Commercial Frustration Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Commercial Frustration, written in plain English, along with examples of how it is used.

What is Commercial Frustration?

After getting into a contract certain circumstances may arise which make it impoosible for one party to continue with the contract and thus declare it void, it is also called frustration of purpse.Example-denial of certain work permits, destruction of goods by fire.

History and Meaning of Commercial Frustration

Commercial Frustration is a legal term used to refer to a situation where, after entering into a contract, certain circumstances may arise that make it impossible for one party to continue with the contract or fulfill their obligations. This situation renders the contract null and void, as it becomes impracticable or impossible to continue with the agreement. The doctrine of commercial frustration applies to circumstances beyond the parties' control, such as natural calamities, war, or government regulations, and is an accepted principle of contract law in many countries.

Examples of Commercial Frustration

  1. A company contracts to stage a big event, but the venue burns down before the event. Since the venue's destruction makes the event impossible to stage, the contract becomes frustrated.
  2. A company imports goods that it has ordered from overseas, but the government imposes an embargo on imports that affect the company's goods. The contract is canceled because the change in the law makes it impossible for the company to fulfill it.
  3. A vendor contracts with a hotel to cater for a wedding. However, the bride and groom postpone the wedding without a new date in sight, and the vendor has other commitments on the former date. The contract is frustrated because the vendor cannot fulfill the obligation.

Legal Terms Similar to Commercial Frustration

  • Impossibility of Performance: When it is legally or practically impossible for one party to perform their obligation under a contract.

  • Force Majeure: A clause included in a contract that frees all parties from liability or obligation due to unforeseeable circumstances beyond their control.

  • Frustration of Purpose: When a situation occurs that makes the fulfillment of the contract's purpose impossible, even if the obligation can be performed.