In the Kenya law of contracts, frustration of purpose is a defense to
enforcement of the contract. Frustration of purpose occurs when an unforeseen
event undermines a party's principal purpose for entering into a contract, and
both parties knew of this principal purpose at the time the contract was made.
Despite frequently arising as a result of government action, any third party
(or even nature) can frustrate a contracting party's primary purpose for
entering into the contract. This concept is also called commercial frustration.
For example, if Joe gets a mortgage for a new home, and, after three years,
the house is destroyed, for whatever reason, at no fault of Joe's. Without a hell
or high water clause, Joe might be exempt from the remainder of the mortgage,
as the principal purpose of the contract (to have a house to live in) has been
compromised. However, he might still have a foreclosure on his credit rating.
Frustration of purpose is often confused with the closely related doctrine
of impossibility. The distinction between the two is that impossibility
concerns the duties specified in the contract, whereas frustration of purpose
concerns the reason a party entered into the contract. For example, suppose
entrepreneur Emily leases space from landlord Larry so she can open a
restaurant that only serves Tibetan Speckled Lizard meat. If the city rezones
the property to forbid commercial uses, or if the property is destroyed by a
tornado, then both Larry and Emily are excused from performing the contract by
impossibility.
However, if the Tibetan Speckled Lizard suddenly goes extinct, then Emily
may be excused from performing the contract because Larry knew her primary
purpose for entering into the lease was to serve Tibetan Speckled Lizard, and
that purpose has been frustrated. In the second scenario, the parties could
still carry out their obligations under the lease, but one of them no longer
has a reason to.