Frustration of Purpose. Coker International, Inc, entered into a contract with Burlington Industries, Inc, under which Coker agreed to purchase 221 used textile looms from Burlington for a total price of $1,021,000. Under the contract, Coker was

Question

required to pay a 10 percent down payment, with the balance to be paid prior to the removal of the looms. Coker planned to resell the looms to a customer in Peru, but the contract was not conditioned on any resale of the looms by Coker. Because of actions of the Peruvian government, Coker's plan to resell the equipment to the Peruvian buyer fell through. Coker sought to rescind the contract with Burlington and recover its down payment, asserting that it should be excused from performance under the doctrine of frustration of purpose. Discuss fully whether Coker can be excused from performance of the contract under this doctrine.

Answer 1

Frustration of purpose
The court granted summary judgment for Burlington against Coker's claim. The court held that the doctrine of frustration of purpose did not apply to this situation, stating that "the actions of the government of Peru may have frustrated Coker's intended resale, but that is not the same as the purpose of its contract with Burlington, which was the conveyance of the looms from Burlington to Coker." Furthermore, the court noted, the doctrine of frustration of purpose, even if applicable, "would discharge only the ‘remaining duties' of Coker, and thus would not affect the completed payment of the non-refundable down payment." The court could find no contractual provision indicating that Coker's successful resale of the equipment was a condition of its obligation to make the down payment, nor was such a condition implicit in any of the contract's terms. Therefore, Coker was not entitled to a return of the down payment on the grounds that the Peruvian government's actions had frustrated his intention to resell the looms to a customer in Peru.