Restatement Second of Contracts 348: Understanding the Doctrine of Frustration and Impracticability

The Restatement Second of Contracts, specifically Section 348, covers the doctrine of frustration and impracticability in contract law. This doctrine addresses situations where circumstances beyond the control of the parties make it impossible to carry out the terms of the contract, even if those terms were agreed upon in good faith.

Frustration occurs when events occur that make it impossible to complete the terms of the contract. For example, if a contracted event cannot take place due to a natural disaster or a change in the law, frustration has occurred. Impracticability, on the other hand, occurs when performance of the contract becomes unreasonably difficult or expensive due to events beyond the control of the parties. For instance, if a key supplier goes out of business or a raw material becomes unavailable at a reasonable price, impracticability has occurred.

When frustration or impracticability happens, the parties are excused from their contractual obligations. This is because the purpose of the contract has been frustrated by events outside of their control. However, it’s important to note that the doctrine of frustration and impracticability is only applied in extreme cases. Courts will only excuse a party’s performance when they are convinced that it’s impossible to carry out the terms of the contract.

The Restatement Second of Contracts 348 offers guidance on how to deal with situations of frustration and impracticability. It states that the party seeking to be excused from their contractual obligations must show that the frustrating event was not foreseeable at the time the contract was formed. If the event was foreseeable, the party has assumed the risk of its occurrence and cannot rely on the doctrine of frustration or impracticability.

Furthermore, the party seeking to be excused from their obligations must show that they did everything reasonably possible to mitigate the effects of the frustrating event. For example, if a supplier is unable to deliver goods on time due to an unforeseen labor strike, the supplier must show that they made every effort to find an alternate source or to make up for the delay in some other way.

In conclusion, the doctrine of frustration and impracticability is an essential aspect of contract law. It provides a mechanism to excuse parties from their contractual obligations when circumstances beyond their control make it impossible to perform. However, this doctrine should be applied with caution, and only in extreme cases where the frustrating event was unforeseeable and unavoidable. By following the guidance provided in Restatement Second of Contracts 348, parties can navigate these situations and find a reasonable way forward.