A service provider’s failure to perform its contractual obligations in an outsourcing arrangement may arise from many possible reasons. Frustration of contract may occur due to force majeure, impossibility, legal incompetency (such as a lack of governmental approvals in a regulated industry), breach by the other party, short supplies and other reasons.
Unlike the Uniform Commercial Code on the sale or leasing of goods, the law governing performance of service contracts does not automatically entitle the service provider to be excused from nonperformance due to events beyond its control. Accordingly, the outsourcing contract needs to define critical elements that excuse the service provider from failures to perform, or excuse the enterprise customer from failure to pay or perform its other obligations.
Excused Nonperformance