Frustration
1. It is assumed that all elements of a legally binding contract (offer, acceptance, intention to
create legal relations and consideration) are all present on the facts.
Outline the claims that will be brought.
2. A contract is frustrated where, after the contract was concluded, events occur which make
performance of the contract impossible, illegal or something radically different from that
which was in the contemplation of the parties at the time they entered into the contract.
Apply to the facts.
3. Basis of Frustration:
a. Illegality:
General rule = supervening illegality can operate to frustrate a contract.
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd
Before respondents had completed the contract, Gdynia was occupied
by the German army.
It was held that the contract was frustrated because in time of war, it
is against the law to trade with the enemy.
The public interest in ensuring that no assistance was given to the
enemy in time of war outweighed the fact that it remained physically
impossible to manufacture and deliver machines.
b. Impossibility:
General rule = a contract which has become impossible of performance is
frustrated.
Taylor v Caldwell
Defendants granted to claimants a licence to use the ‘Surrey Gardens
and Music Hall’ for a series of concerts. After the contract had been
concluded, but before the first concert was performed, the music hall
was accidentally destroyed by fire so that it became impossible to
stage the concerts.
Court held that the contract was frustrated because the destruction of
the music hall rendered performance of the contract impossible.
Partial destruction of subject matter may also frustrate contract where it
renders performance of contract impossible.
Taylor v Caldwell – the contract was for the hire of the music hall
and the ‘Surrey Gardens’ but it was only the music hall that was
destroyed.
Contracts for personal services frustrated by death of either party.
Contracts of employment frustrated if ill-health of employee render him
permanently unfit for work.
Contract may be frustrated where subject matter of contract is unavailable
for purpose of carrying out the contract.
e.g., charter party was held to be frustrated when the ship was
requisitioned and so was unavailable to the charterer.
Temporary unavailability of subject matter may also frustrate the contract.
Jackson v Union Marine Insurance Co Ltd – ship ran aground and
was not available for the voyage for which she was chartered.
The contract was frustrated – a voyage to San Francisco in
late August was performance radically different from that
originally contemplated.
Where the contract is one of fixed duration and the unavailability of the
subject matter is only temporary, the court must, in deciding whether the
contract has been frustrated, consider the ratio of the likely interruption in
contractual performance to the duration of the contract.
, National Carriers v Panalpina – appellants would have lost two out
of ten years’ use of the warehouse, and after access was re-
established, there would be a further three years of the lease.
c. Frustration of Purpose:
General rule = where the common purpose for which the contract was entered
into can no longer be carried out because of some supervening event, the
contract may be frustrated.
Krell v Henry:
The use of the rooms was let and taken for the purpose of seeing the
Royal Procession – it was not just an agreement to let and take the
rooms.
The use of the rooms to watch the procession was regarded by both
contracting parties as the foundation of the contract.
Hearne Bay Steamboat Co v Hutton:
D hired ship from C “for the purpose of viewing the naval review and
for a day’s cruise around the fleet.”
While in Krell the only purpose which both parties had in entering
into such a contract was to hire the rooms for the purpose of viewing
the coronation, in Herne Bay, the defendant could still see the fleet –
although the defendant’s motive in entering into the contract might
have been to see the naval review, it could not be said that that was
the “common foundation of the contract”.
Krell = very narrow decision and whose scope will not be extended.
Davis Contractors v Fareham UDC:
Lord Radcliffe: “frustration occurs when the law recognises that
without default of either party, a contractual obligation has become
incapable of being performed because the circumstances in which
performance is called for would render it a thing radically different
from that which was undertaken by the contract.”
4. Are there factors excluding frustration?
a. Express Provision:
The general rule = a contract is not frustrated where the parties have made
express provision for the occurrence of the alleged frustrating event in their
contract.
Courts have generally taken a narrow interpretation to clauses which, it is
alleged, make provision for what would otherwise be a frustrating event.
Metropolitan Water Board v Dick Kerr:
Contractors agreed to construct a reservoir in six years. The contract
provided that, in the event of delay “whatsoever and howsoever
occasioned”, the contractors were to apply to the engineer for an
extension of time. The contractors were required by Government
Order to stop the work and sell their plant.
Was held that the contract was frustrated because the delay clause
was not intended to apply to such a fundamental change of
circumstances. It was only intended to cover temporary difficulties
and did not cover fundamental changes in the nature of the contract.
The courts insist that provision for the event be “full and complete” before
frustration is excluded – the greater the magnitude of the event, the less
likely it is that it will be held to fall within the scope of the contract.
Therefore, extremely difficult, if not impossible, to draft a force
majeure clause which will exclude the operation of the doctrine of
frustration completely.
As Metropolitan Water Board demonstrates – even the widest of
clauses may be held not to encompass a particularly catastrophic
event.
1. It is assumed that all elements of a legally binding contract (offer, acceptance, intention to
create legal relations and consideration) are all present on the facts.
Outline the claims that will be brought.
2. A contract is frustrated where, after the contract was concluded, events occur which make
performance of the contract impossible, illegal or something radically different from that
which was in the contemplation of the parties at the time they entered into the contract.
Apply to the facts.
3. Basis of Frustration:
a. Illegality:
General rule = supervening illegality can operate to frustrate a contract.
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd
Before respondents had completed the contract, Gdynia was occupied
by the German army.
It was held that the contract was frustrated because in time of war, it
is against the law to trade with the enemy.
The public interest in ensuring that no assistance was given to the
enemy in time of war outweighed the fact that it remained physically
impossible to manufacture and deliver machines.
b. Impossibility:
General rule = a contract which has become impossible of performance is
frustrated.
Taylor v Caldwell
Defendants granted to claimants a licence to use the ‘Surrey Gardens
and Music Hall’ for a series of concerts. After the contract had been
concluded, but before the first concert was performed, the music hall
was accidentally destroyed by fire so that it became impossible to
stage the concerts.
Court held that the contract was frustrated because the destruction of
the music hall rendered performance of the contract impossible.
Partial destruction of subject matter may also frustrate contract where it
renders performance of contract impossible.
Taylor v Caldwell – the contract was for the hire of the music hall
and the ‘Surrey Gardens’ but it was only the music hall that was
destroyed.
Contracts for personal services frustrated by death of either party.
Contracts of employment frustrated if ill-health of employee render him
permanently unfit for work.
Contract may be frustrated where subject matter of contract is unavailable
for purpose of carrying out the contract.
e.g., charter party was held to be frustrated when the ship was
requisitioned and so was unavailable to the charterer.
Temporary unavailability of subject matter may also frustrate the contract.
Jackson v Union Marine Insurance Co Ltd – ship ran aground and
was not available for the voyage for which she was chartered.
The contract was frustrated – a voyage to San Francisco in
late August was performance radically different from that
originally contemplated.
Where the contract is one of fixed duration and the unavailability of the
subject matter is only temporary, the court must, in deciding whether the
contract has been frustrated, consider the ratio of the likely interruption in
contractual performance to the duration of the contract.
, National Carriers v Panalpina – appellants would have lost two out
of ten years’ use of the warehouse, and after access was re-
established, there would be a further three years of the lease.
c. Frustration of Purpose:
General rule = where the common purpose for which the contract was entered
into can no longer be carried out because of some supervening event, the
contract may be frustrated.
Krell v Henry:
The use of the rooms was let and taken for the purpose of seeing the
Royal Procession – it was not just an agreement to let and take the
rooms.
The use of the rooms to watch the procession was regarded by both
contracting parties as the foundation of the contract.
Hearne Bay Steamboat Co v Hutton:
D hired ship from C “for the purpose of viewing the naval review and
for a day’s cruise around the fleet.”
While in Krell the only purpose which both parties had in entering
into such a contract was to hire the rooms for the purpose of viewing
the coronation, in Herne Bay, the defendant could still see the fleet –
although the defendant’s motive in entering into the contract might
have been to see the naval review, it could not be said that that was
the “common foundation of the contract”.
Krell = very narrow decision and whose scope will not be extended.
Davis Contractors v Fareham UDC:
Lord Radcliffe: “frustration occurs when the law recognises that
without default of either party, a contractual obligation has become
incapable of being performed because the circumstances in which
performance is called for would render it a thing radically different
from that which was undertaken by the contract.”
4. Are there factors excluding frustration?
a. Express Provision:
The general rule = a contract is not frustrated where the parties have made
express provision for the occurrence of the alleged frustrating event in their
contract.
Courts have generally taken a narrow interpretation to clauses which, it is
alleged, make provision for what would otherwise be a frustrating event.
Metropolitan Water Board v Dick Kerr:
Contractors agreed to construct a reservoir in six years. The contract
provided that, in the event of delay “whatsoever and howsoever
occasioned”, the contractors were to apply to the engineer for an
extension of time. The contractors were required by Government
Order to stop the work and sell their plant.
Was held that the contract was frustrated because the delay clause
was not intended to apply to such a fundamental change of
circumstances. It was only intended to cover temporary difficulties
and did not cover fundamental changes in the nature of the contract.
The courts insist that provision for the event be “full and complete” before
frustration is excluded – the greater the magnitude of the event, the less
likely it is that it will be held to fall within the scope of the contract.
Therefore, extremely difficult, if not impossible, to draft a force
majeure clause which will exclude the operation of the doctrine of
frustration completely.
As Metropolitan Water Board demonstrates – even the widest of
clauses may be held not to encompass a particularly catastrophic
event.
