Frustration

Question 1

What is Frustration?

Answer 1

Frustration is when unforseen contingencies beyond the parties control prevent performance.
(N/B: it’s parties plural as it applies to both parties)

Question 2

Types of frustrating event(5)

Answer 2

1. Destruction of subject matter
2. Contract becomes illegal to perform
3. government/local authority intervention
4. Commercial purpose has been destroyed
5. death or non-availability

Question 3

Impossibility of performance

Answer 3

Destruction of subject matter was shown in:
Taylor v Caldwell- A music hall was hired for 4 days at the cost of 100pounds per day. After the contract was made, but before the start of the 4-day hire period, the hall burned down. The contract had become frustrated and impossible to perform.

Question 4

Supervening illegality

Answer 4

• Avery v Bowden is an example of when a contract becomes illegal to perform
• Government/local authority intervention can frustrate a contract as shown in:
• Metropolitan Water Board v Dick Kerr- Government intervention ordered all work on a contract to stop, so that the materials could be used to help the war effort. The contract between the parties was frustrated.

Question 5

Change of circumstances making performance pointless

Answer 5

• When commercial purpose has been destroyed, this will frustrate the contract as shown in:
• Krell v Henry- To watch Edward VII’s coronation in 1902, a private room was booked, overlooking Pall Mall. The coronation didn’t take place and as a result the contract was frustrated.
• should be compared with:
• Herne Bay Steam Boat Company v Hutton- This case also involved an event to coincide with Edward VII’s coronation in 1902: a commercial boat was hired to see the king perform a naval review. The contract wasn’t frustrated because although there was no coronation, there was a commercial element in hiring the boat and seeing the review of the fleet
• Death/non-availability also frustrates a contract, as shown in:
• Whincup v Hughes- A six-year apprenticeship with a watchmaker came to an end after a year, when the watchmaker died.

Question 6

Limitations on the doctrine of Frustration

Answer 6

1. Contractual provision
2. Inconvenience/additional expense
3. Foreseen/reasonably forseeable events
4. Self-induced breach

Question 7

Contractual provision

Answer 7

This concerns construction of the clause and whether it has anticipated the actual frustration that has occured. Unless the provision is intended to be all-embracing, it will not prevent the discharge of the obligation

Question 8

Inconvenience/additional expense

Answer 8

• Frustration occurs when performance requires something radically different from what was undertaken.
• It’s not enough to argue that performance has become even extremely difficult. It’s not frustrated where there is merely inconvenience, hardship or increased expense, as shown in:
• Davies Contractors Ltd v Fareham Urban District Council- Builders agreed to build a council estate at a fixed price. Strikes, bad weather and shortages of materials and labour led to delays and the estate being built at a substantial loss. Reasons for the delay didn’t amount to frustration

Question 9

Foreseen/reasonably forseeable events

Answer 9

• Foreseen/reasonably forseeable events tend not to frustrate a contract.
• To attempt to guess the arrangements that the parties would’ve made at the time of the contract, had they contemplated the event that has now unexpectedly happened, is to attempt the impossible.
• The courts will not apply frustration unless they consider that to hold the parties to further performance would, in the light of the changed circumstances, alter the fundamental nature of the contract.

Question 10

Self-induced breach

Answer 10

• When the breach is self-induced, there is no discharge of the contract.
• The onus(one’s duty) of proof is for the party claiming it was self-induced.
• The offending party is not required to prove that the event was not their fault

Question 11

The effect of frustration at common law

Answer 11

Historically, the position was that the contract was discharged from the moment of the frustrating event and losses lay where they fell. This meant that money:
* paid before the frustrating event was unrecoverable
* due before the frustrating event had to be paid
* due after the frustrating event was not payable

Question 12

The Law Reform (Frustrated Contracts) Act 1943

Answer 12

This Act changed the effect of frustration at common law. Under s 1(2):
* All sums payable before the frustrating event cease to be payable
* All sums paid before the frustrating event are recoverable
* There is discretionary power to allow the payee to deduct money already owed to them by the payor against sums paid and/or expenses incurred before the frustrating event.
Section 1(3) gives discretionary power to award a sum in respect of a valuable benefit received before the frustrating event.
The effects of this Act can be seen in:
CL: Gamerco v ICM/Fair Warning- The claimants agreed to promote a rock concert to be performed by Guns N’ Roses. The claimants paid $412,000 as an advance, before the contract was frustrated due to the license being withdrawn by a third party. The claimants had also incurred $400,000 expenditure. The claimants recovered the full $412,000 advance payment