Frustration

Question 1

What is the general rule regarding contractual obligations? Case.

Answer 1

Contractual obligations are absolute. Non-performance will be a breach, regardless of circumstances. Paradine v Jane.

Question 2

What is the definition of frustration? Case.

Answer 2

Davis Contractors v Fareham UDC:
Frustration occurs where there is:
1. A supervening event.
2. Outside the parties’ control and unforeseen.
3. Which renders the contract impossible (Taylor v Caldwell) or radically different (Davis Contractors v Fareham UDC) to perform.

Question 3

Give 4 examples of events which will induce frustration. Cases.

Answer 3

1. Essential person unavailable - Condor v Barron Knights.
2. Essential thing unavailable - Taylor v Caldwell.
3. Non-occurrence of fundamental event - Krell v Henry.
4. Delay, if long enough to radically alter contract - Met Water Board v Dick Kerr.

Question 4

Give 6 examples of events which will not induce frustration. 4 cases.

Answer 4

1. Where force majeure clause in contract.
2. Delay or unavailability of thing/person which is not essential.
3. Event is induced by one of the parties, therefore not out of their control - Maritime Fish v Ocean Trawlers/Super Servant.
4. Event was foreseen/foreseeable - Davis Contractors v Fareham UDC.
5. Contract merely more difficult/expensive to perform, rather than impossible/radically different - Davis Contractors v Fareham UDC.
6. Non-occurence of non-fundamental event - Herne Bay Steamboat v Hutton.

Question 5

Can frustration occur in relation to leases? Case.

Answer 5

Yes - Panalpina.

Question 6

What is the effect of frustration? 3 things.

Answer 6

1. Contract automatically terminated.
2. Both parties released from future obligations.
3. Neither party will be in breach.

Question 7

When reimbursing expenses under s1(2) LR(FC)A 1943, the court has discretion. What is the court’s task in using its discretion? Case.

Answer 7

To redress the harshness caused by the losses lying where they fall, and not simply to awarded the full possible amount - Gamerco v ICM.

Question 8

What approach will the courts take to calculating the sum to be paid for a ‘valuable benefit’ under s1(3) LR(FC)A 1943? Case.

Answer 8

The court will calculate a maximum figure, and then deduct expenses. It is possible this will reduce the sum to 0 - BP Exploration v Hunt.

Question 9

What is the effect if there is no frustration?

Answer 9

The contract continues, and neither party will have a remedy, unless one can be shown to be in breach of contract.