On April 1, KO Contractors, Inc., contracts to build a store for Lo-Cost Jewelry at a specific location in Metro City. On May 1, Metro changes its zoning laws to prohibit the construction of a commercial building at that location. Lo-Cost files a suit against KO. In this situation
A) KO is in breach of contract.
B) Lo-Cost is in breach of contract.
C) the contract is discharged.
D) the contract is suspended.

Question

Quizplus · Accepted Answer

When an unforeseeable event occurs after a contract is formed that substantially affects the party's performance, it is known as a frustration of purpose. In this situation, the zoning law change frustrates the purpose of the contract, and since it is outside both parties' control, it would discharge the contract. Therefore, neither party is in breach of the contract, nor is it suspended.