frustration (notes and cases)

8/13/2019 Frustration (Notes and Cases)

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FRUSTRATION

The doctrine of frustration operates in situations where it is established that due to subsequent change incircumstances, the contract is rendered impossible to perform, or it has become deprived of i ts commercial

purpose by an event not due to the act or default of either party.

Frustration is not to be confused with initial impossibility, which may render the contract void ab initio. SeeCouturier v Hastie ( !"#$ " H% Cas #&' ( Handout on ista)e $.

TESTS FOR FRUSTRATION

There are two alternative tests for frustration*

( $The implied term theory *

+n Taylor v Caldwell (below$ lac)burn - stated*

The principle seems to us to be that, in contracts in which the performance depends on thecontinued e/istence of a given person or thing, a condition is implied that the impossibility of

performance arising from the perishing of the person or thing shall e/cuse the performance.

%ord %oreburn e/plained in F0 Tamplin v 0nglo1 e/ican 2etroleum that the court*

34 can infer from the nature of the contract and the surrounding circumstances that a conditionwhich was not e/pressed was a foundation on which the parties contracted 4 5ere the alteredconditions such that, had they thought of them, the parties would have ta)en their chance of them,or such that as sensible men they would have said if that happens of course, it is all over betweenus .3

(6$ The radical change in the obligation test .

+n the House of %ords case of 7avis Contractors v Fareham 87C, %ords 9eid and 9adcliffe stated that the3radical change in the obligation3 test required the court to*

. Construe the contractual terms in the light of the contract and surrounding circumstances at the timeof its creation.

6. :/amine the new circumstances and decide what would happen if the e/isting terms are applied to it. '. Compare the two contractual obligations and see if there is a radical or fundamental change.

+n ;


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EXAMP ES OF FRUSTRATION

A! "ESTRU#TION OF T$E SPE#IFI# O%&E#T ESSENTIA FOR PERFORMAN#E

The destruction of the specific ob>ect essential for performance of the contract will frustrate it .

Taylor ' #ald(ell

Caldwell agreed to let a music hall to Taylor so that four concerts could be held there. efore the date ofthe first concert, the hall was destroyed by fire. Taylor claimed damages for Caldwell3s failure to ma)e the

premises available. The court held that the claim for breach of contract must fail since it had becomeimpossible to fulfill. The contractual obligation was dependent upon the continued e/istence of a particularob>ect.

%! PERSONA IN#APA#IT)

2ersonal incapacity where the personality of one of the parties is significant may frustrate the contract*

#ondor ' The %aron *nights +,-../ , 0 R 120 drummer engaged to play in a pop group was contractually bound to wor) on seven nights a wee) whenwor) was available. 0fter an illness, Condor3s doctor advised that it was only safe to employ him on fournights a wee), although Condor himself was willing to wor) every night. +t was necessary to engageanother drummer who could safely wor) on seven nights each wee).The court held that Condor3s contract of employment had been frustrated in a commercial sense. +t wasimpracticable to engage a stand1in for the three nights a wee) when Condor could not wor), since thisinvolved double rehearsals of the group3s music and comedy routines.

Phill ips ' Alhambra Palace #o +,-3,/ , 4% 5-?ne partner in a firm of music hall proprietors died after a troupe of performers had been engaged. Thecontract with the performers was held not to be frustrated because the contract was not of a personal nature,and could be enforced against the surviving partners.

6ra'es ' #ohen 7,-8-! 9. T R ,8,The court held that the death of a racehorse owner frustrated the contract with his employee, a >oc)ey,

because the contract created a relationship of mutual confidence.

F# Shepherd ' &eromm +,-1./ : All ER 51-;

The Court of 0ppeal held that a sentence of imprisonment imposed on an employee was capable of

frustrating the employee3s contract of employment if the sentence was such that i t rendered the performanceof the contract radically different from that which the parties contemplated when they entered into thecontract.

#! T$E NON


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*rell ' $enry +,-3:/ 8 *% 293Henry hired a room from @rell for two days, to be used as a position from which to view the coronation

procession of :dward A++, but the contract itself made no reference to that intended use. The @ing3s illnesscaused a postponement of the procession. +t was held that Henry was e/cused from paying the rent for theroom. The holding of the procession on the dates planned was regarded by both parties as basic toenforcement of the contract.

$erne %ay Steamboat #o ' $>tton +,-3:/ 8 *% .1:;

Herne ay agreed to hire a steamboat to Hutton for a period of two days for the purpose of ta)ing passengers to Spithead to cruise round the fleet and see the naval review on the occasion of :dward A++3scoronation. The review was cancelled, but the boat could have been used to cruise round the assembledfleet. +t was held that the contract was not frustrated. The holding of the naval review was not the onlyevent upon which the intended use of the boat was dependent. The other ob>ect of the contract was tocruise round the fleet, and this remained capable of fulfillment.

"! INTERFEREN#E %) T$E 6O=ERNMENT

+nterference by the government may frustrate a contract.

Metropolitan 0ater %oard ' "ic? *err +,-,1/ A# ,,-;

@err agreed to build a reservoir for the 5ater oard within si/ years. 0fter two years, @err were required by a wartime statute to cease wor) on the contract and to sell their plant. The contract was held to befrustrated because the interruption was of such a nature as to ma)e the contract, if resumed, a differentcontract.

E! SUPER=ENIN6 I E6A IT)

0 contract may become frustrated if it later becomes illegal.

"enny@ Mott "ic?inson ' &ames Fraser +,-99/ A# 8.50 contract for the sale and purchase of timber contained an option to purchase a timber yard. y a wartimecontrol order, trading under the agreement became illegal. ?ne party wanted to e/ercise the option. +t washeld that the order had frustrated the contract so the option could not be e/ercised.

Re Shipton@ Anderson and $arrison %rothers +,-,5/ : *% .2.;

0 contract was concluded for the sale of wheat lying in a warehouse. The Bovernment requisitioned the

wheat, in pursuance of wartime emergency regulations for the control of food supplies, before it had beendelivered, and also before ownership in the goods had passed to the buyer under the terms of the contract. +twas held that the seller was e/cused from further performance of the contract as it was now impossible todeliver the goods due to the Bovernment3s lawful requisition.

F! "E A)


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+nordinate and une/pected delay may frustrate a contract. The problem is to )now how long a party mustwait before the delay can be said to be frustrating.

&ac?son ' Union Marine Ins>rance 7,12:! R ,3 #P ,85;

0 ship was chartered in ' Noblee Thorl +,-.,/ 8 All ER ,2-;

T agreed to sell Sudanese groundnuts to


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commercially and fundamentally different. The court held that the contract was not frustrated. T were,therefore, liable for breach 1 the change in circumstances was not fundamental.

#! FRUSTRATION MUST NOT %E SE Fust apportionment of losseswhere a contract is discharged by frustration.

7A! RE#O=ER) OF MONE) PAI"

Section (6$ provides three rules*

oney paid before the frustrating event is recoverable, and oney payable before the frustrating event ceases to be payable, whether or not there has been a

total failure of consideration. +f, however, the party to whom such sums are paid payable incurred e/penses before discharge in

performance of the contract, the court may award him such e/penses up to the limit of the money paid payable before the frustrating event.


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6amerco ' I#MCFair 0arning 7Agency! td +,--5/ , 0 R ,88.;

The plaintiffs, pop concert promoters, agreed to promote a concert to be held by the defendant group at astadium in Spain. However, the stadium was found by engineers to be unsafe and the authorities banned itsuse and revo)ed the plaintiffs3 permit to hold the concert.

frustration (notes and cases)

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