R2d § 265
Discharge by Supervening Frustration
Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.
Professor's notes
Elements: where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption, his remaining duties to render performance are discharged.
Krell v. Henry (coronation flat case) operationalizes: viewing the procession was the principal purpose; cancellation of the procession frustrated that purpose.
Common misunderstanding: students conflate frustration with impracticability. Impracticability (§ 261) is about the obligor's ability to perform. Frustration is about the obligee's reason to want performance. The room could still be rented in Krell: Henry simply didn't want it anymore. Three elements run together: (1) basic assumption defeated; (2) principal purpose substantially destroyed (not just reduced); (3) no risk allocation to the disappointed party. The doctrine is narrow; courts rarely grant it.
Cases that operationalize this rule
Text
R2d § 265. Discharge by Supervening Frustration.
Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.