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Frustration

Contract: Discharge

Question/CasePrinciple/Facts
What is Frustration Frustration of a contract occurs where, after the contract is made, unforeseen events, outside the control of the parties occur which makes the contract impossible, illegal or radically different. (Hannah Blumenthal)
Impossibility Where someone or something necessary for the contract ceases to be available.
Taylor v Caldwell 1863 Destruction of subject matter; the main component of the contract had been destroyed and this was sufficient.
Condor v Barron Knights 1966 Personal service - supervening incapacity; If a contract has been drawn up for a particular person to perform a service, an intervening even which prevents that will be sufficient to frustrate the contract.
Subsequent Illegality Where parties enter a contract which is originally lawful, but a change in law or circumstances makes it unlawful - this will be held to be frustrated.
Fibrosa Spolka v Fairburn Lawson 1943 The contract was frustrated as it was illegal to trade with the enemy during time of war.
Performance is radically different; frustration of purpose The foundation of the contract is destroyed - where the contract is still possible but the main purpose of the contact cannot be achieved, the contract will be frustrated.
Performance is radically different - Non occurrence of an event If the contract centres upon an event which does not go ahead, it may be possible to claim frustration.
Krell v Henry 1903 Hired a room for Kings procession - procession was then cancelled due to illness - held this frustrated the contract - the procession was regarded as the foundation of the contract.
Herne Bay Steamboat Co v Hutton 1903 Hired a boat to see a review by the king - cancelled - D did not use the boat - P sued for the balance of the hire charge - The contract was not discharged on the grounds of frustration - Sole commercial purpose could still be performed.
Self-induced frustration? If a party takes an action which leads to the contract being impossible to perform, they will be prevented from claiming frustration. This will instead be a breach of contract.
Maritime National Fish v Ocean Trawlers 1938 As the appellants deliberately decided not to allocate the respondents trawler, the contract was no frustrated as they were responsible for frustrating event.
The contract is still possible to perform but has become more difficult or more expensive to perform. This will not amount to frustration as it does not make the contract radically different. (Fareham UDC 1956)
What are non-frustrating events? Events foreseen and provided for in the contract - these will not frustrate the contract.
Events foreseen/provided for in the contract A contract which provides a solution for a possible problem i.e. force majeure clauses will prevent a claim of frustration (Jackson 1874).
F C Shepherd v Jerrom 1986 per Mustill LJ "I accept that the presence of a termination provision should inhibit the Court from being too ready to find in favour of frustration.
What is the effect of frustration at common law? A frustrating event will terminate the contract automatically - does not depend on opinion or knowledge of parties (Cheong Yeong Steamship)
When is a contract terminated? The contract is only terminated from the point of the frustrating event. The contract is rendered good up to the point of frustration.
What happens to the rights of the parties? The rule is that the rights and liabilities are frozen at the moment of frustration.
What happens to money due before the frustrating event? This remains payable as the contract is not rendered VOID.
What happens to money due and already paid before the frustrating event? This cannot be recovered. Neither can future liabilities be recovered.
What two cases illustrate the effects of frustration? Krell v Henry and Chandler v Webster.
What does the Law Reform (Frustrated Contracts) Act 1943 do? The Act deals only with the effect of frustration. Makes changes to common law effect.
S1(2) LRA 1943 Money paid before the frustrating Act becomes recoverable and there is no longer a need for a total failure of consideration.
S1(2) LRA 1943 The court has a discretion to allow the payee to recover all or part of the sums to cover any expenses incurred.
S1 (3) LRA 1943 A party who has carried out an act can recover compensation for a valuable benefit
What is 'valuable benefit'? A benefit other than money. (BP Exploration v Hunt)
Created by: Lizannxo