Can our counterparty walk away because an outside event, or a government decision, wrecked the deal?
Not on the strength of frustration of purpose alone, on the Ohio authority verified here. The Eleventh District recorded in 2021 that 'The Supreme Court of Ohio has not expressly adopted the doctrine of frustration of purpose', and declined to adopt it in that case (Wroblesky). The related excuse of impracticability due to government action fails where the contract itself put that risk on the party seeking excuse: because the parties expressly allocated the risk of government delay to the appellants, the court held the doctrine precluded. Two Supreme Court of Ohio statements, quoted in that decision, set the standard and are the harder obstacle. Ordinarily, where one contracts to render a performance for which a government licence or permit is required, it is that party's duty to get the licence, the risk of inability to obtain it is on that party, and refusal by the government is no defence to a breach claim; and governmental interference cannot excuse performance unless it truly supervenes in a way beyond the seller's assumption of risk, the contingency having to be unforeseen and unusual (Security Sewage, as Wroblesky quotes it).
The trap
That makes the allocation language in the clause, not the size of the outside event, the thing that decides an Ohio case. A tenant whose whole purpose depended on a state licence still had to pay, because the lease did not make the licence a condition precedent and did allocate the delay risk. Two limits on this rule, stated rather than glossed over: Wroblesky is a Court of Appeals decision and binds only the Eleventh District, and it is a statement that the Supreme Court has not expressly adopted the doctrine, not a holding that no Ohio court will ever apply it. The impracticability standard stated above is drawn from Official Comment 10 to Ohio's sale-of-goods excuse provision, R.C. 1302.73, by way of a 1968 Supreme Court of Ohio decision; the words of the section itself are not quoted in any authority listed here, so nothing in this rule states the elements of the statutory excuse for a contract for the sale of goods.
8 authorities
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
The Supreme Court of Ohio has not expressly adopted the doctrine of frustration of purpose, and we decline to do so in the present case. Even if the defense were available, however, the appellants did not raise genuine issues of material fact regarding its applicability.
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
Since the parties expressly allocated the risk of government delay to the appellants, the doctrine of impracticability due to government action is precluded.
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
whether the issuance of a liquor permit to the appellants was a condition precedent to the Wrobleskys’ enforcement of the lease; (2) whether the appellants’ performance was excused because of frustration of purpose; and (3) whether the appellants’ performance was excused because of impracticability due to government action. {¶3} After a careful review of the record and pertinent law, we find as follows: {¶4} (1) Based on the plain and ordinary meaning of the lease, the parties did not intend the issuance of a liquor permit to be a condition precedent to the appellants’ payment obligations.
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
Further, the Supreme Court of Ohio has held that “‘[o]rdinarily, when one contracts to render a performance for which a government license or permit is required, it is his duty to get the license or permit so that he can perform. The risk of inability to obtain it is on him; and its refusal by the government is no defense in a suit for breach of his contract.’” Security Sewage Equip. Co. v. McFerren, 14 Ohio St.2d 251, 254, 237 N.E.2d 898 (1968), quoting 6 Corbin on Contracts, Section 1347, at 435.
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
The Supreme Court of Ohio has held that “‘governmental interference cannot excuse [performance] unless it truly “supervenes” in such a manner as to be beyond the seller’s assumption of risk.’ In order to excuse performance, the contingency must be unforeseen and unusual.” Security Sewage at 254, quoting R.C. 1302.73, Comment 10.
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
As indicated, the lease required the appellants to obtain the licenses or permits necessary to conduct their business operations. The lease did not excuse the appellants’ payment obligation in the event of “restrictive governmental laws or regulations, * * * or other reason beyond its control.” Based on the plain and ordinary 15 meaning of these provisions, the parties expressly allocated the risk of government delay to the appellants.
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
The Supreme Court of Ohio has not expressly adopted the doctrine, although the court once acknowledged its existence in a footnote. See In re Adams, 45 Ohio St.3d 219, 220, 543 N.E.2d 797 (1989), fn. 1 (“With respect to the separation agreement, appellee does not challenge the enforceability of the agreement by asserting claims based upon the law of contracts, to wit: frustration of purpose, impossibility of performance or conditions subsequent. Our review of the record discloses no facts to support such assertions”).
- case2021-Ohio-1063Wroblesky v. HughleyOhio Ct. App. 11th Dist.decided 2021
The words that state the rule
Ohio courts that have recognized the doctrine have adopted the standard set forth in the Restatement of the Law. See, e.g., Donald Harris Law Firm at ¶ 16.3 The Restatement describes “discharge by supervening frustration” as follows: {¶58} “Where, after a contract is made, a party’s principal purpose is substantially frustrated without his fault by the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or the circumstances indicate the contrary.” Restatement of the Law 2d, Contracts, Section 265, at 334 (1981).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.