1L Law Source

TO: MJN

FROM: 707528848

DATE: August 22, 1998

RE: Dorn brief

Heading: Dorn v. Goetz, 85 Cal. App. 2d 407, 193 P.2d 121 (1948).

Facts: - On February 15, 1946 plaintiffs entered into a contract for the sale of their home to the defendants for the sum of $13,000.

A standard deposit of $1,000 was made with the agreement the balance would be paid upon transfer of title.
If the seller did not deliver title within 90 days the purchaser could demand the deposit back.
The contract was contingent upon the sellers moving into a new house which the sellers were planning on soon building.
Sellers expected the new home to be ready by July 1, 1946.
Sellers desired not to fix this date specifically because of possible unforeseen building difficulties.
Sellers agreed to give notice to buyers 30 days in advance of the exact date the sellers would vacate and deliver the property to the buyers.
On May 22, 1946 the President approved the Veteran’s Emergency Housing Act which limited construction to housing facilities for veterans.
On June 30, 1947 this act was repealed.
Immediately after signing the contract plaintiffs hired an architect to draw plans for their new home.
Because of the Housing Act plaintiffs were unable to obtain the necessary building priorities which caused the temporary delay of the commencement of the erection of their home.

Procedure: Dorn brought suit for declaratory relief in the Superior Court of San Mateo County. Judgement was for the defendant and plaintiff appealed. The California Appellate Court affirmed the decision of the lower court.

Issue: Did the government’s declaration of the Veterans’ Emergency Housing Act, which limited construction of new housing facilities to veterans, thereby delaying a stipulation in the contract declaring P would build and move into a new house before giving title of his old house to D, constitute frustration therefore entitling P to have the said contract rescinded and cancelled?

Rule: In order to determine if an event allegedly causing frustration was foreseeable the relation of the parties, terms of the contract, and the circumstances surrounding its formation must be examined. If the event causing allegedly causing frustration is found to have been foreseeable, then frustration cannot be used as a defense.

Holding: Frustration did not exist in this case because in order for frustration to apply a supervening and unforeseen event must occur which would cause destruction of the contract. Therefore there are no grounds for rescinding the contract

Rationale: Given the unsettled conditions that occur during war times, P should have foreseen the probability of a difficult time in obtaining necessary supplies for building a new home. Frustration did not occur in this case because the event that is alleged to have caused it was reasonably foreseeable. Also, if frustration is to apply it must be recognized by both parties; the building of another home was the desired object of one party only. Additionally a claim of frustration must be accompanied by evidence of harm. P never presented any evidence to show there was any harm done. P also argues case law supports the reformation of a contract in the event of a mutual mistake. There is no evidence of a mutual mistake. The Housing Act only caused a delay in the sale of the house which is not sufficient reason to claim frustration.

Policy/Notes: The doctrine of frustration and the doctrine of impossibility (Civ. Code 1511) are similar but not the same. Frustration is not a form of impossibility. With frustration performance remains possible but the expected value of the performance has been destroyed.