Frustration

Question 1

What does Taylor v Caldwell say?

Answer 1

Frustration will end a contract when performance of the contract has been made impossible, and this is not the fault of the parties.

Question 2

What are force majeure clauses?

Answer 2

Clauses that exclude liability for extraordinary events. If there is no such clause, a frustrating event must be proven.

Question 3

What are the 3 frustrating events?

Answer 3

1. Impossibility
2. Illegality
3. Radical change in circumstances

Question 4

Discuss impossibility

Answer 4

When either the subject matter of the contract gets destroyed (as in Taylor v Caldwell) or becomes unavailable (as in Jackson v Union Marine).
For unavailability, Tsakiroglou v Noblee Thorl gave an exception, saying it being harder to make the subject matter available is not enough, it must be impossible.

Question 5

Discuss illegality

Answer 5

If the law changes so that performing the contract becomes illegal, this will frustrate the contract, as in Denny, Mott and Dickson v James Fraser

Question 6

Discuss radical change in circumstances

Answer 6

If a contract is made, then circumstances drastically change before performance, the contract may be frustrated as the contract has become pointless, as in Krell v Henry.

Question 7

Discuss inconvenient/non-radical change in circumstances

Answer 7

If the contract is now more inconvenient or slightly different than before, this does not mean the contract is impossible/pointless, as in Davis v Fareham.

Question 8

What are the limits of frustration?

Answer 8

• Foreseeable events

- Self-induced frustration

Question 9

Discuss foreseeable events

Answer 9

If the frustrating event was foreseeable, that event will not frustrate the contract, as in AIP v John Walker.

Question 10

Discuss self-induced frustration

Answer 10

If the frustrating event was due to a voluntary action/ choice of one of the parties, the contract will not be frustrated as one party was in control and so it is their ‘fault’, as in The Super Servant Two.

Question 11

What are the effects of frustration?

Answer 11

Frustration automatically ends a contract from the point of the frustrating event. the parties’ have no choice in this.
The Law Reform (Frustrated Contracts) Act 1943 changed the law surrounding the effect of frustration.
S1(2) said that money paid or owed before the frustrating event is reasonable, minus any just expenses. Also, any money meant to be paid after the event ceases to be owed.
S1(3) said that where no pre-payment was made, but the party has party performed the contract, some money may be awarded.
In Gamerco, the court allowed G to recover money under S1(2), but could have let D keep some money to pay for their expenses.