frustration Flashcards
what is the test for frustration and whether they can get out of the contract
- contractual obligation
- frustrating event
- without the fault of either party
- makes performance impossible OR radically different from what was agreed on
- consequence: automatic discharge at the point of frustration - neither can demand further performance by the other
in what two ways can the doctrine of frustration be used
- as a defence against a contractual claim - a way out - there is no breach of contract if it is discharged by frustration. no contractual obligations exist that might have been breached.
- as a legal basis for a quantum meruit claim (offensive tool) - because of frustration, the plaintiff performed without having being contractually obliged to do so, so wants to be compensated for the work done - no consideration under the contract because there was no contract
what was the doctrine of absolute liability (pre-doctrine of frustration) and how was it rebutted in Taylor v Caldwell
- parties must perform all their contractual obligations irrespective of what happens. it was argued express provisions to deal with contingencies can always be inserted into the contract when it is being negotiated. however, even the best lawyer could not anticipate every frustrating event that might happen and make provision for that.
in Taylor v Caldwell, it was said that absolute liability can have unfortunate results
what is the implied term theory from taylor v caldwell
- an implied term subjects any contract to the doctrine of frustration.
From Davis Contractors v Fareham Urban District Council - not required that performance has become impossible, sufficient that it has become radically different from the performance agreed on
what are some examples of absolute impossibility for frustration
when performance is impossible = automatic discharge:
- sale contract (destruction of the object of sale/good being sold) - Taylor v Caldwell
- service contract - person whose services are required becomes incapable of performing them due to serious illness
- contract for work - external interference with the ability of one party to perform e.g. imprisonment, conscription, may result in frustration if it defeats the purpose of the contract - Morgan v Manser
what are some examples of radical difference for frustration
- where performance is possible but very difficult
- if the main purpose can no longer be fulfilled it is automatically discharged
mere delays do not frustrate the contract if its main purpose can still be substantially achieved - National Carriers v Panalpina - lease of warehouse for 10 years, road closure for a couple months.
also do not if the delay is within the commercial risk of undertaking - e.g. Davis Contractors v Fareham Urban District Council - construction contract and then the building materials got more expensive
if the delay or interruption is such that the performance thereafter will be radically different from the performance that was agreed on, the delay or interruption can be a frustrating event - FC Shepher v Jerrom, Manser’s ten year management contract was frustrated by his indefinite (and no idea how long) call up into the army - Morgan v Manswer.
what is the relevant moment in time for frustration?
- whether a delay or interruption makes performance radically different from what was agreed is something that must be determined when the delay or interruption occurs.
frustration depends on anticipated length of delay rather than actual and the relationship between that anticipated length and the contract overall
how can supervening illegality frustrate a contract
contract may be legal when it is entered into but may become illegal because of some event arising thereafter - this frustrates the contract. Rayneon v Fraser
government interference need not go as far as actually declaring the proposed performance illegal, any form of interference preventing performance will suffice - Metropolitan Water Board v Disk, Kerr
E.g.
- declaration of war makes contracts involving trade with the enemy illegal automatically
- passage of legislation making performance of the contract illegal - question of statutory interpretation (Gore District Council v Power)
- foreign legislation making performance impossible e.g. import ban = cannot deliver goods
how can futility frustrate a contract
performance possible but futile because the entire purpose underlying the contract can no longer be achieved e.g. Krell v Henry - only purpose of lease of flat was to watch the coronation of the king but the king got sick and the coronation was postponed.
if part of the purpose can still be achieved, no frustration - Herne Bay Steam Boat v Hutton - coronation only one of the reasons for the lease of the boat - lovely day on the boat and also watch coronation. here frustration was not met because the purpose could still be fulfilled in part
what are non-frustrating events
- performance does not become impossible, merely more burdensome or expensive (Davis Contractors, The Power v Gore District Council, Tsakiroglou v Noblee Thorl)
a deadline was missed but time was NOT of the essence so it could just be postponed.
depreciation in the value of money - Power v Gore District Council - inflation is a known phenomenon
specific provision made for the event - Claude Neon v Hardie
frustrating event should have been forseen e.g. earthquakes frequent in nz but not in Germany - Planet Kids
where the allegedly frustrating event is self-induced - e.g. failure to apply for required license Maritime National Fish v Ocean Trawlers
where performance is merely delayed or interrupted - National Carriers v panalpina, Tsakiroglou v Noblee Thorl
what are some rules around where the allegedly frustrating event is self-induced
- plea of frustration does not succeed
- innocent party can still plead frustration, as far as the innocent party is concerned, the frustration was not self-induced, FC Shepherd
- burden of proof lies on the party making the allegation that frustration was self-induced. party pleaded frustration does not have to disprove any suggestion that the frustrating event was self induced through negligence/defaulu
what are the legal consequences at common law of frustration
frustrating event discharged the contract as to the future
neither party can demand further performance by the other
what does the CCLA 2017 govern in regards to frustration
only consequences - all other aspects covered by common law
what is the scope of application of the CCLA 2017 for frustration
s 60 and 69
- if parties explicitly provide it will not apply, then s 67 it has no application.
- several classes of contract are excluded from the operation of the Act, e.g. sale of perishable goods, under s 69 CCLA
how does the CCLA 2017 cover rights accrued before frustration
s 62
- total failure of consideration not required
- money paid before frustrating event can be recovered and any other money payable is no longer payable
- confers broad discretion - court not obliged to incline either towards total retention or towards equal division. it may allow a party which has incurred expenses before discharge, and to whom sums have been paid, to retain the whole or any part of such sums. expenses to be recovered if a party to whom sums are payable has incurred them before the discharge.
the task of the court is to mitigate the possible harshness of allowing all loss to lie where it has fallen. the onus of establishing expenses incurred is on the party claiming expenses - Gamerco v ICM/Fair Warning.
s 63 - rights not accrued before frustration
- where any party has obtained a valuable benefit due to the other party’s performance before the frustrating event, the other party can recover a sum equalling the benefit from that party
discretion - court consider all circumstances of the case, particularly expenses benefited party may have incurred, and whether circumstances of frustration have affected the value of the benefit
