Part I of “COVID-19 Contract Performance Defenses Under New York Law” discussed how New York law can, depending on the circumstances, provide a defense to breach of contract when the breach was necessitated by the COVID-19 shelter-in-place orders or other COVID-19-related considerations.
It discussed the impossibility defense, the effect of force majeure clauses, and the UCC commercial impracticability defense (which applies to contracts for the sale of goods).
This Part II discusses two additional, closely-related doctrines that may be relevant to excusing a COVID-19-necessitated breach: (a) frustration of purpose; and (b) illegality of performance.
Contract Performance Defenses
Frustration of Purpose
Under the impossibility doctrine, performance must be objectively impossible, and under the doctrine of commercial impracticability, impracticable. But under frustration of purpose doctrine, “[p]erformance remains possible but the expected value of performance to the party seeking to be excused has been destroyed by a fortuitous event, which supervenes to cause an actual but not literal failure of consideration.” Lloyd v. Murphy, 25 Cal.2d 48, 53 (1944) (en banc).
