Ontario Mortgage Agent Practice Exam

What is frustration in the context of contracts?

1. A court order that prohibits a party from doing something or acting in a certain manner

2. When an event outside of the control of the parties makes the performance of the contract impossible

3. A condition for financing which allows the Borrower to cancel the contract if he or she cannot obtain mortgage financing

4. A threat or act that induces another person to perform some act against his or her will

The correct answer is: When an event outside of the control of the parties makes the performance of the contract impossible

Explanation Frustration in the context of contracts refers to when an unexpected and unavoidable event occurs that makes it impossible for one or both parties to fulfill their contractual obligations. This is often seen as a form of legal defense for parties who can no longer perform their duties due to external circumstances. Option A is incorrect because a court order is a deliberate action, whereas frustration is an unforeseen event. Option C is incorrect because a financing condition only applies if the borrower is unable to obtain a mortgage, not if they are unable to fulfill other contractual obligations. Option D is incorrect because it refers to coercion, which is not related to frustration in contracts.