When does Frustration arise?
If after the parties create their agreement, an unforeseen contingency arises, preventing the attainment of the purpose the parties had in mind
What is the history of Frustration
Paradine v Jane (17th century) - laid down the “absolute rule” to contracts in that if parties bind themselves to do one thing, they cannot escape liability. Policy reason = commercial certainty + domino effect
Taylor v Caldwell (19th century) - allowed the doctrine to evolve for if an extraneous event that was caused by neither party
Krell v Henry (20th century) - if purpose becomes unnittainable (not just physical destruction) the performance of the contract rendered meaningless
What does Planet Kids say about the threshold and nature of the test of frustration?
it is a high threshold, inherently imprecise test featuring exercise of judgement
what does frustration discharge?
discharges parties from all future contractual obligations (kills contract)
Planet Kids?
In this case, the council entered into an agt with Planet Kids to give them money because they wanted the land and furniture back. Before this happened, there was a fire destroying it. Council tried to claim contract was frustrated; this did not occur because the main purpose of the contract was for compensation (thus still completable) and council should not be able to gain from fire (getting land back to build over) and not have to pay
what was foreseen in Planet Kids?
they foresaw a possibility for early termination via clause 40.1 so it must have been foreseeable (even if not the actual fire itself).
what does PK say about hardship?
it is not determinative, but a valid factor (PK would suffer hardship if frustration)
Further discussed in PK about the tests?
there have been many tests over the years for frustration; the SC in PK ltd confirmed the attraction towards the “multi factorial approach” taking into consideration Steven J’s comments in Brisbane City Council, and Rix LJ’s English CA Sea Angels case.
relevant factors for the multi factorial approach?
terms of contract,
matrix,
what parties expectations, assumptions, contemplation to the risk (objectively),
nature of supervening event,
parties reasonable calculations as to future performance
what are the “other factors” discussed?
demands of justice (aligns with modern interpretation - should not be bound by rigid rules), hardship. PK - if some, but not all obligations can be performed, points away from frustration but this is inconclusive. Davis - if circumstances are radically different, points away from frustration.
what does PK discuss about risk?
if parties allocate risk, then frustration is excluded (giving effect to s 60 CCLA) however, frustration may be found if the parties contemplated risk that was of a much less serious nature than what had occured.
3 common situations where frustration may occur?
- unattainability of thing/person
- unattainability of purpose
- supervening illegality
3 cases under unattainability of thing/person?
taylor v caldwell - music hall burns down, gardens were fine but it was essential to performance
boast v firth - death of person
morgan v manser - millitary service
2 cases under unattainability of purpose?
krell v henry - royal coronation cancelled
steamboat - hired for watching show, but no frustration because they also hired boat for a day cruise
1 case for supervening illegality
rayneon v fraser - F was a dentist, hired a sign to advertise business from R. court introduced regulations making neon signs illegal, contract frustrated (was purpose made illegal??)
what does Lord Radcliffe say about when frustration cannot be claimed?
it is not hardship, inconvenience or material loss, there must be such a change in significant circumstanves that if obligations were performed, it would be different from what was materially contracted for
3 common occurences where frustration cannot be claimed
- future performance rendered more onerous
- supervening event is self-induced
- risk is foreseeable
2 cases for future performance rendered more onerous?
davis contractors - after entering into contract to build houses, it was disclosed that there was limited labout, ended up taking 22 months instead of 9 and was extremly expensive (no frustration)
tsakiroglou - contract to deliver goods - no specific terms of delivery date or shipping rules. Suez Canale closed, claimed frustration, but there was another route which was 4 x more expensive, thus no frustration
1 case for supervening event is self-induced?
maritime national fish v ocean trawlers - M was granted 3 liscenses, had 5 boats. chose not to select a boat that it had liscensed to OT to get a liscense, then claimed contract was frustrated. the onus is on the party claiming frustration - although they were not contractually bound to chose one of their ships to be liscnesed, cnanot excuse failure to pay hire by relying on absence of lisecnce
1 case for foreseeable risk?
PK Ltd
CCLA s 61 & 62
money paid out may be recoverable, money payable ceases to be payable.
if it is “just”
CCLA s 63
party may recover a sum that court thinks is just if other party has obtained valuable benefit, taking into consideration circumstances
CCLA s 67
court must give effect to provisions in contract; if parties contracted what is to happen in event of frustration. if more detailed, more likely parties would have contemplated specific event and courts more likely to acknowledge. think what does the client want?
