire was not the fault of either
(02:21):
party and the destruction of thehall rendered it impossible for the
plaintiffs to utilize the venue asintended, the parties were excused from
performing their respective duties.
Okay, let's move on to impracticability.
Performance is discharged as impracticablewhen, [1] an event occurs after contract
formation; [2] that is unanticipatedby both parties at contract formation;
(02:46):
[3] making performance extremely andunreasonably difficult or expensive.
This doctrine is interpretednarrowly by the courts.
Generally, an increased cost toperform a contractual obligation is
not sufficient to render the contractexcused due to impracticability.
In the words of the Restatement, "A merechange in the degree of difficulty or
(03:10):
expense due to such causes as increasedwages, prices of raw materials, or
costs of construction, unless wellbeyond the normal range, does not
amount to impracticability since it isthis sort of risk that a fixed-price
contract is intended to cover."
The case law on this issue, while notalways consistent, makes clear that mere
(03:33):
increased cost, lack of profitability,or even financial loss does not by itself
rise to the level of impracticability.
For example, in the governmentcontracting context, courts have
held that increases in costs of57% and 70% did not by themselves
constitute commercial impracticability.
(03:53):
In contrast, courts have found performanceto be impracticable when compliance with
the contract would entail an extremeincrease in cost, coupled with an extreme
increase in the difficulty of performance.
For example, in one case performancewas held to be impracticable where
it would have taken more than eighttimes longer and cost more than 20
(04:15):
times more than originally anticipated.
In another case performance was heldimpracticable where it would have
taken almost seven times longer andabout 150% more than anticipated.
You likely did not cover thesecases in law school and you don't
need to be familiar with them toanalyze an impracticability case.
(04:36):
The important thing is that you understandthat generally speaking performance
is not impracticable merely because aparty will have to spend more money.
Before we move on, it's worthquickly noting that the terminology
here is not always consistent.
For example, the Restatement substitutes"impossibility" with "impracticability".
(04:57):
In other words, under the Restatementview, physical impossibility is
considered a type of impracticability.
And that might be the wayyou learned it in law school.
If that's the case, you should writeyour rule statements accordingly.
But for the purpose of our discussiontoday, we will be treating impossibility
and impracticability as separate concepts.
You should also treat them asseparate concepts on the bar exam.
(05:20):
Okay, now that we've cleared that up,let's move on to frustration of purpose.
The frustration of purposedoctrine discharges performance
under a contract if the purposeof the contract no longer exists.
Performance is excused if, [1] a party'sprincipal purpose is substantially
frustrated without his fault; [2] by anunforeseeable supervening event outside
(05:41):
the parties' control; and [3] both partiesknew the purpose at the time of formation.
To illustrate, let's go back toEngland for the case of Krell v.
Henry.
You may recall Henry enteredinto an agreement with Krell to
use Krell's flat for two daysto watch the king's coronation.
Henry approached Krell about the flat inresponse to a flyer hanging in Krell's
window, announcing the availability ofthe flat for rent to see the coronation.
(06:05):
The written agreement, however,did not mention the coronation or
any other purpose for the rental.
When the king became ill, thecoronation was canceled, and
Henry refused to pay for the flat.
The court held that Henry's performancewas excused because the contract was
implicitly founded on the assumptionthat the coronation would take place.
In other words, without the coronationtaking place, the contract was
(06:27):
essentially valueless to Henry.
It's important to know that frustrationof purpose is a very narrow excuse
that is invoked successfully evenless frequently than impracticability.
As with impracticability, frustration ofpurpose cannot be invoked merely because
a contract is no longer profitable.
(06:47):
Let's move on to our first hypo.
This one is adapted from theFebruary 2009 California bar exam:
"Developer had an option to purchasea five-acre parcel named The Highlands
in City from Owner, and was planning tobuild a residential development there.
Developer could not proceed with theproject until City approved the extension
of utilities to The Highlands parcel.
(07:10):
In order to encourage development, Cityhad a well-known and long-standing policy
of reimbursing developers for their costof installing utilities in new areas.
Developer signed a contract with Builderfor the construction of 10 single
family homes on The Highlands parcel.
During pre-contract negotiations,Developer specifically informed Builder
(07:31):
that he could not proceed with the projectunless City followed its usual policy
of reimbursing the developer for theinstallation of utilities, and Builder
acknowledged that he understood such acondition to be implicit in the contract.
In a change of policy, City approvednecessary utility extensions to The
Highlands parcel, but only on thecondition that Developer bear the
(07:53):
entire cost, which was substantialwithout reimbursement by City.
Because this additional cost madethe project unprofitable, Developer
abandoned plans for the developmentand did not exercise his option to
purchase The Highlands parcel from Owner.
Builder, claiming breach of contract,sued Developer for the profit
(08:14):
he would've made on the project.
Was Developer's performance excused?"
Alright, you probably noticed thatthere are a few different issues
here, but we're just going to befocusing on our three excuses.
Let's start with impossibility.
It's clear that the first two types ofimpossibility don't apply, because neither
party died or was incapacitated; norwas there any destruction of the subject
(08:37):
matter necessary to fulfill the contract.
The third type might apply, however.
We're told that City had a well-knownand long-standing policy of
reimbursing developers for the costof installing utilities in new areas.
We're then told that in a change ofpolicy, City approved the utility
extensions but without reimbursingthe developer, thereby rendering the
(08:57):
project unprofitable to Developer.
Based on these facts, Developer wouldargue that City's change in policy
was an unanticipated new law orregulation that made his performance
extremely and unreasonably expensive.
But there are two problemswith this argument.
First, it's not entirely clearthat the change in policy
(09:18):
constitutes a new law or regulation.
For one thing, it's not clearthat the policy itself is a law or
regulation, rather than the city'shistorical approach when considering
applications for utility extensions.
It's also not clear whether the change inpolicy was a universal change rather than
a deviation from their usual approach whenconsidering this specific application.
(09:40):
In any case, even if the change inpolicy does constitute an unanticipated
new law, it's highly unlikely that theadded expense to Developer would be
considered extreme or unreasonable.
After all, it's not even clearthat Developer would lose
any money on this project.
All we know is that hewouldn't make a profit.
While the change in policy definitelymakes this a worse deal for Developer, it
(10:04):
doesn't render his performance impossible.
But remember, it can still be impractical.
Okay, that covers impossibility, solet's move forward onto impracticability.
The first element requires an eventthat occurs after contract formation.
That's satisfied, because City's policychanged after Developer and Builder
(10:25):
had already entered into the contract.
The second element requires thatthe event be unanticipated by both
parties at contract formation.
That's also satisfied, because we'retold that Developer specifically informed
Builder that he could not proceed withthe project unless City followed its
usual policy of reimbursing the developerfor the installation of utilities.
(10:47):
And Builder acknowledged thathe understood such a condition
to be implicit in the contract.
The third element requires that theevent made performance extremely and
unreasonably difficult or expensive.
Developer would argue that this elementis satisfied, because he would no
longer make any profit on the contract.
While we don't have all of the factshere, including the amount of anticipated
(11:09):
profit relative to the total valueof the contract, it's unlikely that
Developer's argument will succeed.
While the facts state that the increasedcost is substantial, there is no
indication that it is beyond the normalrange as required by the Restatement.
Moreover, aside from the increasedcost to Developer, there is no
(11:29):
indication that Developer's performancewould be any more burdensome.
Accordingly, Developer's performancewould likely not be considered extremely
and unreasonably difficult or expensive.
Now we just have to addressfrustration of purpose.
We know that City's change ofpolicy was unforeseeable and out
of the parties' control, whichsatisfies the second element.
(11:50):
The real issue here is whetherDeveloper's principal purpose
was substantially frustrated.
Developer would argue thathis principal purpose was to
make a profit on the contract.
In other words, he would not have enteredinto the contract with Builder if he could
not make a profit on the development.
While that's likely true, the same isalso true of almost every party that
(12:11):
enters into a commercial contract.
And the doctrine of frustrationof purpose is not meant to
protect against a loss of profit.
Accordingly, Builder will successfullyargue that the purpose of the contract
was not to make a specified profit, butrather to develop a residential community.
City's change in policy didnot frustrate that purpose.
(12:31):
Builder can still build the homes andDeveloper can still sell the homes.
While the contract is undoubtedlyless valuable to Developer now
that he cannot make a profit,it is not essentially valueless.
Thus the purpose of the contractwas not substantially frustrated.
Alright, let's do one more hypo to makesure we really understand these rules.
This one is adapted from theJuly 2006 California bar exam:
(12:56):
"On Monday, Resi-Clean advertisedits house cleaning services by
hanging paper advertisements ondoor knobs in residential areas.
Maria, a homeowner, responded to theadvertisement, phoned RC on the same
day, spoke to a manager and said shewanted a top-to-bottom house cleaning
as described in the advertisement.
(13:16):
Within minutes after the phoneconversation ended, the RC
manager deposited in the mail aconfirmation of order form to Maria.
The form stated, 'We hereby confirm yourtop-to-bottom house cleaning for $500.
Our crew will arrive at your housebefore noon on Friday.' About an hour
later, Maria sent Resi-Clean an email,which RC received, stating, 'I just
(13:40):
want to explain that it's importantthat your cleaning crew do a good job,
because my house is up for sale and Iwant it to look exceptionally good.' On
Thursday evening, before RC's cleaningcrew was to show up, Maria accepted
an offer for the sale of her house.
The next morning, Friday, at 10:00AM, Maria sent RC another email
stating, 'No need to send your crew.
(14:00):
I sold my house last night andI no longer need your services.'
By that time, however, RC's crewwas en route to Maria's house.
When RC billed, Maria refused to pay.
Is Maria's performance excused?"
Alright, as with our first hypo, let'sstart by addressing impossibility.
None of the types of impossibilityexist here - there is no death or
(14:22):
incapacity, no destruction of thesubject matter of the contract, and
no change in a law or regulation.
Maria might not want the cleaninganymore, but Resi-Clean could still
clean Maria's house and Maria couldstill pay Resi-Clean for their services.
Therefore, Maria's performance isnot excused on impossibility grounds.
What about impracticability?
(14:42):
We're told that the sale of Maria'shouse occurred after she and
Resi-Clean entered into a contract.
So the first element is satisfied.
There is no indication, however,that the sale of the house was
unanticipated at contract formation.
In other words, the non-occurrenceof the sale was not a basic
assumption of the contract.
While Maria later informed Resi-Cleanthat her house was up for sale,
(15:04):
all Resi-Clean knew at the time ofthe contract formation was that she
wanted a top-to-bottom cleaning.
Moreover, the fact that Maria nolonger wants the cleaning does not
render her performance extremely orunreasonably difficult or expensive.
Maria would still pay the exactsame amount for the cleaning, and
Resi-Clean would provide exactly thesame service that it agreed to provide.
(15:25):
Therefore, Maria's performance is alsonot excused on impracticability grounds.
What about frustration of purpose?
Maria will argue that the purposeof the contract was to have a
clean house for prospective buyers.
When Maria sold the house,that purpose was frustrated.
Resi-Clean will successfullyargue, however, that the sale
of the house was foreseeable andentirely within Maria's control.
(15:47):
However, at the time Resi-Clean enteredinto the contract, it had no idea
that Maria was selling her house.
Therefore, Maria's performance is also notexcused on frustration of purpose grounds.
And with that, we'redone with today's hypos.
At this point, you might be askingyourself what it would take for
one of these exceptions to succeed.
And the answer is, quite a bit.
(16:07):
Impossibility, impracticability, andfrustration of purpose are meant to
excuse performance only in the mostextreme or unusual circumstances.
As you saw today, just becauseperformance becomes much harder or more
expensive doesn't mean it is excused.
So, be careful when discussing theseexcuses, and if in doubt, err on the side
of concluding that they will not succeed.
(16:30):
If you enjoyed this episode of theBar Exam Toolbox podcast, please
take a second to leave a review andrating on your favorite listening app.
We'd really appreciate it.
And be sure to subscribeso you don't miss anything.
If you have any questions or comments,please don't hesitate to reach out to
myself or Alison at lee@barexamtoolbox.comor alison@barexamtoolbox.com.
Or you can always contactus via our website contact
(16:51):
form at BarExamToolbox.com.
Thanks for listening, and we'll talk soon!
Welcome to the Bar Exam Toolbox podcast.
Today, we are going to be talkingabout three commonly tested excuses
for non-performance of a contract: impossibility, impracticability, (00:07):
undefined
and frustration of purpose.
Your Bar Exam Toolbox hosts are AlisonMonahan and Lee Burgess, that's me.
We're here to demystify the barexam experience, so you can study
effectively, stay sane, and hopefullypass and move on with your life.
We're the co-creators of the Law SchoolToolbox, the Bar Exam Toolbox, and the
career-related website CareerDicta.
(00:28):
Alison also runs TheGirl's Guide to Law School.
If you enjoy the show, please leavea review on your favorite listening
app, and check out our sister podcast,the Law School Toolbox podcast.
If you have any questions, don'thesitate to reach out to us.
You can reach us via the contactform on BarExamToolbox.com,
and we'd love to hear from you.
And with that, let's get started.
(00:54):
Today, we are going to be talkingabout three commonly tested excuses
undefined
and frustration of purpose.
Unlike defenses to formation, such asmistake or unconscionability, a party
asserting an excuse is not claiming thatthey are not contractually obligated
to perform; rather, they are claimingthat their contractual obligations
(01:16):
should be discharged as a resultof supervening events that occurred
after the formation of the contract.
So, let's review the rules for theseexcuses, starting with impossibility.
Performance is discharged when it isobjectively impossible to perform a
contract because of, [1] death or physicalincapacity of the person necessary
(01:38):
to effectuate the contract; [2] ananticipated destruction of the subject
matter necessary to fulfill the contract;or [3] a new law or regulation that was
unanticipated makes performance extremelyand unreasonably difficult or expensive.
To illustrate, let's look at thelandmark 1863 English case of Taylor v.
(02:01):
Caldwell.
As you may recall, in Taylor, theplaintiffs contracted with the defendants
to use a music hall for concerts andother events over the course of four days.
A week before the first concert,through no fault of either party,
the hall was destroyed by fire.
The court held that because thefire was not the fault of either
(02:21):
party and the destruction of thehall rendered it impossible for the
plaintiffs to utilize the venue asintended, the parties were excused from
performing their respective duties.
Okay, let's move on to impracticability.
Performance is discharged as impracticablewhen, [1] an event occurs after contract
formation; [2] that is unanticipatedby both parties at contract formation;
(02:46):
[3] making performance extremely andunreasonably difficult or expensive.
This doctrine is interpretednarrowly by the courts.
Generally, an increased cost toperform a contractual obligation is
not sufficient to render the contractexcused due to impracticability.
In the words of the Restatement, "A merechange in the degree of difficulty or
(03:10):
expense due to such causes as increasedwages, prices of raw materials, or
costs of construction, unless wellbeyond the normal range, does not
amount to impracticability since it isthis sort of risk that a fixed-price
contract is intended to cover."
The case law on this issue, while notalways consistent, makes clear that mere
(03:33):
increased cost, lack of profitability,or even financial loss does not by itself
rise to the level of impracticability.
For example, in the governmentcontracting context, courts have
held that increases in costs of57% and 70% did not by themselves
constitute commercial impracticability.
(03:53):
In contrast, courts have found performanceto be impracticable when compliance with
the contract would entail an extremeincrease in cost, coupled with an extreme
increase in the difficulty of performance.
For example, in one case performancewas held to be impracticable where
it would have taken more than eighttimes longer and cost more than 20
(04:15):
times more than originally anticipated.
In another case performance was heldimpracticable where it would have
taken almost seven times longer andabout 150% more than anticipated.
You likely did not cover thesecases in law school and you don't
need to be familiar with them toanalyze an impracticability case.
(04:36):
The important thing is that you understandthat generally speaking performance
is not impracticable merely because aparty will have to spend more money.
Before we move on, it's worthquickly noting that the terminology
here is not always consistent.
For example, the Restatement substitutes"impossibility" with "impracticability".
(04:57):
In other words, under the Restatementview, physical impossibility is
considered a type of impracticability.
And that might be the wayyou learned it in law school.
If that's the case, you should writeyour rule statements accordingly.
But for the purpose of our discussiontoday, we will be treating impossibility
and impracticability as separate concepts.
You should also treat them asseparate concepts on the bar exam.
(05:20):
Okay, now that we've cleared that up,let's move on to frustration of purpose.
The frustration of purposedoctrine discharges performance
under a contract if the purposeof the contract no longer exists.
Performance is excused if, [1] a party'sprincipal purpose is substantially
frustrated without his fault; [2] by anunforeseeable supervening event outside
(05:41):
the parties' control; and [3] both partiesknew the purpose at the time of formation.
To illustrate, let's go back toEngland for the case of Krell v.
Henry.
You may recall Henry enteredinto an agreement with Krell to
use Krell's flat for two daysto watch the king's coronation.
Henry approached Krell about the flat inresponse to a flyer hanging in Krell's
window, announcing the availability ofthe flat for rent to see the coronation.
(06:05):
The written agreement, however,did not mention the coronation or
any other purpose for the rental.
When the king became ill, thecoronation was canceled, and
Henry refused to pay for the flat.
The court held that Henry's performancewas excused because the contract was
implicitly founded on the assumptionthat the coronation would take place.
In other words, without the coronationtaking place, the contract was
(06:27):
essentially valueless to Henry.
It's important to know that frustrationof purpose is a very narrow excuse
that is invoked successfully evenless frequently than impracticability.
As with impracticability, frustration ofpurpose cannot be invoked merely because
a contract is no longer profitable.
(06:47):
Let's move on to our first hypo.
This one is adapted from theFebruary 2009 California bar exam:
"Developer had an option to purchasea five-acre parcel named The Highlands
in City from Owner, and was planning tobuild a residential development there.
Developer could not proceed with theproject until City approved the extension
of utilities to The Highlands parcel.
(07:10):
In order to encourage development, Cityhad a well-known and long-standing policy
of reimbursing developers for their costof installing utilities in new areas.
Developer signed a contract with Builderfor the construction of 10 single
family homes on The Highlands parcel.
During pre-contract negotiations,Developer specifically informed Builder
(07:31):
that he could not proceed with the projectunless City followed its usual policy
of reimbursing the developer for theinstallation of utilities, and Builder
acknowledged that he understood such acondition to be implicit in the contract.
In a change of policy, City approvednecessary utility extensions to The
Highlands parcel, but only on thecondition that Developer bear the
(07:53):
entire cost, which was substantialwithout reimbursement by City.
Because this additional cost madethe project unprofitable, Developer
abandoned plans for the developmentand did not exercise his option to
purchase The Highlands parcel from Owner.
Builder, claiming breach of contract,sued Developer for the profit
(08:14):
he would've made on the project.
Was Developer's performance excused?"
Alright, you probably noticed thatthere are a few different issues
here, but we're just going to befocusing on our three excuses.
Let's start with impossibility.
It's clear that the first two types ofimpossibility don't apply, because neither
party died or was incapacitated; norwas there any destruction of the subject
(08:37):
matter necessary to fulfill the contract.
The third type might apply, however.
We're told that City had a well-knownand long-standing policy of
reimbursing developers for the costof installing utilities in new areas.
We're then told that in a change ofpolicy, City approved the utility
extensions but without reimbursingthe developer, thereby rendering the
(08:57):
project unprofitable to Developer.
Based on these facts, Developer wouldargue that City's change in policy
was an unanticipated new law orregulation that made his performance
extremely and unreasonably expensive.
But there are two problemswith this argument.
First, it's not entirely clearthat the change in policy
(09:18):
constitutes a new law or regulation.
For one thing, it's not clearthat the policy itself is a law or
regulation, rather than the city'shistorical approach when considering
applications for utility extensions.
It's also not clear whether the change inpolicy was a universal change rather than
a deviation from their usual approach whenconsidering this specific application.
(09:40):
In any case, even if the change inpolicy does constitute an unanticipated
new law, it's highly unlikely that theadded expense to Developer would be
considered extreme or unreasonable.
After all, it's not even clearthat Developer would lose
any money on this project.
All we know is that hewouldn't make a profit.
While the change in policy definitelymakes this a worse deal for Developer, it
(10:04):
doesn't render his performance impossible.
But remember, it can still be impractical.
Okay, that covers impossibility, solet's move forward onto impracticability.
The first element requires an eventthat occurs after contract formation.
That's satisfied, because City's policychanged after Developer and Builder
(10:25):
had already entered into the contract.
The second element requires thatthe event be unanticipated by both
parties at contract formation.
That's also satisfied, because we'retold that Developer specifically informed
Builder that he could not proceed withthe project unless City followed its
usual policy of reimbursing the developerfor the installation of utilities.
(10:47):
And Builder acknowledged thathe understood such a condition
to be implicit in the contract.
The third element requires that theevent made performance extremely and
unreasonably difficult or expensive.
Developer would argue that this elementis satisfied, because he would no
longer make any profit on the contract.
While we don't have all of the factshere, including the amount of anticipated
(11:09):
profit relative to the total valueof the contract, it's unlikely that
Developer's argument will succeed.
While the facts state that the increasedcost is substantial, there is no
indication that it is beyond the normalrange as required by the Restatement.
Moreover, aside from the increasedcost to Developer, there is no
(11:29):
indication that Developer's performancewould be any more burdensome.
Accordingly, Developer's performancewould likely not be considered extremely
and unreasonably difficult or expensive.
Now we just have to addressfrustration of purpose.
We know that City's change ofpolicy was unforeseeable and out
of the parties' control, whichsatisfies the second element.
(11:50):
The real issue here is whetherDeveloper's principal purpose
was substantially frustrated.
Developer would argue thathis principal purpose was to
make a profit on the contract.
In other words, he would not have enteredinto the contract with Builder if he could
not make a profit on the development.
While that's likely true, the same isalso true of almost every party that
(12:11):
enters into a commercial contract.
And the doctrine of frustrationof purpose is not meant to
protect against a loss of profit.
Accordingly, Builder will successfullyargue that the purpose of the contract
was not to make a specified profit, butrather to develop a residential community.
City's change in policy didnot frustrate that purpose.
(12:31):
Builder can still build the homes andDeveloper can still sell the homes.
While the contract is undoubtedlyless valuable to Developer now
that he cannot make a profit,it is not essentially valueless.
Thus the purpose of the contractwas not substantially frustrated.
Alright, let's do one more hypo to makesure we really understand these rules.
This one is adapted from theJuly 2006 California bar exam:
(12:56):
"On Monday, Resi-Clean advertisedits house cleaning services by
hanging paper advertisements ondoor knobs in residential areas.
Maria, a homeowner, responded to theadvertisement, phoned RC on the same
day, spoke to a manager and said shewanted a top-to-bottom house cleaning
as described in the advertisement.
(13:16):
Within minutes after the phoneconversation ended, the RC
manager deposited in the mail aconfirmation of order form to Maria.
The form stated, 'We hereby confirm yourtop-to-bottom house cleaning for $500.
Our crew will arrive at your housebefore noon on Friday.' About an hour
later, Maria sent Resi-Clean an email,which RC received, stating, 'I just
(13:40):
want to explain that it's importantthat your cleaning crew do a good job,
because my house is up for sale and Iwant it to look exceptionally good.' On
Thursday evening, before RC's cleaningcrew was to show up, Maria accepted
an offer for the sale of her house.
The next morning, Friday, at 10:00AM, Maria sent RC another email
stating, 'No need to send your crew.
(14:00):
I sold my house last night andI no longer need your services.'
By that time, however, RC's crewwas en route to Maria's house.
When RC billed, Maria refused to pay.
Is Maria's performance excused?"
Alright, as with our first hypo, let'sstart by addressing impossibility.
None of the types of impossibilityexist here - there is no death or
(14:22):
incapacity, no destruction of thesubject matter of the contract, and
no change in a law or regulation.
Maria might not want the cleaninganymore, but Resi-Clean could still
clean Maria's house and Maria couldstill pay Resi-Clean for their services.
Therefore, Maria's performance isnot excused on impossibility grounds.
What about impracticability?
(14:42):
We're told that the sale of Maria'shouse occurred after she and
Resi-Clean entered into a contract.
So the first element is satisfied.
There is no indication, however,that the sale of the house was
unanticipated at contract formation.
In other words, the non-occurrenceof the sale was not a basic
assumption of the contract.
While Maria later informed Resi-Cleanthat her house was up for sale,
(15:04):
all Resi-Clean knew at the time ofthe contract formation was that she
wanted a top-to-bottom cleaning.
Moreover, the fact that Maria nolonger wants the cleaning does not
render her performance extremely orunreasonably difficult or expensive.
Maria would still pay the exactsame amount for the cleaning, and
Resi-Clean would provide exactly thesame service that it agreed to provide.
(15:25):
Therefore, Maria's performance is alsonot excused on impracticability grounds.
What about frustration of purpose?
Maria will argue that the purposeof the contract was to have a
clean house for prospective buyers.
When Maria sold the house,that purpose was frustrated.
Resi-Clean will successfullyargue, however, that the sale
of the house was foreseeable andentirely within Maria's control.
(15:47):
However, at the time Resi-Clean enteredinto the contract, it had no idea
that Maria was selling her house.
Therefore, Maria's performance is also notexcused on frustration of purpose grounds.
And with that, we'redone with today's hypos.
At this point, you might be askingyourself what it would take for
one of these exceptions to succeed.
And the answer is, quite a bit.
(16:07):
Impossibility, impracticability, andfrustration of purpose are meant to
excuse performance only in the mostextreme or unusual circumstances.
As you saw today, just becauseperformance becomes much harder or more
expensive doesn't mean it is excused.
So, be careful when discussing theseexcuses, and if in doubt, err on the side
of concluding that they will not succeed.
(16:30):
If you enjoyed this episode of theBar Exam Toolbox podcast, please
take a second to leave a review andrating on your favorite listening app.
We'd really appreciate it.
And be sure to subscribeso you don't miss anything.
If you have any questions or comments,please don't hesitate to reach out to
myself or Alison at lee@barexamtoolbox.comor alison@barexamtoolbox.com.
Or you can always contactus via our website contact
(16:51):
form at BarExamToolbox.com.
Thanks for listening, and we'll talk soon!
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