Contracts can be declared void if the conditions of the contract become impossible (aka the doctrine of frustration). However, the doctrine cannot be invoked just because one side is going to lose a lot of money on the deal. Maple Farms learned this the hard way in the case of Maple Farms Inc. v. City School Dist. (76 Misc.2d 1080, 352 N.Y.S.2d 784 (N.Y.Sup. 1974)). In that case, Maple Farms supplied milk to a local school district for a set price (a fixed price contract). Market factors in 1973 drove the price of milk too high and it became impractical for Maple to sell the milk without a taking a huge loss. They sued for a declaratory judgment that performance had become impracticalThe Court dismissed the claim and held Maple responsible for selling the milk.
- The Court found that even if the price rise was due to unforeseen events, the seller took a risk when they entered into a fixed-price contract.
- UCC §2-615 codifies this rule.
- The general rule is that, except for the most extreme of circumstances, a party claiming discharge from obligation because of unexpected financial burdens caused by a shift in market conditions will still be required to perform on the contract.
- But, courts are not totally consistent on the application of the doctrine of frustration. A similar case, (Mishara Constr. Co. v. Transit-Mixed Concrete Corp. (310 N.E.2d 363 (Mass. 1974)) that was decided the same year Massachusetts came to the opposite conclusion.