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The “Frustration Of Purpose” Doctrine Excuses Association For Performance Under Pool Maintenance Contract

In a matter entitled JB Pool Management, LLC v. Four Seasons at Smithville Homeowners Association, Inc., JB Pool Management contracted with the Association to provide lifeguard and pool maintenance servicesJB Pool contracted with the Association to provide management services to Four Seasons for the indoor pool and outdoor pool, as well as aerobics classes. The successive yearly contracts typically covered a full calendar year from January 1 through December 31. The parties' contract called for JB Pool to receive an annual fee, paid in monthly installments. One lifeguard was to be provided by JB Pool at all times specified in a contract. The lifeguard was responsible for keeping the pool clean, and maintaining the pool area in an orderly condition. The indoor pool was scheduled to be open year-round with the exception of certain holidays.

During the term of a contract, a mold infestation was discovered in the pool facilities, prompting government officials to order the pool closed for seven months while the mold was remediated. JB Pool used the Association for breach of contract, seeking to recover four months of service fees that the Association had not paid while the pool was closed.

In a case of first impression, the Superior Court of New Jersey, Appellate Division, held that the Doctrine of”Frustration of Purpose” could apply to excuse the Association's contractual duties for payment to JB Pool for the four months when the indoor pool was closed. The Court recognized that the Frustration of Purpose Doctrine “deals with the problems that arise when a change in circumstances makes one party's performance worthless to the other, frustrating his purpose in making the contract. . . . The frustration must be so severe that it is not fairly to be regarded as the risks that the party invoking the Doctrine assumed under the contract.” The Court also recognized that relief from contractual obligations under this theory will not be lightly granted, and the evidence satisfying the Doctrine's requirements “must be clear, convincing and adequate.”

The point of the JB Pool case is that under certain circumstances, which are rare, an Association's duty to perform under a contract may be excused if unforeseen circumstances happen which would frustrate the purpose of a contract. It is similar to the Doctrine of “Impossibility,” which may also excuse performance if a party's performance under the contract is rendered impossible by unforeseen events. These are doctrines which an Association should consider when faced with potential liability from a vendor arising out of circumstances that may have been beyond the parties' control.