Discharge of a Contract - Frustration Flashcards
What is the rule of discharge of performance and how can this be unjust?
- It is a strict rule that performance must be complete and exact
- However, this can be seen as too harsh as one party may be liable even if they could not complete their obligation due to an unforeseeable and intervening event.
What is frustration and where is it defined?
- It is defined in Davis Contractors v Fareham Urban District Council
- The law recognizes that without fault of either party, it has become incapable of performing obligations and would render a radically different thing.
- This means that they cannot carry out their promise due to an unforeseeable, intervening event meaning they are not liable ( Seen in Taylor v Caldwell)
What are three reasons for a frustrated contract?
- Impossibility to perform
- Illegality to perform
- Change of circumstance
What is frustration through impossibility to perform?
- It is impossible to perform the contract therefore it can be frustrated
- This also means when the subject matter is unavailable due to no fault
- Impossibility can also occur when one party can not carry out their services, this can be due to illness
What are key cases for impossibility to perform?
- Jackson v Union Marine Insurance = It was impossible to perform so the contract was frustrated
- Robinson v Davidson = They could not carry out their services due to illnesses so it was frustrated
What is frustration through illegality to perform?
- A change in the law may make the contract illegal to continue or in a time of war
What are key cases for illegality to perform?
- Re Shipton Anderson and Co = It could not be completed due to a war so therefore was frustrated
What is frustration through change of circumstance?
- The essential purpose of the contract can no longer be achieved due to a change of circumstance
- It must be the main purpose of the event
- This is subjective
What are key cases of change of circumstance?
- Krell v Henry = The contract was frustrated as the main purpose of the contract had changed to circumstances
- Herne Bay Steamboat v Hutton = It was not the main purpose so could not be frustrated
What are three circumstances where frustration will not apply?
- Self-induced Frustration
- Contract becoming less profitable
- The event was a foreseeable risk
What is self-induced frustration? What is a key case of this?
- The frustrating event may be within control of one party and therefore cannot apply frustration
- This is subjective based on wherher the courts believe it was within their control
- Maritime National Fish v Ocean Trawlers established that the frustrating event was within their control
Why can a decrease of profitable mean that they cannot frustrate the contract? And what is the key case of this?
- A contract becoming less profitable/more difficult to complete is not a reason for frustration
- This is established in Davis Contractors v Fareham Urban District Council. The contract was not radically different to what was agreed
Can a foreseeable risk be frustration? What is a key case of a foreseeable risk?
- If it was a foreseeable risk, the courts will not find frustration however it is based on a subjective test
- This was established in Amalgamated Investment and Property v John Walker and Sons
How often do courts use frustration?
- Courts are reluctant to find a contract frustrated and it will not be invoked lightly
- They are reluctant as the law does not protect you from a bad bargain and therefore do not want to kill a contract
- Frustration should not be relied on by a party as it is due to an extraneous event
What is a remedy for a frustrating event?
- A frustrating event automatically terminates the contract
- Existing obligations must be completed but future obligations are terminated
What is stated in the Law Reform Act 1943 = S1 (2)?
- Money paid before the frustating event is recoverable
- Money payable before the frustrating event ceases to be payable. This means that they do not need to pay the agreed price if there is no obligations
- If they have incurred expenses before the frustrating event, they may be awarded expenses of what they paid
What is stated in the Law Reform Act 1943 = S1 (3)?
- If a party has obtained a valuable benefit from the contract before the frustrating event, the court can order them to pay a sum in respect of this
- This will be what the court considers just
- This is based subjectively
