Plummeting Market Prices: Frustration, Force Majeure, or Hardship?

Abstract

May a substantial reduction in the market price for commodities or minerals activate the doctrine of frustration, thereby relieving a party from its contractual obligations under a related contract – say, for the long-term sale of commodities, or for the construction or expansion of a mineral processing facility? Having regard to the drastic fall in market prices for some commodities and minerals in recent times, this issue assumes growing importance. This article will explore and restate the current law on the doctrine of frustration. It will also discuss the use of contract drafting (in particular, force majeure and hardship clauses) to deal with drastic adverse changes that severely impact on the economic burden of performance of contractual obligations.

Keywords: doctrine of frustration, force majeure, hardship, market price, contractual obligations