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RESTATEMENT, SECOND, CONTRACTS (1981).

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§ 265 CONTRACTS, SECOND Ch. 11

181 Misc. 91, 43 N.Y.S.2d 674 (1943).
Illustration 3 is based on La Cumbre
Golf and Country Club v. Santa Bar-
bara Hotel Co., 205 Cal. 422, 271 P.
476 (1928). Cf. West Los Angeles
Inst. for Cancer Research v. Mayer,
366 F.2d 220 (9th Cir. 1966), cert.
denied, 385 U.S. 1010 (1967). Illus-
tration 4 is based on 20th Century
Lites v. Goodman, 64 Cal. App.2d
938, 149 P.2d 88 (1944); see Illustra-
tion 3 to former § 288. Illustration 5
is based on Swift Canadian Co. v.
Banet, 224 F.2d 36 (3d Cir. 1955);
Amtorg Trading Corp. v. Miehle
Printing Press & Mfg. Co., 206 F.2d
103 (2d Cir. 1953); see Popper v. Cen-
tre Brass Works, 130 Misc. 1028, 43
N.Y.S.2d 107 (1943); Sechrest v. For-
est Furniture Co., 264 N.C. 216, 141
S.E.2d 292 (1965). Illustration 6 is
based on Frazier v. Collins, 300 Ky.
18, 187 S.W.2d 816 (1945); Essex-
Lincoln Garage v. City of Boston, 342
Mass. 719, 175 N.E.2d 466 (1961); see
Megan v. Updike Grain Corp., 94
F.2d 551 (8th Cir.), cert. dismissed
per stipulation, 305 U.S. 663 (1938);
Lloyd v. Murphy, 25 Cal.2d 48, 153
P.2d 47 (1944); Mitchell v. Ceazan
Tires, 25 Cal.2d 45, 153 P.2d 53 (1944);
Pete Smith Co. v. City of El Dorado,
258 Ark. 862, 529 S.W.2d 147 (1976);
Bunting v. Orendorf, 152 Miss. 327,
120 So. 182 (1929); Raner v. Gold-
berg, 244 N.Y. 438, 155 N.E. 733
(1927); Byrnes v. Balcom, 265 A.D.
268, 38 N.Y. S.2d 801 (1942), aff'd, 290
N.Y. 730, 49 N.E.2d 1004 (1943);
Kend v. Crestwood Realty Co., 210
Wis. 239, 246 N.W. 311 (1933);
Annot., 89 A.L.R.3d 329 (1978); cf.
United States v. General Douglas
MacArthur Senior Village, Inc., 508
F.2d 377 (2d Cir. 1974). That the
doctrine of frustration of purpose is
applicable to leases, see Perry v.
Champlain Oil Co., 101 N.H. 97, 134
A.2d 65 (1957). But see Wood v.
Bartolino, 48 N.M. 175, 146 P.2d 883
(1944).
Comment b. Illustration 7 is sug-
gested by McNally v. Moser, 210 Md.
127, 122 A.2d 655 (1956). On the
"fault" of the party seeking excuse,
see Chicago, M., St. P. and Pac. Ry.
v. Chicago & N.W. Trans. Co., 82
Wis.2d 514, 263 N.W.2d 189 (1978).

§ 266. Existing Impracticability or Frustration

(1) Where, at the time a contract is made, a party's
performance under it is impracticable without his
fault because of a fact of which he has no reason to
know and the non-existence of which is a basic as-
sumption on which the contract is made, no duty to
render that performance arises, unless the language
or circumstances indicate the contrary.
(2) Where, at the time a contract is made, a party's
principal purpose is substantially frustrated without
his fault by a fact of which he has no reason to know
and the non-existence of which is a basic assumption
on which the contract is made, no duty of that party to
See Appendix for Court Citations and Cross References
338
Ch. 11 IMPRACTICABILITY OF PERFORMANCE § 266
render performance arises, unless the language or cir-
cumstances indicate the contrary.

Comment:
a. Relation to other rules. A party's performance may be as
easily affected by impracticability existing at the time the contract was
made, because of some fact of which he was ignorant, as by superven-
ing impracticability. Indeed, it is sometimes difficult to characterize a
situation as involving either existing or changed circumstances, as, for
example, where a judicial decision is handed down after the time that
the contract was made giving an unanticipated interpretation to a stat-
ute enacted before that time. Cf. Illustration 3. The rules stated in
this Section for cases of existing impracticability and frustration there-
fore parallel those for supervening impracticability and frustration (§§
261, 265). The rules stated in §§ 262-64 for determining when the
non-occurrence of an event is a basic assumption on which a contract is
made for the purpose of § 261 apply by analogy in determining when
the non-existence of a fact is such a basic assumption for the purpose of
this Section. There are two respects in which the rules stated in this
Section differ from those applicable to supervening impracticability
and frustration. First, under the rules stated in this Section, the af-
fected party must have had no reason to know at the time the contract
was made of the facts on which he later relies. Second, the effect of
these rules is to prevent a duty from arising in the first place rather
than to dischaige a duty that has already arisen. Where a party has
partly performed before discovery of the impracticability or frustra-
tion, he may claim relief including restitution under the rules stated in
§§ 240 and 370-77. See Illustration 5 and § 272(1). In many of the
cases that come under this Section, relief based on the rules relating to
mistake stated in Chapter 6 will also be appropriate. See Introduc-
tory Note to Chapter 6. In that event, the party entitled to relief
may, of course, choose the ground on which he will rely. In other
cases that come under the rules stated in this Section, the rules on
agreements unenforceable on grounds of public policy stated in Chap-
ter 8 will also apply. To the extent that the latter bar relief for rea-
sons based on public policy, they are controlling.

Illustrations:
1. A contracts to sell a specified machine to B for $10,000.
At the time the contract is made, the machine has been destroyed
by fire without A's fault but A has no reason to know this. Under
the rule stated in Subsection (1) no duty arose under which A is to

See Appendix for Court Citations and Cross References

339
§ 266 CONTRACTS, SECOND Ch. 11

deliver the machine, and A is not liable to B for breach of con-

tract. Cf. Illustration 7 to this Section and Illustration 5 to § 263.
2. A and B make a contract under which A is to sell B a
house. B, an experienced real estate dealer, insists on the inclu-
sion of a provision under which A is to procure a permit for its
conversion into a two family dwelling. Two days earlier, a local
zoning ordinance was enacted prohibiting such a conversion, but
A has no reason to know this. A is unable to procure the permit.
Under the rule stated in Subsection (1), no duty arose under
which A is to procure the permit, and A is not liable to B for
breach of contract. See § 264.
3. A, in public bidding, is awarded a contract to build a hos-
pital for the State. A makes a subcontract with B for the installa-
tion of glass. Before B begins performance, a court declares the
contract between A and the State to be invalid because of depar-
tures, of which A had no reason to know, from administrative
procedure required for public bidding. A notifies B that he will
be unable to perform his contract with B. Under the rule stated
in Subsection (1), no duty arose under which A is to perform his
contract with B, and A is not liable to B for breach of contract.
See § 264. Cf. Illustration 3 to § 264. B may have a claim against
A under the rule stated in § 272(1).
4. A, an engineering firm, contracts with B to lay water
mains under a river. After diligent effort, A is unable to do the
work, although other, more experienced firms could do it. Per-
formance is not impracticable. A is under a duty to lay the mains,
and A is liable to B for breach of contract. See Comment e to §
261.
5. A, an owner of land, and B, a builder, make a contract
under which B is to take from A's land, at a stated rate per cubic
yard, all the gravel and earth necessary for the construction of a
bridge, an amount estimated to be 114,000 cubic yards. Much of
the gravel and earth is below water level and cannot be removed
by ordinary means, so that removal would require the use of spe-
cial equipment at ten times the usual cost per cubic yard, but B
has no reason to know this. After removing 50,000 yards, B dis-
covers that this is the case for the remaining gravel and earth, and
refuses to take or pay for it. Under the rule stated in Subsection
(1), no duty arose under which B is to take or pay for the gravel,
and B is not liable to A for breach of contract. A may have a claim
against B under the rule stated in § 272(1).

See Appendix for Court Citations and Cross References

340
Ch. 11 IMPRACTICABILITY OF PERFORMANCE § 266
6. A contracts to sell land to B for B's use as a health resort
and milk farm. Two days earlier, a local zoning ordinance was
enacted forbidding its use for this purpose, but B has no reason to
know this. On discovery of the ordinance, B refuses to take or
pay for the land. Under the rule stated in Subsection (2), no duty
arose under which B is to take or pay for the land, and B is not
liable to A for breach of contract.
b. Contraryindication. As under the rules stated in §§ 261 and.
265, the language or circumstances may indicate that a party has as-
sumed a greater obligation than that imposed on him under this Sec-
tion. It is somewhat more usual for a party to undertake such an
obligation with respect to existing facts than it is with respect to su-
pervening events. A common and important instance occurs when a
seller warrants specific goods against defects (Illustration 7).
Whether a party has assumed such an obligation is a particularly trou-
blesome question where the parties make a contract calling for techno-
logical development under a mistaken assumption that such develop-
ment either is feasible under the existing state of the art or will
become feasible as a result of a technological breakthrough (Illustra-
tions 9 and 10). In such a case the court will determine whether the
obligor took the risk that development might not be practicable by
looking at such factors as the history of the negotiations, the relative
expertise and bargaining power of the parties, their respective roles
with regard to plans and specifications, the nature of the performances
and the state of technology in the industry. If the obligee has under-
taken an obligation as to the accuracy and sufficiency of the plans and
specifications, then the consequences of their inaccuracy or insuffi-
ciency are governed by the rules stated in Chapter 10, Performance
and Non-Performance.

Illustrations:
7. A contracts to sell a specified machine to B for $10,000,
warranting its merchantability. At the time the contract is made,
the machine is not merchantable because of an uncurable defect
not (lue to the fault of A, but A has no reason to know this.
Because of A's warranty, he is under a duty to deliver a merchant-
able machine in spite of the impracticability of doing so, and A is
liable to B for breach of contract.
8. A contracts with B to build a house on B's land according
to plans furnished by A. Because of subsoil conditions, of which
A has no reason to know, this cannot be done unless the land is
drained at great expense. After the house is partly completed, it

See Appendix for Court Citations and Cross References

341
§ 266 CONTRACTS, SECOND Ch. 11

collapses because of these conditions, and A refuses to continue

the work. The court may determine from all the circumstances,
including the fact that A furnished the plans, that A is under a
duty to build the house in spite of the impracticability of doing so,
and that A is liable to B for breach of contract. Compare Illustra-
tion 4 to § 263.
9. A contracts with B to develop, manufacture, and deliver
a light weight electronic device according to A's own specifications
by means of what both A and B understand will be a revolutionary
technological breakthrough. No breakthrough occurs, and A is
unable to deliver the device because it is not possible for any man-
ufacturer, under the state of the art, to keep the weight within the
contract specifications. The court may determine from all the
circumstances, including the facts that A furnished the specifica-
tions and that the parties understand that A will achieve a break-
through, that A is under a duty to deliver the device in spite of the
impracticability of doing so, and that A is liable to B for breach of
contract.
10. A contracts with B to manufacture and deliver a light
weight electronic device according to specifications furnished by
B's engineers. It is not possible for any manufacturer to keep the
weight within the contract specifications, but A has no reason to
know this. A does not deliver the device. The court may deter-
mine from all the circumstances, including the fact that B fur-
nished the specifications, that A is under no duty to deliver the
device because of the impracticability of doing so and that A is not
liable to B for breach of contract.

REPORTER'S NOTE
Subsection (1) is based on former §
456. Subsection (2) makes it clear
that a similar rule applies to frustra-
tion of purpose. See former § 288.
See 6 Corbin, Contracts § 1326 (1962);
18 Williston. Contracts § 1933 (3d ed.
1978).
Comment a. Illustration I is
based on Uniform Commercial Code §
2-613; see Illustration I to former §
456; Kraznowiecki, Sale of Non-Exist-
ent Goods: A Problem in the Theory
of Contracts, 34 N.D. Law. 358
(1959). Illustration 2 is based on
See Appendix for Court Citations and Cross Referenv-u
342
Partridge v. Presley, 189 F.2d 645
(D.C. Cir.), cert. denied, 342 U.S.
850 (1951). For a case where a party
had reason to know of the facts, see
In re Zellmers Estate, 1 Wis.2d 46,
82 N.W.2d 891 (1957). Illustration 3
is based on Boston Plate & Window
Glass Co. v. John Bowen Co., 335
Mass 697, 141 N.E.2d 715 (1957). Il-
lustration 4 is based on B's Company
v. B.P. Barber & Assoc., 391 F.2d
130 (4th Cir. 1968). Illustration 5 is
based on Mineral Park Land Co. v.
Howard, 172 Cal. 289, 156 P. 458
(1916); see Illustration 4 to former §
Ch. 11 IMPRACTICABILITY OF PERFORMANCE
461; Faria v. Southwick, 81 Idaho 68,
337 P.2d 374 (1959); Housing Author-
ity of City of Bristol v. East Tennes-
see Light &Power Co., 183 Va. 64, 31
S.E.2d 273 (1944); Virginia Iron, Coal
& Coke Co. v. Graham, 124 Va. 692,
98 S.E. 659 (1919); Paxton Lumber
Co. v. Panther Coal Co., 83 W. Va.
341, 98 S.E. 563 (1919). But cf. Reid
v. Alaska Packing Ass'n, 43 Or. 429,
73 P. 337 (1903). Illustration 6 is
based on Mariani v. Gold, 13
N.Y.S.2d 365 (Sup. Ct. 1939).
Comment b. Calvin V. Kolter-
mann, Inc. v. Underream Piling Co., 563
S.W.2d 950, 957 n.5 (Tex. Civ. App.
1977), ref. n.r.e., contains broad lan-
guage at variance with the rule of this
Section, but on its facts and reasoning
seems consistent with the first two
sentences of this Comment. Illustra-
tion 7 is based on Illustration 3 to
former § 456. Illustration 8 is based
on Rowe v. Town of Peabody, 207
Mass. 226, 93 N.E. 604 (1911); Stees
v. Leonard, 20 Minn. 494 (1874); see
Illustration 1 to former § 467; Beacon
Tool & Mach. Co. v. National Prods.
Mfg. Co., 252 Mass. 88, 147 N.E. 572
(1925); School Trustees of Trenton v.
Bennett, 27 N.J.L. 513 (1859); cf.
Valley Constr. Co. v. Lake Hills
Sewer Dist., 67 Wash.2d 910, 410
P.2d 796 (1965). Illustration 9 is
based on Austin Co. v. United States,
§ 267
161 Ct. Cl. 76, 314 F.2d 518, cert.
denied, 375 U.S. 830 (1963); J.A.
Maurer, Inc. v. United States, 2Q2
Ct. Cl. 813, 485 F.2d 588 (1973);
Aerosonic Instrument Corp., 1959-1
Board of Contract Appeals Decisions
Par. 2115; see United States v.
Wegematic Corp., 360 F.2d 674 (2d
Cir. 1966). Illustration 10 is based on
Hol-Gar Mfg. Corp. v. United States,
175 Ct. Cl. 518, 360 F.2d 634 (1966);
Foster Wheeler Corp. v. United
States, 206 Ct. Cl. 553, 513 F.2d 588
(1975); Stock & Grove, Inc. v. United
States, 204 Ct. Cl. 103, 493 F.2d 629
(1974); Northern Corp. v. Chugach
Elec. Ass'n, 518 P.2d 76 (Alaska),
modified on rehearing 523 P.2d 1243
(1974); id. on appeal from trial on
remand, 562 P.2d 1053 (Alaska 1977);
Helene Curtis Indus. v. United
States, 160 Ct. Cl. 437, 312 F.2d 774
(1963); Smith Eng'r Co. v. Rice, 102
F.2d 492 (9th Cir. 1938), cert. denied
307 U.S. 637 (1939); see Illlustration 4
to former § 456; cf. Illustration 2 to
Restatement of Restitution § 16;
compare Natus Corp. v. United
States, 178 Ct. Cl. 1, 371 F.2d 450
(1967). On the problems raised by
Illustrations 9 and 10, see Cuneo &
Crowell, Impossibility of Perform-
ance: Assumption of Risk or Act of
Submission, 29 Law & Contemp.
Prob. 531 (1964).

§ 267. Effect on Other Party's Duties of a Failure Justified

by Impracticability or Frustration
(1) A party's failure to render or to offer performance
may, except as stated in Subsection (2), affect the
other party's duties under the rules stated in §§ 237
and 238 even though the failure is justified under the
rules stated in this Chapter.

See Appendix for Court Citations and Cross References

343