Frustration - Contract law: Notes with case law PDF

Preview

Summary

Frustration      The doctrine of frustration provides one of the ways by which contractual obligations end. Lord Radcliffe- Problem must arise without the default of either party. The discharge occurs as a result of the wrongful actions of one of the parties. Where a contract is discharged by f...

Description

Frustration     

The doctrine of frustration provides one of the ways by which contractual obligations end. Lord Radcliffe- Problem must arise without the default of either party. The discharge occurs as a result of the wrongful actions of one of the parties. Where a contract is discharged by frustration, this occurs automatically by operation of law. The courts decide when a contract has been frustrated and, if they decide that it has, then all future obligations cease. The nature of the frustratıng event: Lord Radcliffe in Davis v Fareham urban district council, Frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract...it was not this that I promised to do.



In deciding whether a contract has been frustrated the court must take into account : The terms of the contract itself, its matrix or context, the parties’ knowledge, expectations assumptions and contemplations, in particular as to risk, as to the time of contract, at any rate so far as these can be ascribed mutually and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. Courts have indicated that a contract will be frustrated only where there is a complete change between what was undertaken in the contract and the curcumstances in which it is called upon to be performed. CTI group v Transclear 2008, the COA concluded that a contract to sell cement was not frustrated where the contract remained legally and physically possible but where third party suppliers would not sell the necessary cement to the sellers with the result that the sellers couldn’t supply the buyers with the cement. Destruction of subject matter: Taylor v Caldwell 1863, If something central to the performance of the contract no longer exists , then courts will find that the parties’ obligations come to an end. Asfar v Blundwell 1896, the contamination of perishable goods, which rendered them unusable, was held to be equivalent to destruction. Personal Incapacity: Where both parties have agreed that the contract is to be carried out by a particular individual, and that individual dies, or is too ill to perform contract will be frustrated, Condor v Barron Knights 1966.(the work must be done by the particular individual) Non-occurrence of an event: Krell v Henry 1903, a room overlooking the route of the coronation procession had been hired for the purpose of watching it. When the procession was cancelled, the contract for the hire of the room was held to be frustrated. Effects of war: trading with companies based in enemy territory will be illegal. Contracts made with them will be frustrated. Other governmental action: Gamerco SA v ICM 1995, a stadium which had been booked for a concert was closed for reasons of health and safety, it was held that the contract for the hire was frustrated. Industrial action:











 



 

  

   



The Nema 1981. Limitations on the doctrine: 1. Where the frustrating event has been foreseen and provided for in the contract 2. Where the alleged frustrating event has been self-induced by one of the parties The doctrine of frustration is the event occurring by surprise. If parties have clearly foreseen the possibility of a frustrating event occurring and have made provision for what is to happen in their contract, there will be no room for the doctrine of frustration. In commercial area of force majeure(if the event has been foreseen) and similar clauses may well replace the common law and statutory rules on frustration Another important element in the doctrine is that alleged frustrating event mustn’t be attributable to the fault of either party The courts have interpreted the concept of fault widely in this context: in fact it may be more accurate to say that wherever the alleged frustrating event is attributable to the actions of one of the parties then the doctrine won’t apply. Common Law: A frustrating event terminates the contract automatically, without any need for action by either party. Any attempt to affirm contract after frustration will be ineffective. All future obligations will be discharged but the obligations incurred prior to the frustrating event survived.(Chandler v Webster) Chandler v Webster was modified in Fibrosa Spolka v Fairbairn Lawson 1943, the HOL held ‘total failure of consideration that is party paying the money has received nothing at all under the contract, then money paid could be recovered. Fibrosa led to demand for reform, which was brought about by Law Reform Act 1943

Law Reform Act 1943:  There are some contracts to which the act doesn’t apply, these include contracts of insurance, some charters of ships and cntracts for the carriage of goods by sea.  The exclusion of the shipping thing exists because there are special rules under shipping law which deal with it.  It also excludes contracts for the sale of specific goods, here common law rules will apply.  The two main provisions in the act include: 1. S.1(2), which deals with money paid or payable prior to the frustrating event 2. S.1(3), which deals with benefits conferred prior to the event.  The act has been much criticized for its unsatisfactory drafting particularly in relation to s.1(3).

...