frustration

Question 1

what is discharge by frustration?

Answer 1

If a party to a contract was prevented from keeping the promise because of an unforeseeable, intervening event, they would not be liable for breach of contract

Question 2

Taylor v Caldwell (1863)

Answer 2

• Music hall burnt down. The hirer had spent money advertising the events for which he would not be paid until after the events.
• As it was now impossible to complete the contract, it was frustrated. This ended the contract and there was no recompenses for the wasted expenses.

Question 3

what type of clause do organizations usually include in regards to discharge by frustration?

Answer 3

force majeure clause

Question 4

Force majeure clause

Answer 4

• this excludes liability for the parties for delay in performance or the non-performance if there are extraordinary events.
• if the contract does not contain a force majeure clause, then it may still be possible to rely on frustration to avoid being in breach of contract.
• however, what may constitute a frustrating event depends on the circumstances of each case.

Question 5

what are the 3 main types of frustrating events?

Answer 5

• impossibility of performance
• the contract becoming illegal to perform
• a radical change of circumstances

Question 6

Impossibility of performance

Answer 6

• seen in the destruction of the music hall in Taylor v Caldwell
• frustration also applies where the subject matter becomes unavailable through no fault of the parties
• In a contract for services, the frustrating event may be the unavailability of the party to who is perform the service because of illness or failure to perform based on medical advice

Question 7

Jackson v Union Marine Insurance Co. Ltd (1874)

Answer 7

A ship was chartered to sail from Liverpool to Newport and from there load a
cargo for San Francisco. It ran aground and could not be loaded for a long time. This was seen as ‘the perils of the sea’ and as no one’s fault.

The court decided that this frustrated the contract (unavailability of boat)

impossibility - subject matter becomes unavailable

Question 8

Robinson v Davidson (1871)

Answer 8

• A pianist made a contract to perform, some hours before the performance she became ill
• The court decided that the contract was conditional on the woman being well enough to perform and her illness was a frustrating event

iimpossibility - unavailability of party to who is perform the service

Question 9

Condor v The Baron Knights (1966)

Answer 9

• A contract was entered into by a band required all members of the band to be available to perform for 7 evenings a week if necessary. The drummer became ill and was advised to work no more than 4 nights a week.
• On occasion he ignored this advice, but the court still held the contract was frustrated since they should have arranged for a stand in musician in case he fell ill

impossibility - unavailability of party to who is perform the service

Question 10

The contract becoming illegal to perform

frustration

Answer 10

A contract may be frustrated as the result of a change in the law that makes
the contract illegal to perform e.g. as a result of war.

Question 11

Denny, Mott & Dickson Ltd v James B Fraser (1944)

Answer 11

The court said that a contract to import certain goods could be frustrated if
importing goods of that kind became illegal after the contract was made (think ivory and things like that)

Question 12

Re Shipton Anderson and Harrison Bros (1915)

Answer 12

a cargo of grain was sold, but before it could be delivered war broke out, and
the government requisitioned the cargo so the contract was frustrated.

Question 13

Radical change in circumstances

frustration

Answer 13

If the main purpose of the contract is based on a particular event and the event will not take place, then the contract may be frustrated

• Krell v Henry (1903) - held was enough
• Herne Bay Steamboat v Hutton (1903) - held not enough

Question 14

Krell v Henry (1903)

Answer 14

• A man hired a hotel room in order to view Edward VII’s coronation procession. The prince became ill and the coronation/procession was postponed.
• The court said that the event was the main purpose of the contract (renting) and as it would not occur, the contract was frustrated

Radical change in circumstances

Question 15

Herne Bay Steamboat v Hutton (1903)

Answer 15

Hutton hired a boat to see the king and his fleet, king fell ill.

Court said the contract was not frustrated as one main reasons for the contract still remained – to view the fleet.

All that was missing was the King (who he prob wouldn’t have seen directly anyway) This was not enough to frustrate the contract.

Radical change in circumstances

Question 16

under what circumstances can frustration not apply?

Answer 16

• Self-induced frustration
• The contract becoming less profitable
• The event being a foreseeable risk or one that was mentioned in the contract

Question 17

self-induced frustration

Answer 17

Frustration will not apply when the frustrating event is within the control of one party

• Maritime National Fish v Ocean Trawlers (1935)
• Gamerco v ICM Fair Warning and Missouri Storm (1995)

Question 18

Maritime National Fish v Ocean Trawlers (1935)

Answer 18

A fishing company owned two trawlers and had a contract to hire a third. The company needed a licence for each vessel but was only allocated two licenses. The company then claimed frustration of the hire contract as it wouldn’t be able to use the hire boat. The court held frustration did not apply and the contract was still valid as the frustrating event was within the company’s control as it could have docked one of its own ships and used the hire boat instead.

Question 19

Gamerco v ICM Fair Warning and Missouri Storm (1995)

Answer 19

A Spanish concert promoter and the defendant rock group Guns N’ Roses (Missouri Storm) agreed to put on a concert in Madrid. Shortly before it was due to take place, the stadium was deemed unfit and its license withdrawn by the Spanish authorities. No other stadium was available. The contract had been frustrated and it was not self-induced.

Question 20

Contract has become less profitable

Answer 20

A contract becoming less profitable or more difficult to complete is not a
reason for frustration of that contract

Davis Contractors v Fareham Urban District Council (1956)

Question 21

Davis Contractors v Fareham Urban District Council (1956)

Answer 21

Davis Contractors agreed to build 78 houses for Fareham Council within 8 months for an agreed price of £85,000. Due to a shortage in skilled labour and material the contract took 22 months to complete and was much more expensive than anticipated. Davis Contractors were paid the contractually agreed price but bought an action arguing for more money based on the fact that the contract had become frustrated and therefore they were entitled to further payment based on a quantum meruit basis. The court held the contract was not frustrated. The fact that a contract becomes more difficult to perform or not so profitable is not sufficient to amount to frustration. It was still possible to perform the contract.

Question 22

The event being a foreseeable risk or was mentioned in the contract

Answer 22

mentioned in Amalgamated Investment & Property Co v John Walker and Sons (1977)

Question 23

Amalgamated Investment & Property Co v John Walker and Sons (1977)

Answer 23

The involved a contract to sell a building to the investment company who wanted it for redevelopment. Unbeknown to their party and after the contract was made, the Department of the Environment made the building a listed building, meaning that it could not be used for development. This resulted in a huge drop in the value of the building. The court rejected a claim of frustration, as listing was a risk associated with old buildings of which the developers should have been aware – it was a foreseeable event/risk.

Question 24

where are the remedies for frustration found?

Answer 24

• Law Reform (Frustrated Contracts) Act (1943)
• at common law, frustrating event automatically terminates contract at time of the event. existing obligations to be fulfilled but future obligations terminated

Question 25

Law Reform (Frustrated Contracts) Act (1943)

Answer 25

• Section 1(2) - Money already paid over is recoverable and money due under contract is not payable. Courts can use their discretion to order compensation to be paid for work done and expenses incurred under contract before event
• Section 1(3) - The court may order compensation to be paid for any valuable benefits. E.G building half done adds value to property