DDS Wireless International, Inc. v. Nutmeg Leasing, Inc.
The doctrine of frustration of purpose was first recognized in the 1903 English case of Krell v. Henry, concerning a contract to view the coronation procession for King Edward VII that was cancelled and as originated and applied by Connecticut courts, the doctrine acts to provide an excuse for nonperformance by a party whose purposes were thwarted by events the parties did not contemplate and could not foresee. DDS Wireless International, Inc., brought this breach of contract action against Nutmeg Leasing Inc., for unilaterally repudiating a service agreement. The defendant admitted to terminating the agreement but, denied liability, asserting special defenses, including that the contract's purpose was frustrated. The defendant had purchased from the plaintiff a mobile digital dispatch system to operate its fleet of taxi cabs. A service agreement for the plaintiff to conduct necessary maintenance on the system was renewed in exchange for quarterly payments through June 29, 2011. The contract contained a termination provision if either party failed to perform "and such failure continues for … 30 days after written notice from the other party." Without complying with this provision, the defendant wrote to the plaintiff on Sept. 23, 2010, terminating the contract as of Sept. 30, 2010. The defendant's principal testified to system malfunctions. The trial court rendered judgment for the plaintiff, but concluded that the service agreement's purpose was frustrated by the nonworking system and the plaintiff was not entitled to the full contract price. Judgment entered for the plaintiff, limited to the amount owing before Sept. 30, 2010. The plaintiff appealed, claiming that it was entitled to the full contract price. The Appellate Court reversed the judgment. Given the facts in the record, the trial court improperly concluded that the defendant was excused from performing its obligations under the doctrine of frustration of purpose. The parties plainly contemplated a situation in which the defendant would not be satisfied with the plaintiff's performance. The contract's termination provision gave the defendant a legal avenue to end its relationship with the plaintiff. Because the parties foresaw that the defendant might be dissatisfied with the plaintiff's maintenance of the system, the actual occurrence of this event did not excuse the defendant's duty to perform its obligations under the contract.