Discharge of contract: Frustrating Event

Question 1

frustrating event

Answer 1

when contract has been made but before it can be completed an event occurs (not the fault of either party and unforeseen) which makes completion of the contract impossible.

Question 2

background to frustration

Answer 2

Originally, contract law refused to take this into account as the parties had had the chance, when negotiating the contract, to include any protection that they needed.

So, any party who could not comply with his obligations, even if it were not his fault, would be liable for breach of contract. Paradine v Jane

More recently, courts recognised that this was unfair in the case of an event which was completely unforeseeable.

Developed the doctrine of frustration which, in limited circumstances, allows a party to escape from any further obligation.

Question 3

doctrine of frustration

Answer 3

concept of frustration first recognised in Taylor v Caldwell

now defined frustration as occurring when an event makes the performance of the contract ‘radically different’ from what was originally agreed between the parties.

commercial purpose destroyed

Question 4

when can frustration be used

Answer 4

1) impossibility
2) subsequent illegality
3) death or incapacity
4) radical change in circumstance

Question 5

1. impossibility

Answer 5

impossible for the contract to be completed because the subject matter of the contract is destroyed

Taylor v Caldwell

Question 6

2. subsequent illegality

Answer 6

due to a change in the law the purpose for which the contract was made becomes illegal

Denny, Mott & Dickson v James Fraser

Question 7

3. death or in capacity

Answer 7

in cases of a contract for personal performance

Condor v Barron Knights

Question 8

4. radical change in circumstance

Answer 8

main purpose of contract cannot be achieved Krell v Henry

NOT if reason for contract still remains Herne Bay Steamboat v Hutton

Question 9

when frustration doesn’t apply

Answer 9

1) self induced frustration
2) contract become less profitable/more difficult to perform
3) ‘event’ was either a foreseeable risk or referred to in the contract itself

Question 10

1) self induced frustration

Answer 10

eg. C cause event or in control/could have been avoided (Maritime National Fish v Ocean Trawlers)

Question 11

2) contract become less profitable/more difficult to perform

Answer 11

Davis Contractors v Fareham

Question 12

3) ‘event’ was either a foreseeable risk or referred to in the contract itself

Answer 12

no release from obligations (Amalgamated Investment v Walker)

Question 13

frustration remedies

Answer 13

common law: automatically terminates the contract at time of frustrating event.

Obligations already existing must be completed (Chandler v Webster) but future obligations are terminated (Krell v Henry)

Question 14

related statute

Answer 14

Law Reform (Frustrated Contracts) Act 1943

Question 15

Law Reform (Frustrated Contracts) Act 1943

Answer 15

cover what happens once a frustrating event has occurred, eg. help decide who would owe what and to whom.

s1(2) Money already paid is recoverable. Money already due under the contract (eg Chandler) is not payable.
- court can order compensation for work done/expenses incurred before frustrating event (provided there was alr an obligation to pay)

s1(3) Court may order compensation for any valuable benefits one party may acquire under the frustrated contract.

s1(4) In estimating the amount of any expenses incurred, court includes such sum as appears reasonable in respect of: expenses, work or services performed