Contracts and Sales Multistate Bar Practice Exam

Which event might lead to a discharge for frustration of purpose?

1. A minor delay in performance

2. A change in market prices that impact costs

3. An unforeseen event that makes the purpose of the contract valueless

4. Both parties agreeing to extend the deadline

The correct answer is: An unforeseen event that makes the purpose of the contract valueless

A discharge for frustration of purpose occurs when an unforeseen event fundamentally changes the circumstances surrounding a contract, resulting in the purpose of the agreement being undermined or rendered valueless. In this scenario, when an unforeseen event occurs that makes the purpose of the contract valueless, the party seeking discharge is typically relieved from their obligations because the original intent of the contract can no longer be achieved. For example, if parties entered into a contract for the rental of a venue to host a specific event, and that event is subsequently canceled due to an unforeseen natural disaster, the purpose behind renting the venue is frustrated, thus allowing for discharge. In such cases, the law recognizes that it would be unfair to require performance when the foundational assumption of the contract is no longer valid. Other options reflect situations that do not generally rise to the level of frustration of purpose. A minor delay in performance usually does not nullify the contract’s purpose, as it might be a manageable inconvenience rather than a fundamental change. A change in market prices may impact profitability but does not alter the underlying purpose of the contract itself. Additionally, if both parties agree to extend the deadline for performance, it reflects mutual consent to continue with the agreement and pursue its original purpose, which does not qualify for discharge