Frustration Flashcards
Paradine v Jane (1647)
FACTS: Tenant sued for three years of unpaid rent. Tenant pleaded that as a result of the invasion of an enemy of the King, he was forced out of possession of the property. Tenant refused to pay Plaintiff rent for the time he was forced out of possession by the army.
JUDGEMENT: Tenant had to pay
PRINCIPLE: Historically, the concept of frustration has been invoked to mitigate the onerous doctrine of absolute contracts where performance of a contract is prevented by supervening events for which neither party to the contract is responsible and loss allocation is required. (but did not apply in this case; protecting freedom to contract/pacta sunt servanda)
Taylor v Caldwell (1863)
Impossibility
FACTS: C hired out a music hall in Surrey for the purpose of holding four grand concerts. C went to great expense and effort in organising the concerts. However, a week before the first concert was due to take place the music hall was destroyed by an accidental fire. C sought to bring an action for breach of contract for failing to provide the hall and claiming damages for the expenses incurred.
JUDGEMENT: C’s action for breach of contract failed. The contract had been frustrated as the fire meant the contract was impossible to perform. CA implied a term into the contract that the music hall’s existence was vital for the contract to be performed.
PRINCIPLE: Frustration occurs when there is a destruction of a thing essential to its performance
Davis Contractors v Fareham UDC [1956]
FACTS: D agreed to build 78 houses for F within 8 months for an agreed price of £85,000. Due to a shortage in skilled labour and material the contract took 22 months to complete and was much more expensive than anticipated. D were paid the contractually agreed price but bought an action arguing for more money based on the fact that the contract had become frustrated and therefore they were entitled to further payment based on a quantum meruit basis.
JUDGEMENT: The contract was not frustrated.
PRINCIPLE: The fact that a contract becomes more difficult to perform or not so profitable is not sufficient to amount to frustration. It was still possible to perform the contract.
“Radical change in obligation” test formulated by Davis Contractors v Fareham
- Without default of either party
- Contractual obligation is incapable of being performed because of a radical change in circumstances
- Every hardship, inconvenience/material loss does not attract the doctrine of frustration
Appleby v Myers (1867)
FACTS: The plaintiffs contracted to make and install machinery in the defendant’s factory, as well as to maintain the machinery for two years. Payment was due upon completion of the work. After part of the machinery was installed, an accidental fire destroyed the factory and the machinery.
JUDGEMENT: The contract was frustrated by the literal disappearance of the premises. The plaintiffs could not recover monies in respect of the materials used and work already done because they were only entitled to payment when performance was completed.
Whincup v Hughes [1871]
FACTS: Master of apprentice died, thereby frustrating the contract
PRINCIPLE: Frustration occurs when there is an impossibility of performance; in this case because of death of a party to a “personal” contract
Condor v Baron Knights [1966]
FACTS: A 16 y/o agreed by contract to play the drums for the defendant band for 7 nights per week for 5 years. C suffered a mental breakdown and was told by his doctor that he should not perform more than 4 nights per week. The band dismissed him. He brought a claim for wrongful dismissal.
JUDGEMENT: C’s action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated.
PRINCIPLE: Frustration occurs when there is an impossibility of performance; in this case because of incapacity of a party to a “personal” contract
Impossibility of performance - unavailability
The Evia (No 2) [1983] - ship trapped in Gulf during the 1980 war
The Nema (No 2) [1982] - no cargo due to strike at port of loading
Morgan v Manser [1948]
Artiste called to army for 6 years during 10 year employment of manager; held that the contract was frustrated
Herne Bay Steam Boat v Hutton [1903]
FACTS: D hired out the C’s steamship. The purpose of the contract was to take paying passengers to view the Naval Review which was part of King Edward VII’s coronation celebrations. D were also offering a day’s cruise for the passengers. The Naval Review was cancelled as the King was ill. D did not use the steamship and C brought an action for the agreed contract price. D argued the contract had become frustrated due to the cancellation of the Naval Review.
JUDGEMENT: The contract was not frustrated. The contract had not been deprived of its sole commercial purpose as it was still possible to perform the days cruise. The Naval Review was not the only commercial purpose of the contract.
PRINCIPLE: Frustration of purpose is only recognised in very exceptional cases.
Krell v Henry [1903]
FACTS: D hired a flat for the sole purpose of viewing King Edward VII’s coronation procession. The price agreed was £75 for two days. D paid £25 deposit. Due to illness of the King the coronation was cancelled. Consequently, d did not use the flat. C sought to claim the outstanding £50.
JUDGEMENT: The contract was frustrated as cancellation of the procession deprived it of its commercial purpose. C’s action for breach of contract was thus unsuccessful.
PRINCIPLE: A contract MAY also be frustrated where it is deprived of its commercial purpose/frustration of purpose
Fibrosa Spolka v Fairbairn [1943]
FACTS: An English company which manufactured textile machinery agreed by contract dated 12th July 1939 to supply some machines to a Polish company. The machines were to be delivered in 3-4 months. £1,600 was payable up front and the balance of £3,200 payable on delivery. The Polish company paid £1000 on 18th of July on account of the initial payment due. On 1st Sept Germany invaded Poland and on 3rd Sept Great Britain declared war on Germany. On 23rd of September Orders in Council made Poland an enemy territory making it illegal for British companies to trade with Poland.
JUDGEMENT: Held that the contract was frustrated as it was no longer possible to perform the contract because of the supervening illegality.
PRINCIPLE: Trading with the enemy frustrates a contract.
The Hannah Blumenthal [1983]
FACTS: A contract was made for the sale of a ship. A dispute arose between the parties regarding alleged defects. The dispute was referred to arbitration but the requirement for a third arbitrator under the contract was not fulfilled and the arbitration was delayed. The sellers raised proceedings for a declaration that the arbitration agreement was discharged by repudiation, consensual rescission or frustration. At first instance, it was held that there had been no agreement to abandon the arbitration but it had been discharged by frustration. The CA agreed that the agreement had been frustrated because, due to the long period of time that had passed, it would be impossible for there to be a fair trial of the buyer’s claim. The buyer further appealed to the House of Lords.
JUDGEMENT: The House of Lords allowed the appeal. The arbitration agreement was not frustrated. Both parties were in default of the agreement by not applying to the arbitral tribunal for direction to prevent delay. Such a default excluded the operation of the doctrine of frustration.
PRINCIPLE: The doctrine of frustration cannot be invoked by a party whose own negligence/breach of contract was one of the factors causing the supervening event
Maritime National Fish v Ocean Trawlers [1935]
FACTS: C owned five fishing vessels one of which was chartered to the defendants. The fishing vessels were all fitted with otter trawler nets. New legislation was introduced requiring licences to be held by those using otter trawl nets. The claimant applied for five licences but was only granted three. He had to name which vessels the licence would be used on. He named his own vessels and excluded the vessel which the defendant was using. This meant that the defendant was unable to use the vessel for fishing. The claimant sued the defendant for the price of hire and the defendant in his defence stated the defendant had committed a breach in not providing a licence so he was not obliged to pay for the cost of hire. The claimant argued there was no breach as the failure to provide a licence was a frustrating event in that the decision to grant licences rested with the secretary of state.
JUDGEMENT/PRINCIPLE: The contract was not frustrated since C had chosen to keep the three licences granted for himself rather than using one to fulfil his contractual obligation. He had therefore induced the frustrating event and was therefore in breach of contract.
BP Exploration Co (Libya) Ltd v Hunt (No. 2) [1979]
FACTS: BP entered an agreement with H, under which BP would explore and develop his oil concession in Libya at their own expense. This expenditure would be recoverable from H’s share of the profits when the field produced oil. After oil production began, the parties would share both production and development costs. Oil came on stream in 1967 but in 1971 the Libyan government seized BP’s interest. BP had not received all its initial expenditure from H’s share, and claimed a just sum under s1 Law Reform (Frustrated Contracts) Act 1943. BP contended the contract had been frustrated because of the seizure and, as such, they were entitled to recover the sums due under s1 of the 1943 Act. H contended the contract was not governed by English law, had not been frustrated, and, therefore, the 1943 Act was of no application. H also argued that BP had received compensation from the Libyan government, and BP’s acceptance of this payment was in breach of their contract. H argued BP had agreed to bear the risks of the commercial enterprise, and that H had fulfilled his obligations respecting the pre-production expenses. Even if the contract was frustrated, H contended that BP had received valuable benefits from the contract and he counterclaimed for a just sum under the 1943 Act.
JUDGEMENT: The contract was held to be frustrated in 1971. At the date of frustration, H had received a benefit under the contract because of BP’s contractual performance, and this sum was to be taken into account. The reimbursements already paid by Hunt would also be taken into consideration when the court calculated the just sum to be awarded to BP. BP could, therefore, recover $35 mil.
PRINCIPLE: s1(3) of the Act allows the courts to award a “just sum” to a party who rendered performance before the frustrating event.
