Discharge Of Contract - Discharge By Frustration Flashcards
What does it mean if a contract is frustrated?
-Has been discharged (ended) due to unforeseeable circumstances. Neither party needs to do anything else
-Something preventing either party from completing their side of the contract
What could’ve prevented a party from completing their side of the contract?
-Fire, war, illness. All sorts
When are the rules on frustration not needed?
-If businesses have a force majeure clause (most do)
What is a force majeure clause?
-Clause often found in commercial contracts that excludes liability for the parties delay in performance or non-performance if an extra-ordinary event occurs
What typically occurs?
-C sues D for breach of contract because the D has not done their side of the bargain
-D counter argues that there wasn’t a breach but that the contract was frustrated by an unforeseeable event
What does the dft need to prove for discharge by frustration?
One of:
1. Performance impossible
2. Performance would’ve been illegal
3. Circumstances had radically changed
Cases for contract frustrated because performance has become impossible (2)
-Taylor v Caldwell
-Owner contracted to rent out his music hall.
-Before this could take place music hall burned down
-Hirer spent money advertising events and wouldn’t be paid until after.
-Impossible to now complete the contract as it was frustrated. Ended contract, no recompense for wasted expenses
-Robinson v Davidson: D’s wife meant to be playing piano at concert but was ill on the day. Court held not her fault and that contract was frustrated
Case for contract frustrated because it has become illegal to perform
-Denny Mott v Dickinson
-Court said that a contract to import certain goods would be frustrated if importing goods of that kind became illegal after the contract was made
-eg if had arranged a room for bday party and became illegal to carry out due to Covid restrictions
Case for contract frustrated due to radical change in circumstances
-Krell v Henry
-Man hired hotel room to view Edward VIII’s coronation procession. Only for the day with a balcony. Woman at hotel knew that was the purpose of him hiring the room for just the day
-Prince became ill so coronation and procession postponed
-Court said event was the main purpose of the contract as wouldn’t happen then the contract was frustrated even tho the room still could be used
-main purpose being frustrated - purpose must be known to both parties
Case that WASNT seen as frustrated due to a radical change in circumstances
-Herne Bay steamboat co v Hutton
-Hutton hired boat to see the fleet when the king reviewed it as part of coronation.
-claimed he didn’t have to pay because the king was ill and didn’t attend
-Not frustrated as the main reason for the contract remained as he wanted to see the fleet. Kings presence missing but not enough to frustrate
What are 3 situations where the contract will not be seen as frustrated?
-If the ‘frustrating’ event was self induced
-If the ‘frustrating’ event just made the contract less profitable but not impossible
-The risk of the event happening was mentioned in the contract or was foreseeable (known to be the kind of thing that might happen) at the time the contract was made
Case for if frustration self induced
-Superservant 2 case
-D agreed to transport C’s drilling rig using either super servant one or two. Under contract the dft could replace one with the other means of transport. Superservant 2 sank before performance of the contract and D informed C that he couldn’t use super servant one due to it being engaged in another contract
-C claimed for damages for breach of contract
-D claimed that the contract had been frustrated
-Shouldn’t have put on another contract. No frustration, contract said could use another vessel. Self induced
Case for if the ‘frustrating’ event was just made less profitable but not impossible
-Tsakiroglou v Noblee Thorl
-D’s agreed to ship peanuts from Sunday during 1956 to Germany.
-Both parties anticipated that the ship would go through the Suez Canal, actual route no specified.
-Suez crisis of 1956 meant blocked so couldn’t transport
-D could have transported the peanuts within the specified time but would mean going via longer route costing more
-Court held not frustrated
Case for risk of event foreseeable at the time of the contract
-Amalgamated investment and property co v John Walker
-Contract to sell a building to investment company who wanted for redevelopment. After the contract made the department of environment made listed building so couldn’t be used and decreased in value
-being given listed status is foreseeable risk with old buildings so not frustrated
What are the remedies for a frustrated contract?
-Before 1943 no remedies
-Changed w law reform (frustrated contracts) act 1943
-S1(2) Money already paid can be recovered, money due to be paid doesn’t need to be, if money paid or due to be paid before the event then the court can order that sum of compensation deducted from this to cover any work done, if money only due after the event then no compensation payable
-s1(3) Sum can be claimed if any work already done has unjustly enriched the other party (allowed then to gain benefit from frustrating event)
