Frustration

Question 1

Define frustration

Answer 1

Frustration occurs when, without fault of either party, an unforeseen event occurs, leaving the contractual obligation radically different or incapable of being performed

Question 2

Original common law rule

Answer 2

If you agreed to a contract, you had to carry out obligations no matter what

Question 3

Categories of a frustrating event

Answer 3

Government intervention 
Unavailability of a specific person
Illegality 
Impossibility 
Non-occurrence of a fundamental event

Question 4

What are the rules about contracts for personal services?

Answer 4

May be frustrated if one party is unable to perform through death, illness or incapacity

Question 5

What are the rules on deciding if delay frustrates the contract?

Answer 5

• does the contract provide for delay
• the length of delay
• was there a time set in contract for performance to be finished
• is contract radically different after delay?

Question 6

What is risk allocation?

Answer 6

When circumstances intervene to frustrate the contract, it is said that a potential risk of the contract has emerged

Question 7

What are the rules on risk allocation?

Answer 7

Courts decide whether risk was to be assumed by one or more of the parties

Mere fact that performance turns out to be impossible will not result in frustration where one party took on an obligation to perform in all circumstances

Question 8

Limitations on frustration?

Answer 8

• If it was self-inflicted
• If it was foreseen
• Force Majeure

Question 9

What is a force majeure?

Answer 9

If there is a clause for unforeseen events there will be no frustration

Question 10

What are the common provisions in force majeure clauses?

Answer 10

Notice
Suspension
Termination

Question 11

What are the consequences of frustration?

Answer 11

Contract becomes to an end
Both parties released from further obligations
Neither party is in breach of contract
Termination is automatic

Question 12

Was is the original common law rule on money paid?

Answer 12

Nothing already paid can be recovered and money owed had to be paid

“Loss lies where it falls”

Question 13

S1(2) The Law Reform (Frustrated Contracts) Act 1943

Answer 13

Money paid before event can be recovered
Money which should have been paid before event doesn’t need to be paid
Discretion of court allows a payer to recover expenses out of money paid and payable before frustration

Question 14

S1(3) The Law Reform (Frustrated Contracts) Act 1943

Answer 14

One party has a benefit before frustration occurred and is being unjustly enriched
Court may order a just sum to be paid to the party who did not receive benefit