WHAT IS THE BASIS OF FRUSTRATION?
INTRODUCTION
Lord Radliffe in Davis Contractors: contractual obligation has become incapable of being performed because circumstances now
= radically different than when contract was first signed
Existence & definition of frustration = widely accepted. But the theoretical basis for doctrine of frustration remains
controversial.
SUPERVENING ILLEGALITY
We have to separate supervening illegality from other areas of frustration
This has a distinctive rationale
E.g. all Anglo-German contacts became illegal to perform on the outbreak of law (crime of trading with the enemy)
Reilly v The King: performance of contract became impossible by legislation
Rationale: contract to commit a crime = unenforceable from the outset
IMPOSSIBILITY, IMPRACTIBILITY AND FRUSTRATION OF PURPOSE
Impossibility isn’t treated the same as illegality. Cases show that, even if contract becomes impossible to perform, courts are
reluctant to hold it has been frustrated
Blackburn Bobbin: the impossibility of importing timber from Finland during WW1 did not frustrate a contract for
sale of timber. It was of the “utmost importance…that vendors should be held to their business contracts”
Mary Nour: it was impossible for seller to purchase cement so contract couldn’t be fulfilled. Nevertheless – contract
not frustrated by failure of ultimate source of supply. Field J: a seller assumes the risk of his supplier’s failure
Impossibility isn’t sufficient – but nor is it necessary
Krell v Henry: performance of contract = possible i.e letting out rooms and paying hire charge. But purpose of
contract = frustrated because of cancellation or coronation
Also – no sympathy in situation where performance = possible but financially impracticable
Davis Contrators – performance of building contract = more onerous because of labour shortages. Contract not
frustrated. Radcliffe: shortage of labour = foreseeable
Explanation of these cases fall in to two camps
1. Justice
2. Allocation of Risk
JUSTICE
Lots of leading judicial statements
Lord Sumner: frustration is a device by which rules as to absolute contracts are reconciled with special exception
which justice demands
Rix LJ: justice provides frustration’s ‘ultimate rationale’
But there is a major flaw: no judge defines what justice means
There is nothing ‘unjust’ in holding parties to their contracts
Lord Diplock: parties who have bargained on equal terms in a free market should stick to their agreements. Justice is
done by seeing that they do”
Also – frustration automatically brings contract to an end
A court intent on doing justice might find such an inflexible rule = insufficient for the task
Denning: the court should exercise a qualifying power in order to do what is just and reasonable in the new situation
Ewan McKendrick: the justice formulation means ‘uncertainty is inherent in the doctrine of frustration’. This is worrying –
commercial law needs certainty
RISK ALLOCATION
Lord Sumner: whole point of a contract may be to place the risk of non-performance because of external causes onto the
promisor
INTRODUCTION
Lord Radliffe in Davis Contractors: contractual obligation has become incapable of being performed because circumstances now
= radically different than when contract was first signed
Existence & definition of frustration = widely accepted. But the theoretical basis for doctrine of frustration remains
controversial.
SUPERVENING ILLEGALITY
We have to separate supervening illegality from other areas of frustration
This has a distinctive rationale
E.g. all Anglo-German contacts became illegal to perform on the outbreak of law (crime of trading with the enemy)
Reilly v The King: performance of contract became impossible by legislation
Rationale: contract to commit a crime = unenforceable from the outset
IMPOSSIBILITY, IMPRACTIBILITY AND FRUSTRATION OF PURPOSE
Impossibility isn’t treated the same as illegality. Cases show that, even if contract becomes impossible to perform, courts are
reluctant to hold it has been frustrated
Blackburn Bobbin: the impossibility of importing timber from Finland during WW1 did not frustrate a contract for
sale of timber. It was of the “utmost importance…that vendors should be held to their business contracts”
Mary Nour: it was impossible for seller to purchase cement so contract couldn’t be fulfilled. Nevertheless – contract
not frustrated by failure of ultimate source of supply. Field J: a seller assumes the risk of his supplier’s failure
Impossibility isn’t sufficient – but nor is it necessary
Krell v Henry: performance of contract = possible i.e letting out rooms and paying hire charge. But purpose of
contract = frustrated because of cancellation or coronation
Also – no sympathy in situation where performance = possible but financially impracticable
Davis Contrators – performance of building contract = more onerous because of labour shortages. Contract not
frustrated. Radcliffe: shortage of labour = foreseeable
Explanation of these cases fall in to two camps
1. Justice
2. Allocation of Risk
JUSTICE
Lots of leading judicial statements
Lord Sumner: frustration is a device by which rules as to absolute contracts are reconciled with special exception
which justice demands
Rix LJ: justice provides frustration’s ‘ultimate rationale’
But there is a major flaw: no judge defines what justice means
There is nothing ‘unjust’ in holding parties to their contracts
Lord Diplock: parties who have bargained on equal terms in a free market should stick to their agreements. Justice is
done by seeing that they do”
Also – frustration automatically brings contract to an end
A court intent on doing justice might find such an inflexible rule = insufficient for the task
Denning: the court should exercise a qualifying power in order to do what is just and reasonable in the new situation
Ewan McKendrick: the justice formulation means ‘uncertainty is inherent in the doctrine of frustration’. This is worrying –
commercial law needs certainty
RISK ALLOCATION
Lord Sumner: whole point of a contract may be to place the risk of non-performance because of external causes onto the
promisor
