Frustration Flashcards
What does discharge through performance mean?
that performance must be complete and exact even when one party could not physically uphold their bargain any more as seen in paradine v jane - unjust
what did this harshness lead to?
it 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 wouldnt be liable for breach as seen in taylor v caldwell
Taylor v Caldwell
owner contracted to rent out his 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 way to compense for the wasted expenses.
Davis Contractors Ltd v Fareham district council - definition of frustration:
frustration occurs whenever the law recognizes 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
which case outlined the definition of frustration
davis contractors ltd v fareham urban district council
key elements of frustration:
without default of either party
incapable of being performed
radically different
in simple terms, the contract was to be carried out it would either be: impossible, illegal or the purpose couldn’t be achieved anymore. and the contract would be frustrated
what is frustration through impossibility?
in taylor v caldwell, it was impossible to perform and therefore it could be frustrated through impossibility.
impossibility also includes where the subject matter of the contract has became unavailable through no fault of the contracting parties
jackson v union marine insurance
Jackson v Union Marine Insurance
a ship was chartered to sale from liverpool to newport, then load a cargo for san francisco. couldnt be loaded and became a peril of the sea, the court agreed that it was implied into the contract that the ship should be available for loading in a reasonable time. contract was therefore frustrated
Impossibility through illness: Robinson v Davidson
in a contract for services, impossibility may be that one party can no longer carry out their service, this may be due to illness etc.
a pianist made a contract to perform, some hours before the performance was due she became ill and couldnt attend. conditional on her being well, her illness was a frustrating event.
Illegality to perform:
a change in the law may make the contract illegal to continue. for example covid or times of war
Re Shipton Anderson and Co
Re Shipton Anderson and Co.
a cargo of grain was sold, but before ir 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.
i.e. if the main purpose of the contract is based on a particular event, and that event will no longer take place, it is frustrated.
two contrasting cases demonstrate this:
Krell v Henry
Herne Bay Steamboat v Hutton
Herne Bay Steamboat v Hutton
Hutton hired a boat in order to see the fleet when the king reviewed it as part of his coronation celebrations. Hutton claimed that he didnt have to pay as the king was ill and couldnt attend but one main purpose still remained, to see the fleet so couldnt be frustrated.
Krell v Henry:
A man hired a hotel room to view edward viis progression, the prince had become ill and the coronation was postponed. the main purpose of the contract was the event. event circumstances were changed, the contract was frustrated even though the room was still available.
Limitations of frustration:
1) Self induced frustration
2) the contract became less profitable
3) the event being a foreseeable risk or the event was mentioned on the contract
1) Self induced frustration
if the frustrating event is within control of one party, frustration will not apply.
subjective test
even a slight change in words may determine a frustration or breach
key case: maritime national fish v ocean trawlers
maritime national fish v ocean trawlers - self-induced frustration
a fishing companies owned two trawlers and had a contract to hire a third. they only had two licenses not three. the company claimed frustration to the third boat hire as they couldnt use it. however, the frustrating event was within the companies control as they could have hired one of the allocated licenses to the hired boat instead, but they chose not to.
2) the contract became less profitable
if a contract became less profitable/ more difficult to complete, it is not a reason for frustration of the contract
Davis Contractors v Fareham Urban District council
Davis Contractors v Fareham Urban District council - 2 less profitable
builders contracted to build houses fir 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.
3) the event being a foreseeable risk or the event was mentioned in the contract
if there is a foreseeable risk, then the courts will not find there to be frustration,
Amalgamated Investment and Property v John Walker and sons
Amalgamated Investment and Property v John Walker and sons - foreseeable risk 3
contract to sell a building to an investment company who wanted to develop it. unbeknown to either party, the department of environment made the building listed, meaning it couldnt be used for development. court rejected frustration, as listing was a risk associated with all old buildings of which developers should be aware.
Reluctance and justice
the courts are generally reluctant to find that there has been frustration of the contract.
as we have seen before, contract law does not protect you from a bad bargain. they are reluctant to kill contracts so frustration will not be invoked lightly.
shouldnt be relied on by a party
Remedies for frustration:
A frustrating event automatically terminates the contract
already existing obligations must be completed but future obligations are terminated
can decide whether to compensate
i.e. in krell v henry they didnt have to pay as it was due on arrival, however, if the room was needed to be paid when booking then the obligation would still stand,
Law reform act 1943 (frustrated contracts)
S1(2)
money paid before the frustrating event occurs is recoverable
money payable before the frustrating event ceases to be payable. i.e. no longer an obligation to pay the price agreed
the court may award expenses if the party has incurred expenses before the frustration event. sum is limited to a maximum of the sum of money paid before the frustrating event.
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 sum will be what the courts consider just, in regards to all circumstances of the case
subjective - BP exploration v Hunt
Summary of frustration:
money already paid (such as a 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 on basis of quantum merit
court may order compensation to be paid for any valuable benefit one party may acquire under the frustrated the contract.
