A contract, once validly formed, is ordinarily binding on both parties regardless of how burdensome performance later becomes. The doctrine of frustration is a narrow, well-recognised exception to this rule: it discharges both parties from a contract when, after the contract is formed, an unforeseen event occurs that makes performance either impossible or so radically different from what was originally undertaken that it would be unjust to hold the parties to their original bargain.

Frustration does not apply merely because a contract becomes more expensive, less profitable, or more inconvenient to perform than either party expected. The event must strike at the very root of the contract, destroying the basis on which the parties agreed to contract in the first place -- the classic examples are the destruction of a specific thing essential to performance, a change in law that makes the agreed performance illegal, or the non-occurrence of an event that both parties treated as the foundation of their bargain, where that non-occurrence was not the fault of either party.

Frustration is unavailable in three recurring situations. First, where the event was actually foreseen and provided for in the contract itself -- for instance, through a force majeure clause allocating the risk of exactly that event -- the parties are bound by what they agreed rather than by the general doctrine, since they already addressed the risk themselves. Second, where the supervening event was caused by the fault, negligence, or deliberate act of the party seeking to rely on frustration, that party cannot use the doctrine to escape a difficulty of its own making. Third, frustration cannot be invoked merely because an alternative, more difficult or more expensive method of performance remains available; a contract is frustrated only where the originally agreed method of performance has become impossible or radically different, not merely harder.

Where a contract is genuinely frustrated, both parties are discharged from further performance from the date of the frustrating event onward, without either party being in breach, and any sums already paid or payable in advance are generally adjusted to prevent one party being unjustly enriched at the other's expense.