Contract Law - Frustration
[STEP 1]: Identify contracting parties
There is a contract between C and D for [INSERT CONSIDERATION FROM ONE
PARTY]. However, Y happens, preventing the contract being fulfilled.
[STEP 2]: General rule
The general rule of absolute obligations is that if a party assumes an absolute
obligation, they are liable for breach of contract even if circumstances make
performance of the obligation impossible (Paradine v Jane).
[STEP 3]: Set up claim of frustration
X could rely on an exception to the general rule and claim that the contract was
frustrated in order to avoid liability for breach of contract for [INSERT CONTRACTUAL
OBLIGATION X HAS NOT FULFILLED].
[STEP 4]: Is there frustration?
Is there frustration?
Frustration occurs when:
- A supervening event renders the contract impossible to perform, or radically
different (Davis Contractors Ltd v Fareham UDC);
- is beyond the control of the parties (Maritime Fish Ltd v Ocean Trawlers Ltd);
- occurs after the contract is formed; and
- is unforeseen.
Supervening event rendering the contract impossible to perform or radically different
- An event will not frustrate a contract if the contract merely becomes more difficult
to perform, but not impossible or radically different (Davis Contractors Ltd).
- The unavailability of a thing vital to the performance of the contract can cause
frustration, such as a venue (Taylor v Caldwell).
, - The unavailability of a person vital to the performance of the contract can
frustrate a contract, such as a music-hall artist (Morgan v Manser) or drummer in
a pop group (Condor v Barron Knights).
- An event will not frustrate the contract if it renders the essential person
unavailable for an insignificant period of time.
- Non-occurrence of a fundamental event can lead to frustration (Krell v Henry).
However, non-occurrence of the fundamental event must mean that the
foundation or basis of the contract cannot be accomplished to cause frustration
of the contract (Herne Bay Steamboat Co v Hutton).
- Government intervention may frustrate a contract, if it has the effect of making
performance of the contract impossible or radically different from what the parties
originally envisaged (Metropolitan Water Board v Dick Kerr and Company).
- A contract may be frustrated if performing it becomes illegal (Fibrosa).
- A contract for a lease of land can be frustrated, but it is rare and the court will
consider the length of the lease and how long the party is deprived of the use of
the property (National Carriers v Panalpina).
- In Panalpina, not being able to use property for two years in a ten year
lease was held not to be a frustrating event.
- Delay may cause frustration of a contract, but the court must consider (as per
Metropolitan Water Board):
- The likely length of the delay; and
- Whether the delay causes the contract to become radically different.
Length of delay
- The longer the likely delay, the more likely the court will find the contract is
frustrated.
Radically different?
- In Metropolitan Water Board, the contract was frustrated because if the contract
to build a reservoir was resumed after the end of WWI as stipulated by the
Government, it would be radically different.
- When the closure of the Suez Canal increased shipping times, a sellers’ contract
was not frustrated as it had become more difficult and expensive for sellers, but
the contract could still be performed and had not become radically different
(Tsakiroglou & Co Ltd).
[STEP 1]: Identify contracting parties
There is a contract between C and D for [INSERT CONSIDERATION FROM ONE
PARTY]. However, Y happens, preventing the contract being fulfilled.
[STEP 2]: General rule
The general rule of absolute obligations is that if a party assumes an absolute
obligation, they are liable for breach of contract even if circumstances make
performance of the obligation impossible (Paradine v Jane).
[STEP 3]: Set up claim of frustration
X could rely on an exception to the general rule and claim that the contract was
frustrated in order to avoid liability for breach of contract for [INSERT CONTRACTUAL
OBLIGATION X HAS NOT FULFILLED].
[STEP 4]: Is there frustration?
Is there frustration?
Frustration occurs when:
- A supervening event renders the contract impossible to perform, or radically
different (Davis Contractors Ltd v Fareham UDC);
- is beyond the control of the parties (Maritime Fish Ltd v Ocean Trawlers Ltd);
- occurs after the contract is formed; and
- is unforeseen.
Supervening event rendering the contract impossible to perform or radically different
- An event will not frustrate a contract if the contract merely becomes more difficult
to perform, but not impossible or radically different (Davis Contractors Ltd).
- The unavailability of a thing vital to the performance of the contract can cause
frustration, such as a venue (Taylor v Caldwell).
, - The unavailability of a person vital to the performance of the contract can
frustrate a contract, such as a music-hall artist (Morgan v Manser) or drummer in
a pop group (Condor v Barron Knights).
- An event will not frustrate the contract if it renders the essential person
unavailable for an insignificant period of time.
- Non-occurrence of a fundamental event can lead to frustration (Krell v Henry).
However, non-occurrence of the fundamental event must mean that the
foundation or basis of the contract cannot be accomplished to cause frustration
of the contract (Herne Bay Steamboat Co v Hutton).
- Government intervention may frustrate a contract, if it has the effect of making
performance of the contract impossible or radically different from what the parties
originally envisaged (Metropolitan Water Board v Dick Kerr and Company).
- A contract may be frustrated if performing it becomes illegal (Fibrosa).
- A contract for a lease of land can be frustrated, but it is rare and the court will
consider the length of the lease and how long the party is deprived of the use of
the property (National Carriers v Panalpina).
- In Panalpina, not being able to use property for two years in a ten year
lease was held not to be a frustrating event.
- Delay may cause frustration of a contract, but the court must consider (as per
Metropolitan Water Board):
- The likely length of the delay; and
- Whether the delay causes the contract to become radically different.
Length of delay
- The longer the likely delay, the more likely the court will find the contract is
frustrated.
Radically different?
- In Metropolitan Water Board, the contract was frustrated because if the contract
to build a reservoir was resumed after the end of WWI as stipulated by the
Government, it would be radically different.
- When the closure of the Suez Canal increased shipping times, a sellers’ contract
was not frustrated as it had become more difficult and expensive for sellers, but
the contract could still be performed and had not become radically different
(Tsakiroglou & Co Ltd).
