Contract -> Frustration

After making the contract an unforeseen event occurs beyond the control of either party making performance of the contract (1) illegal (2) impossible or (3) radically different from what was originally contemplated by both parties.

1. Impossibility: events where performance of the contract has become impossible. Physically destruction of subject matter as in Taylor v Caldwell destruction of the concert hall made performance impossible.

Death of one of the parties to a contract (Stubbs v Holywell Railway) will frustrate a contract. Unless performance of the contract need not be performed by any particular person thereby not preventing actual performance.

Temporary Impossiblity may frustrate a contract where eventual performance would be radically different from that originally envisaged. Pioneer Shipping v BTP Tioxide where a charter body was contracted to make 6 voyages within 9 months but this was halved due to a strike at the port therefore although performance was possible it just wasn’t what they originally contracted for.

Sometimes performance may not be impossible as such as the thing still exists but for reasons beyond either parties control it may not be used as they intended. Bank Line v Arthur Capel a ship requisitioned thereby unable to charter on the day.

Also the case that an illness will frustrate a contract. Robinson v Davison wife contracted to play the piano fell ill on day of performance.

Or the unavailability of agreed terms may also frustrate a contract Nickoll & Knight v Ashton, Etridge – unavailability of the specified ship named in the contract frustrates a contract.

2. Illegality although performance is physically possible the contract is frustrate as since the time of the contract there has been a change in the law making further performance illegal. The Fibrosa case in which war broke out as Germany invaded Poland (WWII), it became illegal to trade with the enemy if war is declared before time of performance. Unless it has already illegal at the time of the contract in which case the doctrine of frustration will not apply.

3. Frustration of common purpose of both parties: performance is still possible but would be radically different performance from originally envisaged by both parties. An intervening event has destroyed all purpose of the contract thereby frustrating the contract. But only if the contract “wholly devoid of purpose”. Krell v Henry subject of the contract was a view of the coronation of King Edward VII. Since the king fell ill the purpose was destroyed.

Herne Bay Steam Boat v Hutton: the hire of a boat to observe the kings review of the navy and a cruise of the fleet. The review was cancelled due to the king’s illness… but it was still possible to cruise around the fleet.

Self induced frustration; a party cant plead frustration if he’s responsible for the frustrating event (Maritime v Ocean Trawlers). Although there’s doubt whether a negligent act may amount to self induced frustration. Commercially the answer is yes (The Super Servant II) but in a personal capacity the situation is still unresolved (Joseph Constantine).

Event must not be foreseeable by either party (Davis Contractors v Fareham UDC) otherwise they could have prevented it by taking out insurance or something.

Effect of Frustration

Parties are discharged from performance of ay future obligations. Any monies paid could be recovered if there’s a total failure of consideration (Fibrosa).

Under the Law Reform (Frustrated Contract) Act 1943 any money paid or payable before the frustrating even ceased to be payable but is recoverable by payee subject to 2 things:

1. Any advance payment used in performance of contract maybe kept in full or part (Gamerco v Fair Warning).
2. Where a party has obtained a valuable benefit before the frustrating event, the other party may recover from him a sum not exceeding the value of the benefit (BP Exploration (Libya) v Hunt).

GENERAL ANSWER STRUCTURE

• Has the event sufficiently radically changed to frustrate the contract?
• What is the common objective of the contract and how has it been affected.
• Was the event reasonably foreseeable.
• Has either side received a benefit?
• Can the other party claim for expenditure?