Contract Law 12

8/13/2019 Contract Law 12

1/19

Frustration

It is often the case that whilst some

risks have been foreseen and catered

for in the contract, there may be someunforeseen risks, and this is unplanned

for risk. Should things go wrong, the

courts may have to decide which of the

contracting parties is to bear the risk,

and hence any losses, in question.


2/19

Some key cases on

mistake and frustration ell v !ever ros !td "#$%

Solle v utcher "#&'.

(avis )ontractors case "#&*


3/19

A possible definition of

frustration is: + contract is frustrated where after the

contract was concluded unforeseen

events occur which make performanceof the contract impossible, illegal orsomething radically different from thatwhich was in the contemplation of the

parties at the time they entered thecontract and neither party must be atfault.


4/19

Origins and justification of

frustration aradine v -ane "*/

0aylor v )aldwell "1*$

2ational )arriers !td v analpina32orthern4 !td "#1"


5/19

Why the courts are reluctant toallow frustration to be a

successful defence

0he courts dont want frustration to be seen

as an easy way out of

a bad bargain

made by one of the parties 5 this can be

seen in the

case of (avis )ontractors !td v 6areham

7() "#&*.


6/19

Why the courts are reluctant toallow frustration to be a

successful defence(ue to the ability to insert a force ma8eure

clause into the contract. 9ith one of thesethe contract will not be terminated by

frustration of contract if the event that

happens is in the list in the force ma8eure

clause. 0hus, the effect of a force ma8eureclause is that the contract S0I!! S0+2(S 5

I0 IS 2:0 6;7S0;+0


7/19

Three broad categories of

frustration

impossibility of performance

illegality of performance

radically different performance from

that contracted for.


8/19

Where performance of the

contract is Impossible

+ classic case for physical items is 0aylor

v )aldwell "1*$

+ case for personal services is ;obinson

v (avison "1/"


9/19

Where it would be Illegal

to perform the contract

In the case of 6ibrosa Spolka +kcy8na v

6airburn !awson )ombe arbour !td"#$ 3the 6ibrosa case4 a contract to

sell machinery to the buyers in oland

was frustrated when oland was

occupied by the =ermans during 9orld

9ar 0wo.


10/19

adically different

performance0wo contrasting cases are

>rell v ?enry "#'$ and

?erne ay Steam oat )o v ?utton "#'$.


11/19

Instances when frustration

will not apply!@ when the alleged frustrating event is

self induced

@ when the contract has specificallyprovided for the alleged frustratingevent, and

@ when the alleged frustrating event wasforeseen by the parties at

the time the contract was made


12/19

'The Super Ser$ant Two( )**+!

0he courts have not ruled on the degree of faultthat amounts to self induced frustration but it islikely that a negligent act by the defendant will

amount to self induced frustration because whensomeone is negligent and an adverse eventhappens it cannot be said that the allegedfrustrating event was altogether outside the control

of either party, nor unforeseen. 0his case alsoeAplores the issue of the defendant having achoice in what he does in relation to frustratingthe contract.


13/19

Where the contracte,pressly pro$ides for thealleged Frustrating e$ent

If a clauseBterm in the contract actually

eApressly makes reference to the allegedfrustrating event then the event generally

cannot frustrate the contract because it is

not an unforeseen event. ut, see Cetropolitan 9ater oard v (ick, >err and

)o "#"1


14/19

Where the alleged

frustrating e$ent wasforeseen by the parties whenthe contract was made

+n event is foreseeable and will prevent the

contract being frustrated only where it is one

which any person of ordinary intelligencewould regard as likely to occur when the

contract was initially made.


15/19

-ffects of frustration

!aw ;eform 36rustrated )ontracts4 +ct

"#$.

)handler v 9ebster "#'

6ibrosa case "#$


16/19

A claim to reco$er .O/-0 thatwas paid or was payable beforethe frustrating e$ent happened

Section "3%4 states that any sums +I(

before the frustrating event are recoverableand any sums that were +D+!< before

the frustrating event are no longer payable.

ut, this is modified 5 see=amerco S+ v I)CB6air 9arning 3+gency4

!td "##&

A l i t th l f


17/19

A claim to reco$er the $alue of1oods Supplied or Ser$ices

pro$ided before the frustratinge$ent happened

Section "3$4 is quite complicated but means

that where one party had conferred avaluable benefit on the other party 3other

than a payment of money that is covered by

"3%44, the one conferring the benefit shall be

able to recover a 8ust sum which should not

eAceed the value of the benefit conferred.

See

v ?unt "#/#


18/19

Appleby $ .yers )234

In +ppleby v Cyers "1*/ the plaintiffs agreed toerect machinery on the defendants premises forE. 9hen the work was nearly finished there

was a fire on the premises that totally destroyed allthe work done to date. 0he plaintiffs brought anaction for E"# for work done and materialssupplied. It failed. 0he contract was frustratedand so both parties were eAcused from theirobligations under the contract. +s such thedefendants did not have to pay for servicesalready rendered.


19/19

Sections 5'6( and 5'7(

7nder section %3$4 the +ct will not be appliedwhere the parties to the contract have included inthe contract a clause detailing what is to happen ifa frustrating event occurs.

7nder section % 34 if a contract can be brokendown into bits and some of the bits have been

performed, then these performed bits can besevered from the contract and the frustratingevent and the +ct will only apply to the unseveredbits.

Contract Law 12

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