Kuhn Farm Machinery, a European company, signed an agreement with Scottsdale Plaza Resort, of Arizona, to use the resort for its North American dealers’ convention during March 1991. Kuhn agreed to rent 190 guest rooms and spend several thousand dollars on food and beverages. Kuhn invited its top 200 independent dealers from the United States and Canada and about 25 of its own employees from the United States, Europe, and Australia, although it never mentioned those plans to Scottsdale.
On August 2, 1990, Iraq invaded Kuwait, and on January 16, 1991, the United States and allied forces were at war with Iraq. Saddam Hussein and other Iraqi leaders threatened terrorist acts against the United States and its allies. Kuhn became concerned about the safety of those traveling to Arizona, especially its European employees. By mid-February, 11 of the top 50 dealers with expense-paid trips had either canceled their plans to attend or failed to sign up. Kuhn postponed the convention. The resort sued. The trial court discharged the contract under the doctrines of commercial impracticability and frustration of purpose. The resort appealed. Did commercial impracticability or frustration of purpose discharge the contract? Argument for Scottsdale Plaza Resort: The resort had no way of knowing that Kuhn anticipated bringing executives from Europe, and even less reason to expect that if anything interfered with their travel, the entire convention would become pointless. Most of the dealers could have attended the convention, and the resort stood ready to serve them. Argument for Kuhn: The parties never anticipated the threat of terrorism. Kuhn wanted this convention so that its European executives, among others, could meet top North American dealers. That is now impossible. No company would risk employee lives for a meeting. As a result, the contract has no value at all to Kuhn, and its obligations should be discharged by law.