Limitations on the doctrine of frustration Flashcards
What is one key limitation to the doctrine of frustration in contract law?
A contract is not frustrated simply because an event makes it more expensive or onerous to perform.
Why won’t increased costs or difficulty in performance normally frustrate a contract?
Because courts expect parties to accept some level of commercial risk; mere financial hardship does not amount to frustration.
How do courts typically view claims that frustration has occurred due to external events like a pandemic?
If the event merely causes delay or added cost without making performance impossible or radically different, frustration is unlikely to be found.
What is the second limitation to the doctrine of frustration?
Frustration cannot be claimed where the frustrating event was self-induced by one of the parties.
What must a party prove when alleging the other party caused the frustrating event?
They must show that the other party’s default or decision directly led to the impossibility of performance.
Why does the doctrine of frustration not apply in cases of self-induced impossibility?
Because the doctrine requires that the frustrating event be outside the control of both parties and not the fault of either.
What principle can be drawn from the case where a contractor seeks to end a contract due to delays and cost increases caused by Covid-related issues?
The contract is unlikely to be frustrated if the event only caused increased expense and delay, not fundamental change.
What is the third limitation to the doctrine of frustration in contract law?
If the frustrating event was one which the parties could have reasonably contemplated, the doctrine of frustration will not apply.
Why does foreseeability of an event weaken a claim for frustration?
Because parties are expected to allocate foreseeable risks in the contract. If they fail to do so, courts are unlikely to apply frustration.
What impact does hope or optimism that a foreseeable risk won’t materialise have on a frustration claim?
It has no effect. If the risk was foreseeable, courts will assume the parties chose not to provide for it, and frustration won’t apply.
What is the fourth limitation to the doctrine of frustration?
The doctrine does not override express contractual provisions that deal with the event, such as force majeure clauses.
What is the purpose of a force majeure clause in commercial contracts?
To allocate the risk of unforeseen events (e.g. storms, war, pandemics) and to preserve or modify performance rather than discharge the contract.
Can frustration apply if the contract contains a clear force majeure clause addressing the disruptive event?
No—if the event is expressly covered in the contract, the court will enforce the clause and not apply frustration.
When reviewing a frustration claim, why must courts assess whether an event was provided for in the contract?
Because if the contract addresses the risk, courts will treat it as a contractual matter, not one for the doctrine of frustration.
What is the common law rule on the timing of contract termination when frustration occurs?
The contract is terminated at the date of the frustrating event, and the parties are discharged from future obligations, but pre-frustration rights remain enforceable.
Under Section 1 of the Law Reform (Frustrated Contracts) Act 1943, what can a claimant recover if money was paid before the frustrating event?
The claimant can recover money paid, even where the failure of consideration is partial.
According to the 1943 Act, is a claimant required to pay money that should have been paid before the frustrating event but wasn’t?
No—money that was due but not paid before the frustrating event need not be paid.
When can a defendant (usually the supplier) retain some or all of the money paid by the claimant prior to the frustrating event?
If the defendant incurred expenses in attempting to perform the contract, and the court thinks it is just, they may retain a just sum not exceeding actual expenses.
What must the defendant prove to retain expenses under Section 1 of the Frustrated Contracts Act?
That the expenses were incurred in performance, and it is just and reasonable for the court to allow the deduction.
Can a party be required to pay a just sum for a benefit obtained under the contract before the frustrating event?
Yes—**if a party gained a valuable benefit prior to frustration, they may be required to pay a just sum, not exceeding its value.
What does the court consider when awarding a just sum for benefit obtained before frustration?
The court will assess both the value of the benefit and the just sum owed in respect of that benefit.
in a frustrated contract, when might a claimant be entitled to recover a payment minus a deduction?
When the payee incurred performance expenses and the court finds it just to retain part of the claimant’s paid sum to cover them
