Frustration

Question 1

Taylor v Caldwell

Answer 1

Taken to have introduced an express doctrine of frustration, however, its conceptual basis (implied tern theory) is no longer favoured.
Blackburn J: Roman law - since the subject matter had perished, the parties were discharged from their respective duties

Question 2

Lords Reid and Radcliffe, Davis Contractors

Answer 2

Abandoned implied terms theory of Taylor and replaced it with “overall test” (McKendrick): “radically different” from what had been contracted for?

Question 3

McKendrick on Davis Contractors

Answer 3

Reveals the courts’ reluctance to invoke doctrine of frustration

Question 4

Prof Ibbetson on Taylor v Caldwell

Answer 4

Conceptual basis no longer favoured, 19th century judges were inventing/imposing intention which is essentially a legal fiction

Question 5

McKendrick on foresight

Answer 5

A frustrating event is one that was not foreseen and was not foreseeable by the parties (subjective and objective elements)

Question 6

The Super Servant Two

Answer 6

SELF-INDUCEMENT –> no frustration: if the contract had specifically provided for the Super Servant Two to be used, it would have been frustrated by her sinking
In D’s control to allocate the Super Servants, human choice –> frustration could not be pleaded

Question 7

Denning vs. Treitel in The Eugenia

Answer 7

Denning (OBITER): There’s a presumption that any foreseeable risk of an event will be allocated to a party BUT that presumption is rebuttable. You construe the contract first to see whether the risk has been allocated , and more often than not you’ll find that it has been.

Treitel: ANY foreseeability means that frustration cannot be pleaded. suggestion - foreseeability (subjectively or objectively) will allow court to draw the interference that risk was allocated

Question 8

The Eugenia

Answer 8

No frustration. additional time was not excessive enough, impact not serious enough, cargo not perishable, could have taken alternative route

Question 9

Treitel on The Super Servant Two

Answer 9

Misapplication of doctrine to argue that it cannot be available to a party who has more than one contract to uphold - there should be a first come first serve rule (first upheld, last frustrated if necessary)

Question 10

Two circumstances that will bar a plea of frustration

Answer 10

1) self-inducement

2) foresight

Question 11

McKendrick (approving of Treitel) on Krell v Henry

Answer 11

common purpose: facilities to be provided for watching coronation
If the facts were different and Mr Henry had taken ill - no frustration because it would have only affected Mr Henry’s intention not Mr Krell’s as the coronation was still taking place

Question 12

Lord Radcliffe, Davis Contractors

CONTRA implied terms theory

Answer 12

1) frustration happens outside of anything the parties knew/intended implied terms (implied by knowledge of parties)
2) Must be incapable of being performed because it would render a thing radically different from what was undertaken by contract

Question 13

Lord Russel, dissenting in Panalpina

Answer 13

Lease should not be frustrated unless physical destruction of the land (coastal erosion) - bargain had passed with all its advantages and disadvantages!

Question 14

Force majeure clauses (cover things like acts of god, natural disasters)

Answer 14

Rarely enough to exclude all possibility to rely on frustration but they can be relied upon as evidence that parties considered various possible outcomes (helpful giants party trying to plead frustration

Question 15

Krell v Henry

Answer 15

Coronation of King Edward VII was postponed, but D had rented a room
ESSENTIAL: cancellation after contract executed
Common purpose frustrated - room hired for particular reason, advantage of that particular room’s view, advantage of that particular coronation - only one possible reason for contract: coronation

Question 16

What is frustration?

Answer 16

A failure to contract - event occurs after formation (unlike mistake which is operative at the time the contract is concluded, has then already happened), that is outside of the control of the parties and renders the purpose of the contract impossible or radically different

Failure to contract rarely happens, most of the time, a duty can be traced back to one of the parties

Question 17

Why are the courts reluctant to find frustration?

Answer 17

i) contracts are binding agreements, usually expected that someone pays if they don’t perform
ii) allows one party to walk away, leaving the other to bear the costs
iii) risk can always be traced back to one party

Question 18

The Chrysalis

Answer 18

Dispute as to when frustration had arisen: when dispute between Iran and Iraq began OR when shipowners generally had confirmation of this
Held: at later date because then the parties had become aware of the fundamental different circumstances in which they were operating

Question 19

When does frustration happen?

Answer 19

i) Impossibility (e.g. natural disaster)
ii) Illegality (e.g. you’re no longer allowed to sail down the route planned)
iii) frustration of common purpose
iv) other circumstances (e.g. death)

Question 20

Beale in Chitty: bar to a plea of frustration

Answer 20

Someone either at fault or whose act was deliberate - how would they argue the event was outside their control?

Question 21

Chandler v Webster

Answer 21

BEFORE Law Reform (Frustrated Contracts) Act 1943: THE LOSS MUST LIE WHERE IT FELL AT THE TIME OF FRUSTRATING EVENT - rights/liabilities frozen at that point
termination, unlike rescission, is not retroactive so a payment prior to discharge could not be gotten recovered and balance had to be paid

Facts similar to Krell.
Contract had required hirer to pay before the date of the precession –> risk passed to him
Frustration merely releases parties from obligations of future performance
Consideration for benefit of promise, simply a bad bargain

Question 22

Bank Line v Arthur Capel and Co

Answer 22

When both parties share an interest in an commercial adventure, one cannot protest that the other is still obliged to pay for services which cannot meaningfully be rendered
Difference (charter April-April became September-September) fundamental in business terms: freight rates had risen

Question 23

Paradine v Jane

Answer 23

Old position: frustration was not available
Where a duty was assumed by contract (here pay lease for farm), it was to be performed notwithstanding any accident by inevitable necessity (here, being expelled by Prince Rupert).
The opportunity to take account of such risks had been at the time of contracting.
OBITER: even if the land is gained by sea, made barren by wildfire…

Question 24

Hardship clauses (adjust contract when certain events take place)

Answer 24

Can also be used to show events being planned for by parties –> increasingly less scope for frustration to apply

Question 25

Davis Contractors v Farnham Urban District Council

Answer 25

RADICALLY DIFFERENT not simply more onerous.

No frustration, because performance was only delayed and not impossible. Labour shortage was foreseeable to certain extend –> risk lay with contractors

Question 26

Blackburn Bobbin v T.W. Allen and Sons

Answer 26

Outbreak of WWI made sipping impossible, but the means by which D were to obtain timber was wholly immaterial to P and did not have to be in P’s contemplation - D was responsible for transport –> no frustration

Question 27

McKendrick on Fibrosa

Answer 27

Improved law on frustration in cases of failure of consideration but only applied to total failure of consideration. What about part performance?

Question 28

Law Reform (Frustrated Contracts) Acts 1943 [passed to deal with the numerous frustration cases arising from WWII]

Answer 28

1. goes beyond Fibrosa and allows recovery of a sum paid before frustration even if there has been no total failure of consideration
2. allows party who has done work for the other’s benefit before frustration without any accrued right to payment nevertheless to claim compensation
3. Act does not alter circumstances in which frustration will/will not be found

Question 29

National Carriers v Panalpina

Answer 29

Approved Davis Contractors.
However, theoretically frustration could apply to leases (doubted before - lease = interest in land which endures notwithstanding events which deprive lessee of land’s usefulness) - Majority thought a rigid distinction between leases and other contracts would lead to anomalies

HERE: interruption of two years of a 10 year lease was not sufficient!

Question 30

Joseph Constantine Steamship Line v Imperial Smelting Corporation

Answer 30

HoL overruled CoA: Unfair to party who had been victim to an unpredictable event - very difficult to prove negligence had NOT cause explosion
Party countering with allegation of self-inducement of frustration must bear the burden of proof

Question 31

Bank Line vs. Blackburn Bobbin

Answer 31

BB: deal was the same, no prejudice to one party or fundamental alteration of deal by delay

BL: difference in timing and in vessel had led to a completely different deal with an extreme effect on one party

Herling: nonsense, courts just <3 shipping
“not the other side’s problem” vs. “common object” found in exchange of services for payment –> any interruption of exchange of services (thus affecting common interest) = frustration?

Question 32

Herne Bay Steam Boat v Hutton

Answer 32

No frustration because no particular connection between the Cynthia and the purpose of the contract - other ships would have done as well
Multiplicity of contractual purposes: there could (realistically) have been only one reason for hiring that room with a view during coronation, whereas many reasons for chartering the Cynthia to simply sail around

Question 33

Effect of frustration

Answer 33

Contract is immediately TERMINATED.
NOT void
NOT voidable
This means all future obligations are discharged

Question 34

Fibrosa SA v Fairbairn Lawson Combe Barbour

Answer 34

Overruled Chandler.
Lord Simon’s 2 types of consideration:
1) for the purposes of contract formation (i.e. exchange of promise
2) total failure of consideration (i.e. when actual consideration has not been provided)

Polish company never received their consideration so they could recover £1000 (they couldn’t deliver because Germany had invaded Poland)

Question 35

Section 1(2) Law Reform (Frustrated Contracts) Act 1943

Answer 35

Provides that money paid prior to a frustrating event can be recovered. This is subject to the proviso that if the party to whom the payment was made has incurred expenses, such amount as the courts consider just may be retained to cover these.

Question 36

Section 1(3) Law Reform (Frustrated Contracts) Act 1943

Answer 36

UNJUST ENRICHMENT PREVENTION
Covers instances where one party has obtained a “valuable benefit” prior to frustration and the party providing the benefit has to right to payment

Question 37

BP Exploration v Hunt

Answer 37

Government intervention can lead to frustration

Question 38

When frustration was not available as a doctrine

Answer 38

Paradine v Jane

Question 39

Frustration of common purpose cases

Answer 39

Bank Line v Arthur Capel and Co
Krell v Henry
Herne Bay Steam Boat Co v Hutton

Question 40

Self-induced frustration cases

Answer 40

The Super Servant Two

Joseph Constantine Steamship Line v Imperial Smelting Corporation

Question 41

Foresight case

Answer 41

The Eugenia

Question 42

Delay (“radically different”) cases

Answer 42

Bank Line v Arthur Capel

The Chrysalis

Question 43

Effect of frustration

Answer 43

Chandler v Webster
Fibrosa SA v Fairbairn Lawson Combe Barbour
Law Reform (Frustrated Contracts) Act 1943