[Peter_Spaeth]

Yep. This is at least the right framework.

Closely related to impossibility, frustration of purpose applies when a change in circumstances makes one
party’s contract performance worthless to the other party. See Restatement (Second) of Contracts § 265.

The defense commonly contains three elements:
1. the party’s principal purpose in making the contract is frustrated;
2. an event occurred whose non-occurrence was a basic assumption underlying the contract; and,
3. the party invoking the defense was not at fault.

The validity of the defense often turns on the first element. The principal purpose of a contract must be
something which is so completely the basis of the contract that, without it, the transaction between the
parties would make little sense. Thus, while impossibility is primarily concerned with “the nature of the
event and its effect upon performance,” frustration is concerned with “the impact of the event upon the
failure of consideration.”

The famous “Coronation Cases” provide a royal example of frustrated purpose. In Henry v. Krell, a British
court excused a defendant from his promise to pay fifty pounds to watch the coronation parade of King
Edward VII from the plaintiff’s flat when the coronation was abruptly cancelled due to the King’s health.
Krell demonstrates that frustration is not substantial when the disadvantaged party merely stands to gain
less than the bargained-for performance. Rather, the frustration must be so total, and caused by an event
so wildly unpredictable and outside the scope of either party’s reasonable expectations, that it would be
unfair to enforce the terms of the contract. The Second Circuit, for example, limits the doctrine to “virtually
cataclysmic, wholly unforeseeable events.”