Frustration of Purpose

Case: Washington State Hop Producers, Inc. v. Goschie (1989, WA) [pp. 850-858]

Parties: Plaintiff - Washington State Hop Producers. James W. Butzow, Trustee

Defendant - hop growers (Goschie Farms)

Procedural History: P appealed superior courts summary judgment in favor of D

rescinding various contracts for the purchase of hop allotments. Wash. Appeals
court affirmed.

Facts: Until 1985, the Dept of Agriculture required hop growers to obtain federal
allotments in order to market their hops, known as "hop base". P, the trust, was
organized in 1979 to acquire, lease and sell federal hop base. Over time, "hop
base" became a scarce and expensive commodity and the marketing allotments order
were terminated in 1985. Prior to termination the trust had received bids on many
of their hop bases. After the termination, the price had decreased to 1/10 of the
price beforehand. Those growers who had paid sued the trust for return of their
money, the trust sued the non payers.

Issue: Whether the bidders can be excused because of a change in law that no
longer required them to K with the trust. -Yes.

Holding: The court granted summary judgment holding the trust was not entitled
to the money, and the growers were entitled to a return of their money.

Reasoning: The court stated that the basis purpose of the contracts, to purchase
a hop allotment base, was frustrated by the termination of the allotment system
because hop base existed only by virtue of that system. Thus, the continued need
to own or control hop base in order to sell hops was an assumption central to the
subject matter of the contract, and without this assumption no contract would have
been made.

○ Contracts §265 - "Where the contract is made, a party's principal purpose

is substantially frustrated without his fault by the occurrence of an event the
non-occurrence of which was a basic assumption on which the contract was made, his
remaining duties to render performance are discharged, unless the language or the
circumstances indicate the contrary."