Court Upholds Defense Based On The Frustration-Of-Purpose Doctrine Due To Covid 19 Pandemic Preventing Access To Public Events

Posted: June 13, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Breach of Contract, COVID-19

Court Upholds Defense Based On The Frustration-Of-Purpose Doctrine Due To Covid 19 Pandemic Preventing Access To Public Events

On May 15, 2025, Justice Joel M. Cohen denied a summary judgment motion seeking dismissal of a defense based on the frustration-of-purpose doctrine after the Covid 19 pandemic prevented the party from fulfilling its contractual obligation to provide access to high-profile performances and live events. In Penske Media Corp. v. Shutterstock, Inc., Index No. 652761/2024, Penske Media Corporation (PMC) and Shutterstock had entered into an agreement whereby PMC granted Shutterstock access to high-profile live events like the Academy Awards and Tony Awards ceremonies in exchange for a cut of royalties. The Covid 19 pandemic disrupted this arrangement by canceling many such events, leading to a declaration of default for failing to provide access to live events. The Court denied summary judgment on the doctrine, explaining:

“In order to invoke the doctrine of frustration of purpose, the frustrated purpose must be so completely the basis of the contract that, as both parties understood, without it, the transaction would have made little sense.” . . . As this Court observed in another pandemic-related contract action, the frustration of purpose doctrine “has its origin in what are known as the coronation cases” in which “defendant was excused from his duty of payment for use of the plaintiff’s apartment along the route of the coronation procession, when the procession was cancelled because the King became ill.” . . . In this case, Shutterstock had agreed to pay PMC a large, up-front “annual fully recoupable advance” against such royalties at the start of each of the Agreement’s six successive, one-year License Periods. . . . Thus, under the Agreement, Shutterstock has a viable argument that each License Period stands on its own. And at the time the payment was due, none of these Events were happening. . . . Moreover, deriving some nominal value under the Agreement during the pandemic does not conclusively foreclose the defense here because, as noted, the question is whether this unforeseen event “substantially frustrated” Shutterstock’s “principal purpose” in entering the Agreement.

The attorneys at Schlam Stone & Dolan frequently counsel clients facing disputes over contracts disrupted by the pandemic. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such issues.