Can a Contract be Breached for Frustration of Purpose in California?
A renowned bridal event planner hires a caterer for a large double wedding with an expected guest list of over 300 people. The caterer has great reviews and most importantly, excellent food. The menu is planned and the initial deposits and payments have already been made. On the day before the double wedding, the caterer calls to cancel, explaining all of her staff quit unexpectedly. Now the event planner has to deliver the news to both brides, is out the money spent on initial deposits and will have to find a new date and a new caterer. Is she entitled to her deposit? Can she sue the caterer for breach of contract?What is Frustration of Purpose?
Frustration of purpose is actually a defense to a breach of contract. It is usually used in contracts or negotiations between a buyer and seller. While the caterer might try to allege she should be released from contractual duty due to frustration of purpose, it is unlikely it would hold up in court. This is because as the merchant, she is receiving funds in return for a service, which is catering a large event. In this scenario, the wedding planner and couples are the “buyer.” Frustration of purpose is usually only appropriate when an unforeseen event or occurrence renders the buyer in a position for no longer needing to enter the contract, and the seller understands the buyer’s specific purpose when entering into the contract. Frustration of purpose is also referred to as commercial frustration.
This is contrasted with force majeure. Force majeure is a legal principle meaning neither party must be held to terms of the contract due to unforeseen circumstances. Cal. Civ. Code § 3526 (2021). Force majeure is usually only implicated in the event of a true emergency or an act of God preventing the contracted event or sale of goods or services from occurring. Recently courts have seen an uptick in force majeure contract breaches due to the COVID-19 pandemic.What Non-Monetary Contract Remedies are Available?
When a plaintiff sues for breach of contract and is successful in litigation, they are entitled to damages. However, in breach of contract suits, damages are not always monetary. For example, in the hypothetical used in the blog, the plaintiff could seek specific performance ordering the caterer to honor the contract and provide catering services for the rescheduled event.
Specific performance is a non-monetary remedy, and is rarely utilized. In our hypothetical, it is unlikely the plaintiff would trust the caterer to handle the event after she cancelled at the last minute, so asking the same caterer to perform would not be an adequate remedy. A plaintiff can also ask the court to rescind the contract. A non-breaching party can request that they be relieved of contractual obligations in light of the defendant’s breach. Usually a breach of contract asks for several remedies, both compensatory and non-compensatory.Contact Our Business Litigators at SAC Attorneys, LLP
No one enters a business relationship in good faith expecting the partnership to sour. Similarly, it makes no sense to form a contract only for circumstances to make it invalid or impossible to meet demands. Fortunately, there are remedies available for plaintiffs who have suffered due to a force majeure. Our attorneys at SAC specialize in complex business formation and litigation and can help you settle a commercial dispute faster and with a better outcome for all parties involved. We pride ourselves in exceeding our clients’ expectations and serve parties throughout the Silicon Valley and neighboring counties. Call today to schedule a consultation.