Definition of Legal Terms
Performance obligations in acan be discharged if performance by one or both parties has been rendered “impossible” or “commercially impracticable,” or if there has been a “frustration of purpose” of one of the parties to the contract by events occurring after the contract was signed.
Impossibility is a strict, objective standard and means that not only could the party (or parties) affected by events not perform the terms of the contract, but neither could anyone else under the circumstances.
Impracticability of performance is closely related to the doctrine of impossibility. Commercial impracticability is a doctrine in contract law stating that relief from obligations under a contract may be granted when performance has been rendered excessively difficult, expensive, or harmful by an unforeseen contingency occurring after the contract was signed.
Frustration of Purpose applies when a party's purpose in entering into the contract is destroyed by supervening events, in which case most courts will discharge that party from performing. The purpose of the contract must be known and understood by both sides before “frustration of purpose” can be used as a defense.