Chapter 12 Frustration Outline - Contract Law 1L PDF

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Frustration OutlineLord Radcliffe : Not the fault of either party after entering into a contract , as a result of subsequent events, the continued performance of a contract becomes impossible or radically different from that which was undertaken by the contract.Davis v Fareham UDC [1956]in certain s...

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Frustration Outline

Lord Radcliffe : Not the fault of either party after entering into a contract, as a result of subsequent events, the continued performance of a contract becomes impossible or radically different from that which was undertaken by the contract.

Davis v Fareham UDC [1956]

in certain situations where there is a change in the circumstances (not attributable to fault of either party ) which makes performance of the contract radically different from what the parties originally intended, justice requires that court should treat the contract as having come to an end.

promisor cannot rely Upon a supervening event as an excuse for non performance.

Paradine v Jane (1647)

A farm tenant was excluded from his farm for 2 years by ‘enemies of the king’ and claimed he was not liable to pay rent for the period he was dispossessed, held he was liable, as he had assumed an absolute obligation.

The contract was to be Taylor v Caldwell (1863 regarded as being subject to an implied term that parties shall be excused, if performance of contract were to become impossible by virtue of some event which is the fault of neither party.

The collateral benefit to be incurred under S2.(1) of the LSSA 1985 the congruency

adherence to freedom of contract was maintained by the use of an implied term whether or not a contract has been frustrated, courts apply a ‘multifactorial approach’ Factors which courts should take into account include:

Davis v Fareham UDC [1956] Edwinton v Tsavliris (The Sea Angel) (2007)

 Terms of the contract • Its matrix or context, • The parties’ knowledge, expectations, • Assumptions and contemplations, in particular as to risk, • The nature of the supervening event, • Parties’ reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances.

Therefore a contract will not be frustrated where performance is merely more expensive , inconvenient or difficult , but not radically different

Davis Contractors Ltd v Fareham Urban District Council

Court did not allow contract to be discharged by frustration when construction work took almost 3 times longer to complete and at increased cost. The contractors had taken the risk of the cost being less or greater than he expected and even though the job was more onerous , it never became a job of a different kind from what was contemplated in contract

Tsakiroglou & Co v Noblee and Thorl (1962)

The closure of the Suez Canal did not frustrate a contract for the carriage of goods from Port Sudan to Hamburg. The contract had not specified the route and the fact that the alternative route, via the Cape of Good Hope, would take much longer was not sufficient to frustrate the contract.

CTI Group Inc v Transclear SA (2008)

COA concluded that a contract to sell cement was not frustrated where the contract remained legally and physically possible where third party suppliers would not sell the necessary cement to the sellers with the result that the sellers could not supply the buyers with the cement.

Canary Wharf v EMA [2019]

A lease of London premises to the defendant was not frustrated by UK’s departure from EU(Brexit). The EMA was not legally required to move its offices but thought it convenient to do so. Performing the lease post Brexit was not a ‘’radically different thing than that undertaken under original contract’’

How do Courts determine frustration Destruction of Subject Matter

Unavailability of subject matter

Taylor v Caldwell (1863)

In this case a music hall, hired for a series of concerts, was destroyed by fire before the concerts took place. Blackburn J held that this destruction brought the contract to an end and discharged both parties from any further obligations under it.

Asfar v Blundell(1896)

Court stated that even partial destruction of subject matter can frustrate the contract, if that partial destruction has made contract impossible to perform or has made it radically different to what parties expected

Bank Line Ltd v Arthur Capel & Co( 1919)

A charterparty contract was held to be frustrated when the ship was requisitioned and so was unavailable for the charter. A ship was chartered for the voyage in Nov 1871 from Liverpool – Newport- san Francisco. On the way to Newport in Jan 1872 the ship ran aground and was not fully repaired until end of August 1872. Held a voyage to san Francisco in late Aug 1872 was performance radically different from what was originally contemplated , therefore contract frustrated due to non-availability of the ship.

Jackson v Union Marine(1874)

The Nema (1982)

Personal incapacity

Condor v Barron Knights( 1966)

Hart v Marshall &

A charter party was frustrated when a long strike closed the port at which the ship was due to load, so that out of the 6-7 voyages contracted to be made between April and December , no more than two could be completed.

Court held Condors employment contract was frustrated in a commercial sense as it was impractical to engage a stand in when he could not work 1974 -1976 was ill, when he had recovered he

Non -occurrence of an event The contract may be linked to an occurrence of an event , the non-occurrence of it, MAY result in contract being frustrated.The determining factor is whether the commercial purpose of the contract has failed completely – if so contract will be frustrated

Effects of War

Sons( 1978)

was informed there was no longer any work and he was let off. Tribunal found employee was a key worker and employer was justified in engaging a replacement after employee had been absent for 4 months.Employer had not dismissed employee rather his contract had been terminated by frustration

Krell v Henry [1903]

watch the coronation procession of Edward VII.. The king fell ill and the procession did not take place on the original date fixed. The commercial purpose of the contract as recognized by both parties was to watch the coronation,this meant the contract had been frustrated and parties are released from obligations of further performance.

Herne Bay Steam Boat Co v Hutton [ 1903]

rent a boat to view King’s review of his naval fleet and for a day’s cruise around the fleet. . The naval review was cancelled due to the king’s illness. Held that the contract was not frustrated. The tour of the fleet was still possible , part of the purpose could still be achieved. Hirer remained obliged to pay for use of boat.

Fibrosa Spolka Akcyjna v Fairbairn Lawson Barbour Ltd(1942)

-The contract contained a provision that to the effect that if dispatch was delayed by any cause beyond control of parties , including war, a reasonable extension of time will be granted. -Held; despite the fact that the clause in the contract made express provision to the contingency of war, contract was frustrated as it involved a prolonged and indefinite interruption to prompt contractual performance and therefore a total failure of consideration, the buyer could recover the advance payment.

Finelvet AG v Vinava Shipping Co Ltd (1983)

The continuing war between Iran and Iraq trapped certain ships in the Gulf for a lengthy

Other government actions Government action not related to war can frustrate a contract

frustration need not result from direct government action Gamerco SA v ICM/Fair Warning Agency [1995] Amalgated Investment and Property Co Ltd v John Walker & Sons(1977)

period. Contracts relating to the charter of these ships were held to be frustrated.

pop concert was closed for health reasons and safety as the venue was not structurally sound. Held contract frustrated. listing of building as being of architectural and historical interest thus limiting development was held to be frustration of contract.

Limitations on the doctrine (Situations where Frustration will not occur) Frustrating event has been foreseen and provided for in the contract 



If there is an express contractual provision for the occurrence of the specific event, no frustration If the specific event was not covered by an express provision : How different is it from the situation provided for?

Ocean Tramp Tankers Corp v V/O sovfracht (The Eugenia) [1964];

Held the charterers were in breach and the blocking of the canal was not so fundamentally different from the situation provided for in the contract. ‘force majeure’ or ‘hardship clauses’. -- parties themselves make provision in the contract for what is to happen should the performance of the agreement become impossible or radically different because of some subsequent event for which neither of them is to blame. Court will give effect to it. This means If risk of the event occurring has have been allocated by the parties frustration will not occur as it implies that parties have foreseen the risk

Jackson v Union Marine Insurance Co(1874) Even where parties have foreseen the event and provided for it in the contract , frustration is still possible to plead if consequences of the event as they affect the contract was much more serious

- navigation accident occurs , parties must act according to the clause and frustration cannot be pleaded. However in this case when the ship was badly damaged requiring repairs done over 7months , court held that parties had not foreseen such a serious consequence on account of a navigation accident in the contract terms.  Interpret such clauses narrowly.

Self inducement of Frustrating event Frustration will not occur , if the frustrating event is attributable to the actions of either party ( whether at fault or not). If it is , then the likelihood is that party at fault will be in breach of contract.

than what parties anticipated; Maritime National Fish v Ocean Trawlers(1935)

Lauritzen AS v Wijsmuller BV, The Super Servant Two (1990).

Held it was case of self induced frustration , it was claimants decision not to use one of the permits to operate the hired vessel that prevented them from proceeding with contract of hire . Held D could have performed their obligations to P using SS/1 , but they had elected not to do so. Frustration cannot be pleaded. It was a breach of contract.

Effect of Frustration. Hirji Mulji v Cheong Yeong Steamship Co Ltd(1926) - Frustrating event terminates the contract automatically by operation of law( without any need for action by either party). Therefore any attempt to affirm the contract following a frustration will be ineffective Common Law position Chandler v Webster(1904).- At common law all future obligations were discharged but obligations incurred prior to the frustrating event survive whom the loss will fall ,would depend entirely on what the contract said about when payment was to be made or when work was to be done. Doesn’t always revolve around money, obligations are included

Modifications to the Chandler v Webster(1904)

Money Paid prior to frustrating event

Recoverable if total failure of consideration

Fibrosa v Fairbrain

Partial failure of consideration money isn’t recoverable

Whincup v Hughes (1871)

Money payable before frustrating event

Must be paid

Money due after the frustrating event

Ceases to be payable

A claim to recover the value of a benefit prior to frustrating event

Cannot be made

Appelby v Myres

Position under the Law Reform (Frustrated Contracts) Act 1943

s.2(5)

does not apply to contracts of insurance, some charters of ships, carriage of goods by sea, Contracts for the sale of specific goods. The common law rules will apply to these

s.1(2)

Money paid prior to frustrating event

s.1(2)

Money due/payable prior to frustrating event

S 1(3):

Recoverable (irrespective of a total failure of consideration- this is an improvement compared to the common law ) cease to be payable.

However from any sums that paid ,the payee is entitled to set off any expenses which have been incurred towards the performance of the contract.

Gamerco SA v ICM

Similarly if money was payable cost of expenses may be recovered, to the extent that court considers just in the circumstances. The amount that can be set off or recovered for expense cannot exceed the amount that was already paid or amount that was due

Compensation for a ‘valuable benefit’ where a party has received a benefit other than money prior to the

BP Exploration Co Libya Ltd v Hunt

reduces the scope of recovery for the provision of benefits .It held purpose of act to prevent unjust

frustrating event. In such situation the section allows the party to recover from the other party ‘such sum …as court considers just having regard to all circumstances of the case. Court should take into account any expenses incurred by benefitted party.

enrichment and value of any alleged benefit must be assessed in light of frustrating event itself. Where, therefore, the frustrating event has had the effect of destroying the benefit, nothing will be recoverable under s.1(3)....