Frustration

Question 1

Definition

Answer 1

An unforeseen event that occurs after the contract is made, so that it is …
- impossible [Taylor v Caldwell],
- illegal [Fibrosa v Fairbairn], or
- undermines the purpose of the contract [Krell v Henry]
+ frustration allows for the complete discharge of the parties’ duties
vs. there is a disadvantage to claiming frustration: if the event is held to not frustrate the contract, then you will be liable for breach of contract

Question 2

Impossibility

Answer 2

• Taylor v Caldwell = the building which was burnt down was an implied term, that without the contract could not function
• The court can also imply allocation of risk, so if the contract is silent, you can imply that the parties want it to continue [Morgan and Bridge based on Herne Bay Steamboat Co v Hutton where frustration was not found as there was no shared purpose, so the contract could continue]

Question 3

Purpose

Answer 3

• Davis Contractors v Fareham Urban DC = radically different test
• The purpose must be common to both parties
• Krell v Henry = cancelled coronation, this case was about the view from a flat to watch the parade, and both parties knew this was the purpose
• Vs. Herne Bay Steamboat Co v Hutton where frustration was not found as there was no shared purpose; the hired boat could have been used for a number of reasons

Question 4

Illegality

Answer 4

• Fibrosa v Fairbairn: the outbreak of war made it illegal to contract with the other party
  + Historically, leases of land cannot be frustrated, but it can be in special cases
• vs. Forced majeure clauses can be used to account for the unseen – e.g. European Professional Club Rugby v RDA Television LLP [2022] – this case concerned the covid pandemic and the clause specified epidemics

Question 5

No frustration where …

Answer 5

• Forced majeure
• purpose is not common [Herne Bay Steamboat Co v Hutton]
• where either party is blameworthy
  – this was harshly applied in The Super Servant Two: a barge sank and the other was used for another contract, but the court held that frustration could have been prevented, although this would have meant that the owner would breach the other contract = self-induced frustration

Question 6

Mistakes?

Answer 6

The Great Peace – this case concerned whether a common mistake could void the contract, it was held that a common mistake must make the contract impossible to perform to frustrate it.

Question 7

Impact of frsutration

Answer 7

• complete discharge of duties - why courts do not readily allow it as drastic
• if unsuccessful, then you are in breahc of contract
• If the contract has been completed prior to frustration, the parties can get paid due to allowing for restitution – the Law Reform (Frustrated Contracts) Act 1943 regulated this = when money is paid prior to frustration, the money can be claimed back
  = BP v Exploration Co v Hunt - stage 1: identify the value + stage 2: assess the just sum