Frustration

Frustration happens when an event supervenes (without the fault of either party, and for which the contract doesn't address the event) which so significantly changes the nature of the contract from what they could reasonably have contemplated when making the contract, that the courts would find it unjust to hold them to the literal contract in the new circumstances. In such situations, the parties are entitled to not perform their contractual obligations.
 
Typically, the courts ask the hypothetical question: if the contracting parties, as reasonable people, had contemplated the supervening event at the time of contracting, would they have agreed that it would put the contract to an end.  This artificial notion has been replaced by the view that parties will be released from their obligations as a matter of law if, without the fault of either of them, there has been a radical transformation in the circumstances governing performance under the contract.
 
In British Columbia, there is a Frustrated Contract Act.  A decent plain language summary of the doctrine can be found in Wikipedia. It deals with the law of England, but it can be applied at a general level in Canada.
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