Should the law remove the foreseeability element from general law frustration claims? PDF

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Summary

The final assessment of Contracts I is an essay which requires AGLC4 referencing (you will be marked on your referencing skills).
This response received a distinction mark and was on the topic of frustration....

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In Australia, a plea of frustration will be unsuccessful where the foreseeability of parties in a contractual dealing has resulted in the construction of specific provisions to provide for what may otherwise have been a frustrating event1 or, where the supervening event should have been foreseen and provided for but otherwise was not.2 In both instances, where the parties have foreseen the supervening event as a serious possibility, the parties are assumed to have taken on the risk of the event occurring and consequently, discharge by frustration is precluded.3 This essay will discuss the importance of foreseeability to general law frustration, with a focus on the element’s versatility and effectiveness in legal problem solving. In section one, the essay will discuss how foreseeability can be used in frustration as a tool to provide fair and reasonable outcomes in legal disputes and why it remains an integral part of the legal system. Section two will then outline the causal link between the principles of foreseeability and its integral role determining allocation of risk among parties in frustration claims. This essay will ultimately conclude that foreseeability is an essential element of frustration and should not be removed however, reform may be warranted but only to the extent of improving equity in legal outcomes. It will not provide any in depth reform alternatives and will instead focus on the versatility and integral nature of foreseeability in frustration as a matter of rejecting its proposed removal. Foreseeability is stability. The premise of frustration is clear, a contract may be discharged by frustration where a supervening event that was not foreseen by and without default of either party, renders performance obligation impossible or, radically different from that which was undertaken.4 However, defining and applying the doctrine of frustration has continued to prove difficult for law makers but the expectation remains the same.5 Where frustration is found, courts must exercise their powers in a manner that will ‘... achieve a result which is just and reasonable.’6 According to leading scholars, both nationally and internationally, foreseeability provides a measurable, stable base from which to draw inference and ultimately determine the viability 1 See Claude Neon Ltd v Hardie [1970] Qd R 93, [16] (W.B Campbell); PT Arutmin Indonesia v PT Thiess Contractors Indonesia [2013] QSC 332, [163] (Jackson J). 2 Walton Harvey Ltd v Walker and Homfrays Ltd [1913] 1 Ch 274. See generally Stephen Graw, An Introduction to the Law of Contract (Thomson Reuters, 8th ed, 2015) 498-500. 3 oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255, [ .See generally McElroy RG and GL Williams, Impossibility of Performance (Cambridge University Press, 1941) 242-6 4 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, [408] (‘Codelfa’), citing Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, (Lord Radcliffe). 5 Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169, [188] (Latham CJ); Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 6 Arnold D McNair, ‘Frustration of Contract by War’ (1940) 56(2) Law Quarterly Review 173, 174.

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of a frustration claim.7 For example, the element’s practicality with respect to operation can be seen where parties in contract have provided express conditions for action should a particular event occur. It is well settled that courts are to deal with it in the manner provided for by the agreement and generally not in frustration.8 Thus, not only does foreseeability promote the forward thinking of parties to protect themselves from economic disadvantage, but it also alleviates some of the judicial burden in decision making. Therefore, it should not be removed. Foreseeability to determine risk acceptance. The doctrine of frustration is widely regarded as flexible9 however, flexibility with respect to the law can create significant issues for operation. That is, there can be great difficulty in determining whether risk has been accepted by the parties10. In oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd11 (‘oOh! Media’) discussion was had as to these very pitfalls namely, the lack of guidance ‘as to the degree or extent an event must overturn expectations … or how unjust and unreasonable a result must follow … before the contract is taken to be frustrated.’12 Fortunately, foreseeability provides a far more stringent base to judge risk and control, and is most helpful in constructing and interpreting force majeure and other legal proofing clauses.13 One such example was provided by Robertson14 in his highly persuasive work on the positive relationship factors of foreseeability and force majeure in solving contractual disputes, wherein he argues that where the degree of foreseeability is high, it is more likely that risk will have been accepted as parties would have been afforded the opportunity in the contracting stage to sufficiently consider this.15 Similarly, lack of foreseeability also indicates that the supervening event lay outside the control of the parties 7 David McLauchlan, 'Frustration in the Court of Appeal' (2013) 44(3/4) Victoria University of Wellington Law Review 593; Eisenberg, Melvin A, 'Impossibility, Impracticability, and Frustration' (2009) 1(1) Journal of Legal Analysis 207. 8 (‘Codelfa’) n (4). 9 See, eg, Cricklewood Property and Investment Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221, [241] (Lord Wright); oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255, [65] (Nettle JA) (‘oOh! Media’), quoting Edwinton Commercial Corporation v Tsavliris Russ [2007] 2 Lloyd’s Rep 517, 532 [86]. 10Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143, [163] (Stephen J); Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169, (Latham CJ). 11 (2011) 32 VR 255. 12 Ibid [66] (Nettle JA). 13 Donald Robertson, ‘‘Frustration and force majeure: Commentary’ (2012) 25(4) Commercial Law Quarterly 16. 14 Donald Robertson, ‘‘Force Majeure Clauses’ (2009) 25(1) Journal of Contract Law 62, 77. 15 (‘oOh! Media’ ) [72]-[74] (Nettle JA). See also Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 67, when assigning risk the unassigned risk may be implied to fall with the other party in the interest of justice and completeness.

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and is thus not sufficient for risk consideration and allocation.16 Here one can see the versatility that foreseeability has when framed within the sphere of complex problem solving in cases of potential discharge by frustration. Therefore, foreseeability provides necessary foundations in which to guide general law frustration and any removal of the element would be counterintuitive. To conclude, the importance of foreseeability within the context of frustration cannot be ignored. Its practical approach to mitigating the uncertainty and often harsh parameters of frustration is the focal point of argument in this essay. Word Count: 1098

16Robertson (n 9) 242.

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BIBLIOGRAPHY

A Articles/Books/Reports Eisenberg, Melvin A, 'Impossibility, Impracticability, and Frustration' (2009) 1(1) Journal of Legal Analysis 207 Graw Stephen, An Introduction to the Law of Contract (Thomson Reuters, 8th ed, 2015) McLauchlan, David, 'Frustration in the Court of Appeal' (2013) 44(3/4) Victoria University of Wellington Law Review 593 Robertson, Donald, ‘Force Majeure Clauses’ (2009) 25(1) Journal of Contract Law 62 Robertson, Donald, ‘Frustration and force majeure: Commentary’ (2012) 25(4) Commercial Law Quarterly 16 McElroy RG and GL Williams, Impossibility of Performance (Cambridge University Press, 1941) 242-6 McNair Arnold D, ‘Frustration of Contract by War’ (1940) 56(2) Law Quarterly Review 173

B Cases Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 Claude Neon Ltd v Hardie [1970] Qd R 93 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 oOh! Media Roadside Pty Ltd v Diamond Wheels Pty Ltd (2011) 32 VR 255 PT Arutmin Indonesia v PT Thiess Contractors Indonesia [2013] QSC 332 Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169 Walton Harvey Ltd v Walker and Homfrays Ltd [1913] 1 Ch 274...