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Frustration
Contract: Discharge
| Question/Case | Principle/Facts |
|---|---|
| What is Frustration | Frustration of a contract occurs where, after the contract is made, unforeseen events, outside the control of the parties occur which makes the contract impossible, illegal or radically different. (Hannah Blumenthal) |
| Impossibility | Where someone or something necessary for the contract ceases to be available. |
| Taylor v Caldwell 1863 | Destruction of subject matter; the main component of the contract had been destroyed and this was sufficient. |
| Condor v Barron Knights 1966 | Personal service - supervening incapacity; If a contract has been drawn up for a particular person to perform a service, an intervening even which prevents that will be sufficient to frustrate the contract. |
| Subsequent Illegality | Where parties enter a contract which is originally lawful, but a change in law or circumstances makes it unlawful - this will be held to be frustrated. |
| Fibrosa Spolka v Fairburn Lawson 1943 | The contract was frustrated as it was illegal to trade with the enemy during time of war. |
| Performance is radically different; frustration of purpose | The foundation of the contract is destroyed - where the contract is still possible but the main purpose of the contact cannot be achieved, the contract will be frustrated. |
| Performance is radically different - Non occurrence of an event | If the contract centres upon an event which does not go ahead, it may be possible to claim frustration. |
| Krell v Henry 1903 | Hired a room for Kings procession - procession was then cancelled due to illness - held this frustrated the contract - the procession was regarded as the foundation of the contract. |
| Herne Bay Steamboat Co v Hutton 1903 | Hired a boat to see a review by the king - cancelled - D did not use the boat - P sued for the balance of the hire charge - The contract was not discharged on the grounds of frustration - Sole commercial purpose could still be performed. |
| Self-induced frustration? | If a party takes an action which leads to the contract being impossible to perform, they will be prevented from claiming frustration. This will instead be a breach of contract. |
| Maritime National Fish v Ocean Trawlers 1938 | As the appellants deliberately decided not to allocate the respondents trawler, the contract was no frustrated as they were responsible for frustrating event. |
| The contract is still possible to perform but has become more difficult or more expensive to perform. | This will not amount to frustration as it does not make the contract radically different. (Fareham UDC 1956) |
| What are non-frustrating events? | Events foreseen and provided for in the contract - these will not frustrate the contract. |
| Events foreseen/provided for in the contract | A contract which provides a solution for a possible problem i.e. force majeure clauses will prevent a claim of frustration (Jackson 1874). |
| F C Shepherd v Jerrom 1986 per Mustill LJ | "I accept that the presence of a termination provision should inhibit the Court from being too ready to find in favour of frustration. |
| What is the effect of frustration at common law? | A frustrating event will terminate the contract automatically - does not depend on opinion or knowledge of parties (Cheong Yeong Steamship) |
| When is a contract terminated? | The contract is only terminated from the point of the frustrating event. The contract is rendered good up to the point of frustration. |
| What happens to the rights of the parties? | The rule is that the rights and liabilities are frozen at the moment of frustration. |
| What happens to money due before the frustrating event? | This remains payable as the contract is not rendered VOID. |
| What happens to money due and already paid before the frustrating event? | This cannot be recovered. Neither can future liabilities be recovered. |
| What two cases illustrate the effects of frustration? | Krell v Henry and Chandler v Webster. |
| What does the Law Reform (Frustrated Contracts) Act 1943 do? | The Act deals only with the effect of frustration. Makes changes to common law effect. |
| S1(2) LRA 1943 | Money paid before the frustrating Act becomes recoverable and there is no longer a need for a total failure of consideration. |
| S1(2) LRA 1943 | The court has a discretion to allow the payee to recover all or part of the sums to cover any expenses incurred. |
| S1 (3) LRA 1943 | A party who has carried out an act can recover compensation for a valuable benefit |
| What is 'valuable benefit'? | A benefit other than money. (BP Exploration v Hunt) |
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Lizannxo
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