frustration Flashcards
when is a contract frustrated
when circumstances make performance radically different from what was originally undertaken so that it would be unjust to hold the parties still bound.
contract is discharged automatically and prospectively from the time of the frustrating event.
rationale for Law Reform (Frustrated Contracts) Act
BP v Hunt Goff said the fundamental principle underlying the Act is prevention of unjust enrichment of either party at the other’s expense. Rejected other potential objectives e.g. achieving loss apportionment or protecting reliance interest.
Money benefits
C’s money paid before frustration is prima facie recoverable and if he was liable to pay before frustration he is no longer liable.
According to Gamerco, approach to proviso is that in applying it the court should do what was just. What the band had spent was a cap on the allowance.
Facts of Gamerco
Claimant concert promoter paid Guns N Roses advance payment for concert. Concert was frustrated by lack of suitable venue. Band had incurred $50,000 wasted expenses. no award made because the promoter’s wasted expenditure had vastly exceeded the band’s wasted expenditure.
Goff and s 1(2)
OBITER that this was statutory recognition of change of position.
but this is unconvincing because when the Act was passed, COP was not recognised. The proviso also doesn’t mirror common law COP. COP reading unduly limits court’s discretion to apportion loss.
Burrows’ and Virgo’s view is to be preferred that the proviso is intended to go beyond a limited COP defence and encompass loss apportionment, but it is only a limited form of loss apportionment.
non money benefits approach
- identify and quantify the valuable benefit
where the services have resulted in an end product, valuable benefit is the end product.
Apportion the part of the benefit that was attributable to what the claimant had done.
Value at date of frustration. At valuation stage, under s 1(3)(a) deduct expenditure incurred by D. At valuation stage, under 1(3)(b), adjust valuation to reflect effect of frustrating event on benefit.
- Quantify just sum
this is not a discretionary exercise in loss apportionment, it is a more limited exercise consistent with the view that s 1(3) gives a restitutionary remedy only. The just sum is the value of the services, capped by the value of the benefit.
NB CA said the just sum is what the trial judge thinks is just, and didnt endorse Goff’s view that the principle underlying the Act was the prevention of UE
Criticisms of Goff’s approach to 1(3): Goff and Jones
” Goff and Jones: nothing in the relevant working papers to suggest that any method as complicated as this was intended, and questionable whether the stat language really does compel the judge’s approach. More straightforward approach in Atwal v Rochester, but not good authority because didn’t refer to Hunt. Also critical of valuing benefit at date of frustration because this gives Act narrow scope, making the importance of the effect of the frustrating event a mandatory rather than discretionary factor.
criticisms of Goff’s approach to 1(3): Virgo
” Virgo and Mitchell: it is not purely restitutionary, it is about restitution and loss apportionment. Factors in (a) and (b) are only relevant at the second stage but are not the only relevant factors, court has a much freer exercise of discretion.
“ For Virgo the identification of the valuable benefit is the reversal of D’s unjust enrichment and the identification of the just sum is the apportionment of loss
“ Virgo: analysis of just sum leaves too much to the discretion of the court
Criticisms of Goff’s approach to 1(3): Burrows
” Burrows: approach is inconsistent with the wider law of unjust enrichment. To make it consistent, should value the benefit at the time of receipt not at the time of the frustrating event; should value the services not the end product; rethink application of 1(3)(a) and (b), as a restitutionary analysis would say that those factors should only be relevant at the stage of the just sum.
s 2(3) terms of contract can limit post frustration restitution
Per BP v Hunt, needs to be really clear that the contract is meant to operate that way in the frustrating event, need to show more than the mere fact that the obligation to do the work was entire
