Topic 7- Frustration of Contracts
Lecture 1- 29/01/19
If an event occurs outside the control of either party (eg, a fire) that makes the contract
impossible, then the contract is frustrated. – exceptional circumstances- cant be an event
that occurs all the time- makes the law of frustration coherent
The law used to be very harsh and it didn’t matter if there was an external factor-
Paradine v Jane 1647
Frustration was introduced to stop this harshness
National Carriers Ltd v Panalpina Ltd (1981)
Definition come from the Davis Contractors Case 1936 (in handout)
Relationship between frustration and contract interpretation:
Force Majeure Clauses
Parties can include this clause- this allocates the risk of an external event- remedies may be
included in this clause or it could say the contract can be delayed, makes it more flexible
J Lauritzen AS v Wijsmuller BV (1990)
“This contract will be cancelled if…”
Structure to the Law of Frustration
Grounds of Frustration
Limits to the operation of frustration- is it a party’s fault?
Effects of Frustration- what can they get back? Deposit?
Grounds of Frustration
Frustration by Illegality: The contract will be frustrated if the performance of the contract
turns out to be illegal
Metropolitan Water Board v Dick, Kerr and Co ltd (1918)
6 year contract was made
WW1 broke out and government said they had to use their resources for war
If they didn’t, it would be illegal
Therefore, the contract conditions were altered, contracted was held frustrated
Islamic Rep of Iran Shipping Lines v Steamship Ass. (2010)
UK prohibited business with some Iranian companies, including the claimant
Courts said that there was no frustration, only certain types of frustration were
banned.
Lecture 1- 29/01/19
If an event occurs outside the control of either party (eg, a fire) that makes the contract
impossible, then the contract is frustrated. – exceptional circumstances- cant be an event
that occurs all the time- makes the law of frustration coherent
The law used to be very harsh and it didn’t matter if there was an external factor-
Paradine v Jane 1647
Frustration was introduced to stop this harshness
National Carriers Ltd v Panalpina Ltd (1981)
Definition come from the Davis Contractors Case 1936 (in handout)
Relationship between frustration and contract interpretation:
Force Majeure Clauses
Parties can include this clause- this allocates the risk of an external event- remedies may be
included in this clause or it could say the contract can be delayed, makes it more flexible
J Lauritzen AS v Wijsmuller BV (1990)
“This contract will be cancelled if…”
Structure to the Law of Frustration
Grounds of Frustration
Limits to the operation of frustration- is it a party’s fault?
Effects of Frustration- what can they get back? Deposit?
Grounds of Frustration
Frustration by Illegality: The contract will be frustrated if the performance of the contract
turns out to be illegal
Metropolitan Water Board v Dick, Kerr and Co ltd (1918)
6 year contract was made
WW1 broke out and government said they had to use their resources for war
If they didn’t, it would be illegal
Therefore, the contract conditions were altered, contracted was held frustrated
Islamic Rep of Iran Shipping Lines v Steamship Ass. (2010)
UK prohibited business with some Iranian companies, including the claimant
Courts said that there was no frustration, only certain types of frustration were
banned.
