Anticipatory breach & Frustration

Question 1

A contract might be discharged in one of the following ways

Answer 1

1) performance
2) agreement
3) breach
4) frustration

Question 2

Discharge by performance: entire obligations rule

Answer 2

The promisee is entitled to the benefit of complete performance exactly according to the promosor’s undertaking. Where a contract provides for payment after performance by the other, there is no action to recover such payment, nor an action for proportionate payment (quantum meruit)
Cutter v Powell - Cutter died at the sea, so he could not perform an undertaking to serve the ship to Liverpool,contract wasn’t completely performed

Question 3

Mitigation of the entire obligations rule

Answer 3

1. acceptance of partial performance
   Sumpter v Hedges - if the innocent party accepts partial performance, then the party in default will be entitled to quantum meruit. In this case the innocent party could not voluntarily accept (work had been done on his land, he had no choice but to complete the work.
2. substantial performance
   Hoenig v Isaacs - possible for the party who rendered such performance to obtain contract price subject to a deduction to reflect the cost of remedying the defect
3. wrongful prevention of the performance. innocent party has 2 options: 1) to sue for damages for breach of contract, or 2) claim quantum meruit.
4. divisible contracts where contract itself allows for performance of one or more obligations separately from others
   Rose & Frank v Crompton Bros
5. performance by a 3rd party, acceptable unless it is a contract of personal service.
   Robson v Drummond (personal service) cf British Waggon v Lea

Question 4

Discharge by Agreement: 2 ways

Answer 4

1) new contract (agreement to discharge ir supported by consideration)
2. by operation of a term in the contract itself (condition precedent or subsequent)
3. equitable waiver

Question 5

Discharge by a new binding contract

Answer 5

1) The Hannah Blumenthal - mutual waiver of further performance in consideration
2) where one party performed, another not - Foakes v Beer (part payment of debt, not good consideration)
3) it may be discharged by “accord& satisfaction” (Pinnel’s Case)

Question 6

Discharge by operation of a term in the contract

Answer 6

1. Condition precedent - condition which must be satisfied before any rights come into existence. Where the condition precedent is not fulfilled, there is no true discharge because the rights and obligations under the contract were contingent upon an event which did not occur, i.e. the rights and obligations never came into existence
   (Pym v Campbell)
2. Condition subsequent - term providing for the discharge of obligations outstanding under the contract, in the event of specified occurrence
   (Head v Tattersall)

Question 7

Discharge by equitable waiver

Answer 7

Brikom Investments v Carr - principle of promissory estoppel applied to all cases where a party to whom a representation or promise had been made had in fact relied on it.

Question 8

Discharge by breach: anticipatory breach

Answer 8

before the time of performance of contract one party informs the other they will not fulfill their obligations to perform the contract
(Hochster v De la Tour)

Question 9

Terms and breach

Answer 9

1) condition - terminate or affirm and claim for damages
2) warranty - damages only
3) innominate term - depends upon the seriousness of the consequences of the breach
(Hong Kong Fir v Kawasaki Kisen Kaisha)

Question 10

Right of election

Answer 10

Innocent party allowed time to decide to sue at once or to affirm the contract and wait for the performance on the due date. If the party elects to affirm the contract survives and the rights of the innocent party are preserved
(Stoznia Gdanska v Latvian Shipping Co (No2))

Question 11

Limitations on affirmation

Answer 11

1) innocent party must not need co-operation of the party in breach
(White & Carter v McGregor
2) there must be legitimate interest in affirming

• The Alskan Trader
  no legitimate interest where affirmation is wholly unreasonable
• The Dynamic
  it will only be in extreme cases that the innocent party will not have a legitimate interest in affirmation:
  a) burden of proof is on the contract breaker to show that the innocent party has no legitimate interest in performing the contract rather than claiming for damages.
  b) this burden is not discharged merely by showing that the benefit to the other party is small in comparison to the loss of the contract breaker
  c) exception to the general rule applies only in extreme cases where damages would be inadequate remedy and where an election to keep the contract alive would be unreasonable.

BUT: landlord may have legitimate interest in affirming by keeping property available (Reichman v Beveridge)

Question 12

Dangers of affirmation

Answer 12

1) The Simona
affirming party may breach the contract themselves
2) Avery v Bowden
a frustrating event may deny a right to damages

Question 13

Right of election: Termination

Answer 13

1) The Santa Clara
notification of election to terminate is required
2) Howard v Pickford Tool
an unaccepted repudiation is a thing “writ in water”

Question 14

Frustration: radical difference theory (now)

Answer 14

Davis Contractors v Fareham UDC

Question 15

Rule of absolute obligations

Answer 15

Paradine v Jane - no excuse for non-performance.

Question 16

Implied term theory

Answer 16

Taylor v Caldwell - burned music hall. the court found an implied term of the contract: as long as the hall exists.

Question 17

Types of frustration: Impossibility

Answer 17

Unavailability of a thing or a person to perform
1) destruction of a thing
Taylor v Caldwell
Appleby v Myers - burned factory was necessary to perform - contract was frustrated
2) unavailability of a thing (even temporary unavailability may discharge the contract if the interruption is such as to make the performance substantially different.
The Sea Angel - contract involved 20 day charterparty out of which there was little time left to run. However, the work under the contract was accomplished. As the purpose of the contract had been achieved, the contract was not in fact frustrated.
Jackson v Union Marine Insurance - court found an implied term regarding completion within a reasonable time so that the contract was frustrated because of long delay. The contract would be frustrated if the requisition takes up a disproportionate amount of the whole contract period
3) unavailability of a person
* incapacity
Morgan v Manser - the clown was uncapable to perfrome
*death
Stubbs v Holywell Railway Co

Question 18

Types of frustration: Supervening illegality

Answer 18

Fibrosa v Fairbairn - illegal to contract with Poland - frustration
Denny, Mott & Dickson v James B. Fraser - it is plain that a contract to do what it has become illegal to do cannot be legally enforceable

Question 19

Types of frustration: Frustration of a purpose/ non occurrence of the event

Answer 19

• must be common purpose of both parties
  The Coronation cases
  Krell v Henry - H. hired 3rd floor flat to view the coronation procession. King fell ill and processions did not take place on the days appointed. Contract was frustrated.
  cf
  Herne Bay Steamboat v Hutton - no frustration. Though he could not view the Naval Review, could still have cruised around the fleet.

Question 20

Types of frustration: Government Intervention

Answer 20

Metropolitan Water Board v Dick Kerr - fundamental change of circumstances (nature of a contract)

Question 21

Can lease be frustrated?

Answer 21

• never - Paradine v Jane
• never/hardly ever
  Cricklewood Property v Leighton’s Invest Trust
• in rare circumstances - yes
  National Carriers v Panalpina - 18 m. out of 10 years - not frustrated. It may be frustrated if the property is unavailable (look at length of lease)

Question 22

No frustration where the contract made merely more onerous

Answer 22

Tsakiroglou v Noblee Thorl

Question 23

No frustration where event is self-induced,

burden of proof

Answer 23

Maritime National Fish v Ocean Trawlers - charterparty was not frustrated because it was the defendants own act which prevented the trawler from being licensed for fishing.
The Superservant Two - one of the two ships sank. court held that the defendant should have used another one, it was possible to perform the contract.

burden of proof on the party alleging self-induced frustration
Joseph Constantine Steamship v Imperial Smelting Corporation

Question 24

No frustration where event is foreseeable

Answer 24

Walton Harvey v Walker - hotel was compulsory bought and demolished - it was foreseeable for the parties
The Sea Angel - the less event is foreseeable, the more likely it is to lead on to frustration

Question 25

Consequences of frustration

Answer 25

all future obligations are discharged from the date of the frustrating event

Question 26

Effects of frustration: Frustration at common law

Answer 26

Fibrosa v Fairbrain - where there had been total failure of consideration, then money already paid could be recovered and money due and payable need not be paid.
Chandler v Webster - partial failure of consideration: any money paid prior to frustrating event were lost.

Question 27

Effects of frustration: Law Reform (Frustrated contracts) Act 1943
s. 1(2)

Answer 27

• money paid before the event can be recovered, even though the failure of the consideration may only be partial.
  *money payable ceases to be payable
  *court may order recovery of money as it thinks just in all the circumstances to account for expenses incurred by the payee.
  The amount recovered cannot exceed:
  i) the actual expenses incurred, and ii) the amount paid or payable prior to the frustrating event.
  *burden is on the party that incurred expenses to show it is just for them to retain.
  Gamerco v ICM/Fair Warning - could not prove on what the amount was spent

Question 28

Effects of frustration: Law Reform (Frustrated contracts) Act 1943
s. 1(3)

Answer 28

a party who has gained a valuable benefit under the contract before the frustrating event may be required to pay a just sum for it.
BP Exploration v Hunt - 1) actual end product; 2) how much it is fair for you to get back

Question 29

Effects of frustration: Law Reform (Frustrated contracts) Act 1943
s. 2(3)

Answer 29

Parties can contract out of Act

Question 30

Effects of frustration: Law Reform (Frustrated contracts) Act 1943
s. 2(5)

Answer 30

Contract excluded from the Act:
carriage of goods by sea
insurance companies

Question 31

Where frustration is an issue, I need to consider

Answer 31

i) does the relevant agreement cover the frustrating event?
ii) as a matter o fact or law, is the contract frustrated?
iii) where there is/may be frustration what are the effects of it - future obligations are discharged and prior obligations will be determined by the Law Reform (Frustrated contracts) Act 1943, unless ss. 2(3) or 2(5) apply