Frustration

Question 1

Davis Contractors v Fareham 1956

Answer 1

Test for frustration:

1. by operation of the law
2. happens because of something outside the control of the parties
3. when circumstances have changes
4. so that contractual obligations are incapable of being performed
5. if new circumstances make performance A THING RADICALLY DIFFERENT from what was undertaken in the contract

**a labour shortage that cause the project to last longer, causing the builder to lose money, is not such an unforeseeable circumstance that it warrants frustration***

1. change in circumstandes
2. by operation of law
3. without any fault by parties
4. new circumstances from what the parties agreed
5. with the result that the agreed contract no longer be performed

EXTERNAL EVENT OUTSIDE THE CONTROL OF THE PARTIES

Question 2

Three types of frustration:

Answer 2

1. supervening impossibility - rei interitus (Taylor v Caldwell)
2. supervening illegality (Cantiere San Rocco v Clyde SS 1923)
3. Commercial Frustration (Krell v Henry)

Question 3

Taylor v Caldwell 1863

Answer 3

ENGLISH CASE (supervening impossibility)

Music Hall - concert June - music hall burnt down in May - became impossible

THIS WOULD BE AN UNJUSTIFIED ENRICHMENT CASE TODAY

Question 4

Cantiere San Rocco v Clyde SS 1923

Answer 4

supervening illegality

shipbuilding co. in Astria - supplying marine engines to Cantiere - signed contract 20th May 1914 - first instalment paid at contract signing - first product due in a year - war broke out - contract frustrated

Question 5

Krell v Henry 1903

Answer 5

frustration of purpose (commercial frustration)

One of the coronation cases - found to be frustrated

He had rented out the flat to view the procession. procession didn’t take place - he didn’t want to pay for it - court found that the viewing of the procession was an implied term - frustrated - he didn’t have to pay

Question 6

force majeure clause

Answer 6

a clause that governs proceedings if the contract does end up being frustrated. that means that the contract will still subsist… will not be governed by regular law of frustration - what has been agreed in the contract will take precedence

Question 7

Heyman v Darwins [1942]

Answer 7

Strictly speaking the contract is not frustrated. It is the future performance, or the adventure, which is frustrated.

The result is that, even after frustration, arbitration clauses may be enforceable.

Question 8

Methods of discharge of obligations: (4)

Answer 8

1. Performance/Payment or Acceptilation
2. Novation or Delegation
3. Set Off (compensation)
4. Prescription (Presciption and Limitation (s) Act 1973)

Question 9

Novation

Answer 9

X, Y and Z agree that in the future the debt is owed by Y to Z. This requires the consent of all the parties, which is a disadvantage, but the agreement can also vary the terms of the original contract, which may be an advantage. Novation creates a new contract

Question 10

Delegation

Answer 10

an obligation is transferred and a new debt substituted. Subsitution of a new debtor for the old debtor. It is a form of novation, except that the whole contract is not discharged; only the debtor is altered. Requires the consent of all of the parties.

Question 11

Law Reform (Frustrated Contracts) Act 1943

Answer 11

1. losses lie where they fall
2. sometimes remedy in enrichment
3. only when it is conditional on the contract being performed

Relieved of future obligations under contract
Doesn’t affect the contract retrospectively