## Facts

- The Commonwealth, through its Department of Public Works, contracted with John J. Paonessa Company, Inc. to resurface and improve sections of Route 128, including replacing a grass median with concrete surfacing and precast concrete median barriers.
- Paonessa entered into supply contracts with Chase Precast Corporation under which Chase would manufacture and supply, in the aggregate, 25,800 linear feet of concrete median barriers meeting the Department’s specifications, as reflected in purchase orders.
- After construction began, residents protested removal of the grass median and installation of barriers; a Superior Court action was filed seeking to stop installation.
- The Department temporarily suspended barrier installation; anticipating a project reduction, Paonessa asked Chase to stop production, and Chase complied.
- Chase had already produced and delivered about half the barriers and was paid for those delivered.
- The Department later settled the citizen litigation and unilaterally deleted the median-barrier work from Paonessa’s prime contract, eliminating the project’s need for additional barriers.
- Chase sued Paonessa for anticipated profits on the undelivered portion of the supply contracts; Paonessa impleaded the Commonwealth for indemnification if Paonessa were held liable.

## Issues

1. Whether Massachusetts recognizes frustration of purpose as a defense to a breach of contract action.
2. If recognized, whether the Department’s unforeseeable, unilateral deletion of the barrier work from the prime contract—without contractual risk allocation—discharged Paonessa’s duty to buy the remaining barriers and barred Chase’s claim for lost profits.

## Decision

- The Supreme Judicial Court affirmed judgment for Paonessa.
- The court held that Massachusetts recognizes frustration of purpose as a contract defense.
- The court concluded that Paonessa’s remaining performance under the subcontract was excused because a supervening governmental action eliminated the subcontract’s principal purpose.
- The court treated frustration of purpose, not impossibility, as the correct doctrinal basis because performance was still physically possible but had lost its value for the contracted project.

## Legal Principles

- Frustration of purpose may discharge a party’s remaining contractual duties when an event, not anticipated or caused by either party, and not allocated by the contract, destroys the contract’s principal purpose and thus substantially destroys the value of the expected performance.
- Impossibility/impracticability concerns inability to perform the promised act; frustration concerns destruction of the value of performance while performance remains possible.
- A governmental modification deleting the relevant work from a public contract can frustrate a related subcontract where the subcontract’s purpose is tied to the deleted work and the parties did not assign the cancellation risk to either side.
- Frustration requires more than reduced profitability or ordinary commercial risk; it requires loss of the contract’s basic purpose.

## Conclusion

Because the Commonwealth’s unforeseeable, unilateral deletion of the median-barrier item from the highway project substantially destroyed the purpose and value of Paonessa’s remaining obligations under the supply contracts, and the parties had not allocated that risk, Paonessa was discharged by frustration of purpose and was not liable to Chase for anticipated profits on the undelivered barriers.


Chase Precast Corp. v. John J. Paonessa Co., 409 Mass. 371, 566 N.E.2d 603 (Mass. 1991)