Frustration of Purpose and Impossibility of Performance Must be Pleaded as Affirmative Defenses

JB Pool Management, LLC v. Four Seasons at Smithville Homeowners Ass’n, Inc., 431 N.J. Super. 233 (App. Div. 2013).  Plaintiff, a pool management company, contracted with defendant condominium association to supply lifeguards and maintenance service for the association’s indoor pool.  During the contract period, mold was discovered in the pool facilities, and the pool was closed for months, by order of government officials, so that the mold condition could be remediated.  Plaintiff sued for four months’ worth of service fees that the association had not paid while the pool was closed.

Defendant did not assert as affirmative defenses in its Answer either the doctrine of frustration of purpose or the principle of impossibility of performance, though defendant did invoke impossibililty of performance in its successful opposition to plaintiff’s motion for summary judgment.  After a three-day jury trial, the Law Division, on its own motion, charged the jury with the frustration of purpose doctrine.  The jury returned a verdict for defendant on plaintiff’s claim, and also ruled for defendant on a counterclaim involving different issues.  Plaintiff appealed.  In an opinion by Judge Sabatino, the Appellate Division reversed on plaintiff’s breach of contract claim but affirmed the verdict for defendant on the counterclaim.

Judge Sabatino provided a detailed description of what he called “doctrinal siblings within the law of contracts”:  impossibility of performance and frustration of purpose.  Both doctrines have been recognized in New Jersey and elsewhere, and the Restatement (Second) of Contracts, which is cited throughout the opinion, addresses those concepts as well.   

The panel stated that the trial judge “should be commended for his perceptiveness” in noting, at the jury charge conference, that frustration, rather than impossibility, best fit the facts of this case.  But the problem was that plaintiff was not put on notice that frustration of purpose would be in the case until the charge conference, well after discovery had closed.  Had plaintiff known sooner that frustration of purpose would be argued to the jury, plaintiff “might well have explored the elements of that doctrine in [its] trial preparation.” 

Judge Sabatino did not blame defendant for not having given notice of a frustration of purpose defense, since neither the Court Rules nor any caselaw expressly require a party to plead frustration of purpose or impossibilty of performance as affirmative defenses.  (The opinion did note, however, that Model Jury Charges do consider frustration and impossibllity as affirmative defenses; in a footnote, Judge Sabatino urged that the Model Civil Jury Charge Committee consider whether the Model Charge on frustration is “internally redundant” and whether it “could lead to inconsistent judge/jury determinations,” the third time this month that a panel of the Appellate Division has expressed criticism of Model Civil Jury Charges).

Especially since frustration and impossibility are not listed among the illustrative defenses recited in Rule 4:5-4, the panel was “loathe to declare that the association waived these defenses here by omitting them from its responsive pleading.”  Instead, the Appellate Division reversed and remanded for a new trial preceded by a period of discovery on the frustration of purpose issue.  The decision also mandated that, “in future cases, the defense of frustration of purpose, or impossibility of performance, be raised in a responsive pleading, unless exceptional circumstances excuse that oversight.”

There was an additional reason for reversal on plaintiff’s breach of contract claim.  The contract itself stated that “[t]here will be no reduction in charges of the contract amount for any closing” of the pool.  The frustration of purpose doctrine does not undo a party’s duties under a contract where “the [contract] language or the circumstances indicate the contrary.”  The trial judge did not take account of this language, or whether it was ambiguous so as to permit or require extrinsic proof of the parties’ intent in choosing that language.  On retrial, the panel directed that this be done.

Defendant did not try to “hide the ball” in this case.  It simply did not timely assert certain available defenses.  By adding frustration of purpose and impossibility of performance to the list of defenses as to which timely notice must ordinarily be given, the decision in this case serves the desirable ends of reducing procedural gamesmanship and resulting unfair surprise in future cases.