frustration Flashcards
whats a frustrating event?
an external event which makes the contract impossible or illegal to perform or the event destroys the purpose of the contract.
what do the strict rules of discharge through performance outline?
- that there must be exact and full performance for there to be discharge.
this was the case even if one party could not physically uphold their bargain anymore
Paradine v Jane 1647
showed that the defendant was still liable to pay rent on land even though he had been forced off the land by an invading army during the english civil law
this was then to harsh and led to injustices as such if one party to a contract couldn’t carry out their promise due to an unforeseeable , intervening event then they would not be liable for the breach.
which is the case for this ?
Taylor v Caldwell 1863
Taylor v caldwell 1863
owner contracted to rent out this music hall. Through no ones fault and before the rental could take place , the music hall burned down. as it was now impossible to complete, it was frustrated. This ended the contract and there was no recompense for the wasted expenses.
key case of frustration
Davis contractors ltd v Fareham urban district council 1956
davis contractors Ltd v fareham Urban district council 1956 out lines frustration as the following:
frustration occurs whenever the law recognised that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.
if the contract was to be carried out still it would either be impossible illegal or the purpose couldn’t be achieved anymore, and as such the contract is deemed to be frustrated
impossiblity to perform
impossibility also includes where the subject matter of the contract has become unavailable through no fault of the contracting parties
example:
if you have paid a deposit for a kitten and then the kitten dies it is impossible to carry out the contract as the subject matter has become unavailable
it also may be that one party can no longer carry out their service this may be due to illness etc
Jackson v union marine insurance co ltd 1874
a ship was chartered to sail from Liverpool to Newport then load a cargo for San Francisco. it ran aground and couldn’t be loaded for a long time. it was seen as a peril of the sea the court agreed that it was implied into the contract that the ship should be available for loading in reasonable time and the contract was therefore frustrated.
Robinson v Davidson 1871
a pianist made a contract to perform some hours before the performance was due she became ill and her husband informed the claimant that she would be unable to attend. The court decided that the contract was conditional on the women being well enough to perform and therefore her illness was a frustrating event.
illegal to perform
a change in the law may make the contract illegal to continue
for example , covid laws meant that lots of contracts would been illegal to perform during lockdown
it may also be in times of war
re Shipton Anderson and co
a cargo of grain was sold but before it could be delivered war broke out . the government took the cargo so the contract became frustrated
change of circumstances
a change of circumstances may mean the essential purpose of the contract can no longer be achieved
ie if the main purpose if the contract is based on a particular event and that event will no longer take place it is frustrated
Krell v Henry 1903
a man hired a hotel room in order to view Edwards vii’s procession. the prince became ill and the coronation and procession were postponed. The court said that the event was the main purpose of the contract, as the event circumstances changed , the contract was frustrated even though the room was still available.
Herne bay steamboat v Hutton 1903
Hutton hired a boat in order to see the fleet when the king reviewed it as part of his coronation celebrations. Hutton claimed he didn’t have to pay as the king was ill and didn’t attend. The court said the contract was NOT frustrated as the one main purpose for the contract still remained to see the fleet.
limitation of frustration
frustration will not apply in the following circumstances:
1 self- induced frustration
2 the contract becoming less profitable
3 the event being a foreseeable risk or the event was mentioned in the contract.
self induced frustration
if the frustrating event is within control of one party , frustration will not apply.
maritime national fish ltd v ocean trawlers 1935
A fishing company owned two trawlers and had a contract to hire a third. they only had two licenses though not three. the company claimed frustration to the third hire boat as they could not use it, the court held that frustration did not apply as as the ‘frustrating event’ was within the company’s control as it could’ve allocated one of their two licenses to the hired boat instead but they chose not to,
- this is subjective to the courts as to what they think is in their control or not
- even a slight change in words may determine whether it is frustration or if it is a breach of contract
the contract has become less profitable
if the contract becomes less profitable / more difficult to complete it is not a reason for frustration of that contract
Davis contractors v Fareham urban district council 1956
Builders contracted to build houses for the urban district council for £94,000 but then discovered it would cost £115,000 to complete the contract due to labour shortages, The builders claimed frustration of the contract but weren’t successful as the contract was not radically different to what the parties had originally intended, just less profitable.
the frustrating event being a foreseeable risk or the event was mentioned in the contract
if there is foreseeable risk, then the courts will not find there to be frustration.
Amalgamated investment and property v John walker and sons 1977
Contract to sell a building to an investment company who wanted to redevelop it . unbeknown to either party, the department of the environment made the building listed, meaning it couldn’t be used for development. Court rejected frustration, as listing was a risk associated with all old building of which the developers should’ve been aware.
reluctancy and justice
courts are generally reluctant to find there ad been a frustration of contract.
frustration shouldn’t be relied on by a party. it must instead be due to some outside event or extraneous change of circumstance
law doesn’t protect you from a bad bargain
remedies
a frustrating event automatically terminates the contract
already existing obligations must be completed but future obligations are terminated
e.g. in Krell v Henry they didn’t have to pay for the hotel room as payment was due to be on arrival however, if the room need to be paid when booked, then this obligation would still stand
law reform frustrated contract act 1943 s1 2
money paid before the frustrating event occurs is recoverable.
money payable before the frustrating events ceases to be payable ie no longer an obligation to that price agreed or goods/services
the court may award expenses if the party has incurred expenses before the frustrating event. sum is limited to a maximum of the sum before the frustrating event.
no damages just money back
s1 3
if a party has obtained a valuable benefit from the contract before the frustrating event, the court may order them to pay a sum in respect of it
that sums will be what the court considers just, in regards to all the circumstances of the case.
there is subjectivity so that the claimant can be compensated fairly of the money lost. case example Bp exploration v hunt
summary
money already paid such as deposit is recoverable and money already due under the contract is not payable
the court can use its discretion to order compensation to be paid for work done and expenses incurred under the contract before the frustrating event paid based on the principle of quantum meruit.
the court may order compensation to be paid for any valuable benefit one party may acquire under the frustrated contract
tip - consider whether the event preventing the performance of the contract comes from outside the contracting parties. if it does , it is more likely to be frustration
