Describe the doctrines of commercial impracticability and commercial frustration.

Question

What will be an ideal response?

Answer 1

Some courts are relaxing the strict common law position on impossibility of performance by recognizing as an excuse for nonperformance circumstances that do not amount to impossibility. These courts recognize commercial impracticability as an excuse when unforeseeable developments make performance highly or unreasonably expensive, or of little value to the promisee. Assume, for example, that Biggs rented a boat from Maritime, Inc. The contract required Maritime to keep the boat in repair. While Biggs was loading the boat, it was rammed by another boat, causing severe damage. Estimates showed that it would cost more to fix the boat than the boat was worth prior to the collision. The court might well find it was unreasonable to require Maritime to repair the boat under these circumstances. Commercial impracticability acts as an excuse only if the promisor did not expressly or impliedly assume the risk that the event would occur. The Restatement has adopted the commercial impracticability standard, as has the Uniform Commercial Code (UCC) for contracts involving the sale of goods.

Commercial frustration, or frustration of venture, is very similar to impracticability. Under this doctrine, performance is excused when events occur after the formation of the contract that would make the return performance of the other party worthless to the promisor. Like impracticability, the event must not have been foreseeable, and the promisor must not have expressly or impliedly assumed the risk that the event would occur.