What effect does a recognized frustration of purpose have on a contract?

Recognized frustration of purpose occurs when an unforeseen event undermines the primary reason both parties entered into a contract, thereby affecting the contract's purpose. This doctrine allows a party to be released from their performance obligations because the foundational basis for the agreement has been negated.

When frustration of purpose is established, it significantly alters the obligations of the parties, as one or both parties can no longer perform their duties as originally intended. This release from performance obligations is based on the idea that it would be unjust to force someone to continue fulfilling their contractual duties when the purpose of the contract has been destroyed due to circumstances beyond their control.

It is important to distinguish that this does not automatically terminate the contract or make it voidable at the discretion of the parties. Instead, it specifically relieves a party of their obligations, effectively allowing them to exit the contract without liability for nonperformance, as the core intent that justified the agreement can no longer be fulfilled.