Discharge of Contracts Case No. 91 FRUSTRATION OF PURPOSE/RESCISSION Supreme Cou

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Discharge of Contracts Case No. 91 FRUSTRATION OF PURPOSE/RESCISSION Supreme Court, Kings County NYLJ, August 21, 1984, p. 11, col. 3b FACTS: On May 10, 1983, Plaintiff Sure Fire Transport Corporation (Sure Fire) entered a contract with Defendant Garsite Products, Inc. (Garsite) in which Garsite agreed to expand a fuel tank owned by Sure Fire so that it could carry 6500 gallons of fuel rather than 5500 gallons. The contract price for the service was approximately $8,000.00. Prior to June 22, 1983, Garsite had completed half of the expansion job. On or about that date, an explosion of unknown causes occurred at Garsite's place of business and damaged Sure Fire's fuel tank. As a result, the tank was rendered unsafe for transporting fuel, a fact that was confirmed by a consulting engineer whose specialty was in petroleum handling and transportation. At the time of the explosion, Garsite had completed about half the work required to expand the tank according to the contract. After the explosion, Sure Fire instructed Garsite not to do any more work because of the damaged and unsafe condition of the tank. When Sure Fire refused to pay, Garsite filed a lien (security interest) against property obligated to pay Garsite and cancelling the lien. In return, Garsite sought a court order requiring Sure Fire to pay for Garsite's services. of Sure Fire. In response, Sure Fire sought a court order stating that it was not FIRST ISSUE: Where the benefit anticipated by a party from performance of a contract is no longer possible due to the occurrence of an unforeseeable event, is the party entitled to rescind the contract? DECISION: Yes. REASONING: The doctrine of frustration of purpose applies in this case. Frustration of purpose provides that where, as a result of unforeseeable events, performance would no longer provide the benefit which induced the party to enter the contract, that party can rescind. Here the explosion was an unforeseeable event that damaged the fuel tank rendering it dangerous for transporting fuel. Since Sure Fire would no longer use it for frustrated (eliminated). Sure Fire thus rightly rescinded the contract by directing ISSUE: When a contract is rescinded due to frustration of purpose, is a party compensation for the services performed? trans ng fuel, Sure Fire's purpose in expanding the tank's fuel-carrying capabilities been arsite to discontinue its performance. o has partly performed prior to the occurrence of the event that caused the frustration

Explanation / Answer

Garsite had completed half of the job and damaged the fuel tank of Sure Fire which resulted in the tanker not being able to use to the tank for fuel transportation since the tanker being unsafe. After The explosion Garsite was instructed not to continue the work. The benefit which was anticipated was not met and the purpose was not fulfilled which resulted in Doctrine of frustration of purpose.

As a result of unforeseen events, performance would not provide the benefit what was required to be gained since damaged was already done and the tanker was identified as not fit to be used for fuel transportation. Since Sure fire cannot use the fuel carrying tanker due to the damage the performance cannot be measured since the same tanker cannot be used.

               

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