Frustration

Question 1

What is frustration?

Answer 1

Frustration occurs when something happens which is not the fault of either party but makes the contract impossible, illegal or pointless.

Question 2

What is the frustration rule?

Answer 2

If there is an unforeseeable, intervening event which makes performance impossible, then the party unable to perform cannot be sued for breach of contract.

Question 3

What are the 3 main types of frustrating event?

Answer 3

1. Event makes performance impossible
2. Performance becomes illegal
3. Contract becomes pointless due to a radical change in circumstance.

Question 4

How can a contract become impossible?

Answer 4

A contract becomes impossible to perform if:

1. Subject matter is destroyed
2. Subject matter becomes unavailable
3. Person becomes unavailable

Question 5

What case illustrated subject matter being destroyed?

Answer 5

This usually involves things such as a building burning down in which a contract would be impossible to perform.

Taylor V Caldwell:

• Hall burnt down before event
• Contract frustrated, hirer could not get costs back.

Question 6

What case illustrated subject matter becoming unavailable?

Answer 6

This is when they are unable to perform the contract as a central part of the contract is unavailable for use.

Jackson V Union Marine Insurance:

• Ship broke down could not be loaded
• Long delay frustrated the contract as it was unavailable

Question 7

What case illustrated a person becoming unavailable?

Answer 7

If a person central to the contract becomes unavailable before performance, the contract will be frustrated.

Robinson V Davidson:

• Pianist taken ill
• Inability to perform frustrated the contract

This also includes the failure to perform on medical advice.

Condor V Baron Knights:

• Became ill not advised to work more than 4 nights. He ignored and still did 7.
• Contract frustrated as it was necessary to have a stand in, incase he became ill.

Question 8

How can performance become illegal?

Answer 8

This is usually caused by the passing of an act which makes the contract illegal to perform.

Denny, Mott & Dickson V James Fraser:
- Contract for wood frustrated after act made sale of it illegal.

Re Shipton Anderson V Harrison bros:

• Ships cargo claimed by government when war declared.
• Frustrated the contract.

Question 9

What is a radical change in circumstances?

Answer 9

This is when the contract is not impossible but the intervening event has made it pointless.
Usually involves some sort of event which is central to the contract which doesn’t happen.

Krell V Henry:

• Hired a room in Pall Mall so he could watch procession.
• Coronation postponed.
• Contract frustrated as sole reason for entering into contract was to watch procession.

However, all of the commercial purpose of the contract must become pointless. If there is something left it will not be frustrated.

Herne Bay Steamboat V Hutton:

• Hired a boat to watch the fleet and procession.
• Argued frustrated as procession postponed, but as they could still watch the fleet not all purpose gone.
• Not frustrated.

Question 10

What limitations are there to the frustration rule SLFF?

Answer 10

Self-induced
Less profitable
Foreseeable
Force majeure clause

Question 11

What is meant by self-induced?

Answer 11

If you brought the event upon yourself or had some control over it then the contract will not be frustrated.

Maritime National Fish V Ocean Trawlers:

• Used only 2 licences for 2 trawlers claimed frustrated as couldn’t get license for hired boat.
• They could have avoided situation by ensuring that they had enough licenses.

Question 12

What is meant by less profitable?

Answer 12

Just because a contract becomes more expensive to perform does not give grounds for frustration.

The Suez Canal case:

• Suez canal was closed so they had to take an alternative route which would cost more.
• Argued it was frustrated as became impossible.
• Sellers could still ship so they needed to do this regardless of cost.

Question 13

What is meant by foreseeable?

Answer 13

If the intervening event was a foreseeable risk or it was mentioned in the contract then it will not be frustration.

Amalgamated Investment & Property V John Walker & Sons:

• Contracted to buy an old building. It became listed so couldn’t redevelop.
• Foreseeable risk for all old buildings so not frustrated.

Question 14

What is a force majeure clause?

Answer 14

If both parties have a clause written in the contract which sets out what to do in the case of frustration then they are bound by this.

Question 15

What remedies can be found in common law?

Answer 15

• Contract is terminated at the intervening event.
• Anything already done or paid for is lost (Chandler V Webster)
• Anything to be done or paid for in the future can be ignored (Krell V Henry)

Question 16

What remedies can be found in the law reform (frustrated contracts) act 1943?

Answer 16

Replaces the law in these 3 areas:

1. Money already paid is recoverable
2. Money already due does not have to be paid
3. At the courts discretion compensation can be ordered to be paid for work done or expenses incurred before the event.
4. Compensation can be ordered for any valuable benefit one party may acquire under the frustrated contracts.

Question 17

What case was the new law reform act illustrated in?

Answer 17

Guns N Roses case:

• Concert cancelled because the stadium was declared unsafe.
• Promoters had paid the band a big advance, could recover. (P1)
• Band incurred expenses in preparation for the concert, courts would not order compensation for this (P3)