Discharge by Frustration

Question 1

Define the doctrine of ‘Frustration’

Answer 1

Frustration is a doctrine whereby a contract becomes impossible to perform because of some supervening event which neither party could have foreseen. The contract is therefore frustrated.

Question 2

What is the landmark case?

Answer 2

Common law impossibility to meet contractual obligations as per landmark case of

Taylor v Caldwell (1863)

Question 3

General rules

In what two circumstances will a contract be considered ‘frustrated’?

Answer 3

1 - A contract may become frustrated if it becomes illegal, for example trading with the enemy.

2 - if the very foundation of the contract becomes impossible, then frustration can apply

Question 4

General rules

In what instances would a claim of frustration of contract fail?

Answer 4

1 - If the frustrating event has been foreseen and provided for in the contract (i.e. a force majeure clause) then the contract will not be deemed as frustrated by the courts.

2 - The word impossible is significant; simply because events make the contract more difficult to perform does not mean the doctrine can be invoked

3 - The frustrating event must not be self-induced.

Question 5

Foundation of the contract becomes impossible:

Name the ‘coronation’ cases

Answer 5

Krell v Henry (1903) [held frustrated]

Herne Bay Steamship Co v Hutton (1903) [held not frustrated]

Question 6

Foundation of the contract becomes impossible:

Name two leading cases where a claim of impossibility failed

Answer 6

Impossibility:
Tsakirglou & Co v Noblee Thorl GmgH (1962) [held not impossible]

Self-induced:
Maritime National Fish Ltd v Ocean Trawlers Ltd (1936)

Question 7

What is the statute governing Frustrated Contracts?

Answer 7

Law Reform (Frustrated Contracts) Act 1943

Question 8

What are the relevant sections of the statute?

Answer 8

Section 1 (2) of The Law Reform (Frustrated Contracts) Act 1943 provides that where money has been paid under a contract which has been frustrated it can be recovered, subject to the deduction of such reasonable expenses as the court thinks just in the circumstances.

Section 1 (3) states that if one of the parties has received a valuable benefit under the contract, the court can order that a fair amount can be recovered from him by the other party.