Discharge By Frustration

Question 1

Introduce discharge by frustration.

Answer 1

• Discharge of contract - how contract comes to an end.
• Discharge by frustration - where unforeseen events outside control of parties makes performance impossible.
• Taylor v Caldwell: if party’s prevented from keeping promise because of unforeseeable, intervening act, wouldn’t be liable for breach of contract.
• Davis Contractors: more modern view of frustration - Lord Radcliffe stated ‘law recognises that without default of either party - contractual obligation has become incapable of being performed as circumstances would ender it radically different from that undertaken by contract.’
• For this reason, many contracts contain ‘force majeure’ clause - excludes liability for any extraordinary circumstances meaning you can’t perform whole / part performance.
• If contract doesn’t contain ‘force majeure’ clause - still possible to rely on frustration.
• Frustration requires performances to become impossible as result of outside events beyond control + contemplation of parties.
• 3 points to establish frustration.

Question 2

Explain the first point of frustration, event which resulted in (one of the following).

Answer 2

(Only need 1 - but can pick multiple)
Impossibility of Performance:
* Jackson: subject matter becomes unavailable through no fault of contracting parties.
* Robinson v Davidson: in contract for services - frustration may be unavailability of party who’s to perform service due to illness.
Contract Becomes Illegal To Perform:
* Denny: changes in law that makes contract illegal to perform - can be frustrated.
Essential Commercial Purpose of Contract Can’t Be Achieved:
* Krell v Henry: radical change of circumstances as essential commercial purpose of contract can’t be achieved (i.e. main purpose of contract wont take place).

Question 3

Explain the second point of frustration, above chosen event wasn’t fault of either party to contract.

Answer 3

• Event wasn’t either the V or D’s fault.

Question 4

Explain the third point of frustration, event significantly changed nature of outstanding obligations.

Answer 4

• If contract was to be performed now - wouldn’t look anything like it was supposed to.

Question 5

Explain the circumstances in which frustration can’t apply.

Answer 5

Self-Induced Frustration:
* Maritime National Fish: frustration wont apply when frustrating event is within control of one party - one party instigated event / was aware frustrating event could happen + still decided to take on contract.
Contract Becoming Less Profitable:
* Noblee: contract becoming less profitable / more difficult to complete isn’t reason for frustration.
Event Being Foreseeable Risk / Event Mentioned In Contract:
* John Walker + Sons: foreseeable risk - frustration fell down.

Question 6

Explain the remedies for frustration.

Answer 6

• Common law - frustrating event automatically terminates contract - obligations already existing must be completed + future obligations terminated - can lead to unfairness, where one party large has performed obligations + other hasn’t.
• Law Reform (Frustrated Contracts) Act 1943: resolved disparity in losses.
• S.1 (2): money paid before frustrating event occurs is recoverable, money payable before ceases to be payable, expenses before discharge resulting from frustrating event - court may award damages.
• S.1 (3): if 1 party obtained valuable benefit before frustrating contract - court may order them to pay sum in respect - what courts consider ‘just’ by looking at circumstances
• Judge has total discretion.