Contract 6 Frustration

Question 1

General rule for absolute obligation

Answer 1

If a party has assumed an absolute obligation, even if circumstances make performance of this obligation impossible, he is liable for breach of contract (Paradine v Jane)

Question 2

Define frustration in contract

(4 elements)

SCUM

Answer 2

A contract is frustrated when

a supervening event S

which is outside the control of both parties (Maritime Fish ltd) and (The super servant two) C

which is unforeseen U

that renders/makes the contract impossible to perform or radically different (davis contractors ltd) M

Question 3

Would the following event frustrate a contract?

Drummer of band taken illl and was only able to perform 3-4 times a week instead of 7 as agreed

what if the drummer is only sick for 1 day?

Answer 3

Based on Condor v Barron Knights; held contract is frustrated

Where an essential person to the contract is unavailable, the contract will be frustrated.

However, contract is not frustrated if essential person is unavailable for insignificant period

Question 4

Would the following event frustrate a contract?

Music hall hired but burnt down day before concerts meant to begin and it was neither party’s fault.

Answer 4

Taylor v Caldwell; held contract is discharged

where an essential thing is unavailable making the perfomance of the contract impossible, the contract will be frustrated

Question 5

Would the following event frustrate a contract?

C’s flat advertised to view coronation. D hired the flat for two days to view the procession. Coronation was cancelled then D withheld payment.

D hired shop for 2 days with the purpose of viewing the Naval review and for a day cruise around the fleet. Naval review cancelled due to King’s illness.

Answer 5

Krell v Henry
Herne Bay Steamboat Co v Hutton

Rule: a contract may be frustrated if the fundamental event that the contract relies on did not occur.

in Krell v Henry, the whole point of renting the place was to view the coronation. The very reason that the place was selected was its view to the street.

In Herne Bay, the cruise around the fleet was still possible despite the cancellation

Question 6

Would the following event frustrate a contract?

Met Water Board was building reservoir; governement ordered men and equipment to be used for the war effort for a period uncertain.

Answer 6

Metropolitan Water Board v Dick Kerr and Company

A contract may be frustrated due to government intervention or if a delay makes the contract impossible to fulfill or radically different.

Serious delay can result in frustration

Question 7

Would the following event frustrate a contract?

D agreed to manufacture machinery for C (a polish company) and to deliver it to Poland.
Before completion Germany invade Poland.

Answer 7

Fibrosa Spolka Akcyina v Fairbairn Lawson Combe Barbour Ltd

Illegality of performance frustrates a contract.

Question 8

Would the following event frustrate a contract?

C agreed to build 78 houses with 8-month period; difficulties arose amd D made a case for frustration and demand quantum meruit.

Answer 8

Davis contractors Ltd v Fareham Urban District Council

A contract will not be frustrated if an interfering event should have been foreseen or has merely made the contract more expensive to perform.

Question 9

Would the following event frustrate a contract?

Sellers agreed to ship groundnuts from Port Sudan to Hamburg; Closure of Suez Canal forced them to sal around Cape of Good Hope.

Answer 9

Tsakiroglou & Co ltd v Noblee Thorl

A contract will not be frustrated if costs/price for performing the contract increases.

Question 10

Would the following event frustrate a contract?
C hired D to transport oil rig. only one is available to load the oil rig and unfortunately it sank. D pleaded frustration.

Answer 10

The Super Servant Two

self-induced mistake will not frustrate a contract

Question 11

Would the following event frustrate a contract?

Property could not be used for 2 years out of a 10-years lease

Answer 11

National Carriers Ltd v Panalpina (Northern) ltd

Contract will not be frustrated if the delay in performance is not substantial.

Question 12

Define Force Majeure clause

Answer 12

A clause that releases parties from contractual obligations when circumstances beyond their control rises

Question 13

Common law rules for frustration in contract (consequence)

Answer 13

The contract is automatically discharged/terminated
Future obligations cease
No parties are in breach

Question 14

Explain the statutory reform on common law rules on frustrations by virtue of Law Reform (Frustrated Contracts) Act 1943

specially for the purpose of s.1(2) LR(FC)A 1943

（2）

Answer 14

Money paid before the frustrating event is recoverable

Money that was payable before the frustrating event is no longer payable

Question 15

Are expenses incurred prior to a frustrating event recoverable?

Answer 15

Only the expenses incurred by the payee are recoverable but:

subject to a price ceiling not exceeding the amount paid before the frustrating event and money payable,

the court has a board discretion as to the amount to avoid unjust enrichment. The amount may be adjusted to take account of the expenses incurred by the payer

Question 16

Explain the statutory reform on common law rules on frustrations by the virtue of Law Reform (Frustrated Contracts) Act 1943

specially for the purpose of s.1(3) LR(FC)A 1943

(surviving benefit)

Answer 16

If there is any valuable benefit that survives the frustrating event. Court may order a just sum to be paid with regard to all the circumstances.

The size of this sum will be decided with regard to:

the value of the benefit to its recipient at time of event

any expenses awarded under s.1(2)

Question 17

Define valuable beneift

(purpose of the contract)

Answer 17

benefits accrued in or for the purposes of the contract

Question 18

Review remedies for breach of contract

TRAM

Answer 18

1. Type of breach:

if serious, a repudiatory breach, the innocent party can either discharge the contract and seek damage or affirm

2. Remoteness
   the loss must either:
   arise naturally from the breach itself; or
   could reasonably be supposed to have been in reasonable contemplation of parites at time of contract due to special circumstances known to them
3. Amount/measure of damages
   compensatory: expectation loss, the aim is to put back the claimant in the position he would have been in if the contract had been properly performed
   if impossible
   Reliance loss: put the claimant back in the position he would have been in had the contract never been entered into.
4. Mitigation: the claimant must have taken reasonable steps keep loss to a minimum