What does the doctrine of frustration of purpose provide?

• A. The frustrated party is entitled to rescind the contract without paying damages; the event must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption.
• B. The frustrated party may recover damages.
• C. The contract automatically terminates and damages are owed.
• D. Only if performance becomes physically impossible.

Answer: (A)

The doctrine of frustration of purpose kicks in when an unforeseen event destroys the contract’s main purpose, so delivering performance would not serve the agreed-upon value. If that event is not caused by the party seeking relief and its occurrence (or nonoccurrence) was a fundamental assumption on which the contract was formed, the contract can be rescinded and the frustrated party is excused from further performance without owing damages. This is why the best answer states that the frustrated party may rescind without damages, under the conditions that the event wasn’t the party’s fault and its occurrence was a basic assumption.

The other ideas don’t fit because frustration does not automatically award damages; the typical remedy is discharge of the contract, not damages owed. It’s also broader than physical impossibility—the purpose can be frustrated even if performance remains physically possible, as long as the essential goal of the contract is undermined.