Frustration

Question 1

What expenses/costs can be recovered if a contract is discharged through frustration (Law Reform (Frustrated Contracts) Act)?

Answer 1

• Advance payments - money paid before the time of discharge should be repaid
• Money payable ceases to be payable

This helps the paying party

The court also has discretion to order recovery of money for expenses incurred by supplied:
- Cannot exceed actual expenses incurred or amount paid/payable by paying party

Question 2

Can sums paid prior to the frustrating event be recovered?

Answer 2

This is subject to the court’s discretion
- to allow the payee to retain sums or recover sums payable, up to amount of expenses incurred for the purposes of performing the contract

Question 3

Is a contract frustrated because it becomes more expensive/onerous to perform?

Answer 3

NO - a contract is not frustrated merely because it becomes more difficult or expensive to perform

Unforeseen events, including hardship, loss or inconvenience which made a contract more onerous do not frustrate it

Question 4

What is the effect of frustration on a contract?

Answer 4

It relieves a party from further obligations under the contract (so they do not have to meet these radically different obligations)

Question 5

What is the legal principle for frustration?

Answer 5

If a contract’s fundamental purpose frustrated by an unforeseen event, rendering the contract impossible to perform, it may be considered void

• Must be sufficiently fundamental