Case No. 91 FRUSTRATION OF PURPOSE/RESCISSION Sure Fire Transport Corporation v. Garsite Products, Inc. Supreme Court, Kings County NYLJ, August 21, 1984, p. 11, col. 3b FACTS: On May 10, 1983, Plaintiff Sure Fire Transport Corporation (Sure Fire) entered a contract with Defendant Garsite Products, Inc. (Garsite) in which Garsite agreed to expand a fuel tank owned by Sure Fire so that it could carry 6500 gallons of fuel rather than 5500 gallons. The contract price for the service was approximately $8,000.00. Prior to June 22, 1983, Garsite had completed half of the expansion job. On or about that date, an explosion of unknown causes occurred at Garsite's place of business and damaged Sure Fire's fuel tank. As a result, the tank was rendered unsafe for transporting fuel, a fact that was confirmed by a consulting engineer whose specialty was in petroleum handling and transportation. At the time of the explosion, Garsite had completed about half the work required to expand the tank according to the contract. After the explosion, Sure Fire instructed Garsite not to do any more work because of the damaged and unsafe condition of the tank. When Sure Fire refused to pay, Garsite filed a lien (security interest) against property of Sure Fire. In response, Sure Fire sought a court order stating that it was not obligated to pay Garsite and cancelling the lien. In retum, Garsite sought a court order requiring Sure Fire to pay for Garsite's services. FIRST ISSUE: Where the benefit anticipated by a party from performance of a contract is no longer possible due to the occurrence of an unforeseeable event, is the party entitled to rescind the contract? DECISION: Yes. REASONING: The doctrine of frustration of purpose applies in this case. Frustration of purpose provides that where. as a result of unforeseeable events, performance would no longer provide the benefit which induced the party to enter the contract, that panty can rescind. Here the explosion was an unforeseeable event that damaged the fuel tank rendering it dangerous for transporting fuel. Since Sure Fire would no longer use it for transporting fuel. Sure Fire's purpose in expanding the tank's fuel-carrying capabilities had been frustrated (eliminated). Sure Fire thus rightly rescinded the contract by directing Garsite to discontinue its performance. SECOND ISSUE: When a contract is rescinded due to frustration of purpose, is a party who has partly performed prior to the occurrence of the event that caused the frustration entitled to compensation for the services performed? DECISION: Yes. In this case, Garsite is entitled to $4.000.00, the value of the work done up to the time Garsite was instructed by Sure Fire to discontinue the work. REASONING: When rescinding a contract, the rescinding party must put the other party in the same position it was in before the contract was made. Sure Fire is thus obligated to pay Garsite for the work completed prior to the rescission. Since half of the manhours required for the job had been performed at the time of the explosion, Garsite is entitled to half the price. However, because Sure Fire rightly rescinded the contract. Garsite was not entitled to payment for the work performed after Sure Fire rescinded. * * * QUESTION > > + (See back of text for answer) 1) How do the doctrines of frustration of purpose and impossibility of performance differ