Frustration

Question 1

Frustration - Topics

Answer 1

• Definition
• Key Principles
• McGuill v. Aer Lingus & United Airlines
• Foundation of the Contract
• Business Ventures
• Increased Burden
• Ordinary Risk

Question 2

Frustration - Definition

Answer 2

• If a contract cannot be performed, it may be legally discharged. This is called “frustration” of a contract, and it is a defence to an action for breach of contract.
• Relevant if a contract is performed some time after it was entered into.

Question 3

Frustration - Key Principles

Answer 3

7 key principles established in McGuill:

1. A party bound by a contract to perform something which becomes impossible
2. Without default of either party, the contract becomes incapable of being performed
3. The circumstances causing frustration should be strictly scrutinised
4. A party cannot rely on frustration caused by circumstances they are responsible for
5. All the circumstances of the contract should be strictly scrutinised.
6. The event must be an unexpected event.
7. If one party anticipated or should have anticipated the event and did not cover it in the contract, they should not be permitted to rely on the event as causing frustration.

Question 4

Frustration - Case Law

Answer 4

• McGuill v. Aer Lingus & United Airlines
• Krell v. Henry [1903]
• Steam Boat v. Hutton [1903]
• Tsakiroglou v. Noblee [1961]
• Zuphen v. Kelly Technical Services [2000]

Question 5

McGuill v. Aer Lingus & United Airlines

Answer 5

• Aer Lingus had issued tickets for flights operated by United Airlines. A strike by UA employees prevented UA from performing the contract. UA claimed frustration.
• Court rejected the defence as UA was aware strike was possible 2 months earlier
• Held: UA took the risk without mitigating it in the contract. They could not subsequently rely on the strike happening as a frustrating event.

Question 6

Krell v. Henry [1903]

Answer 6

• The court held that the cancellation of the Coronation procession frustrated the contract for renting rooms overlooking the route.
• Even though the contract didn’t explicitly mention the Coronation, the court looked at the circumstances and found that the procession was the “foundation of the contract”

Question 7

Steam Boat v. Hutton [1903]

Answer 7

• Steamboat chartered to see a Naval Review which was subsequently cancelled.
• The Court rejected the claim of frustration as the fleet remained at anchor and could still be viewed. Held that the Naval Review was not the foundation of the contract.

Question 8

Tsakiroglou v. Noblee [1961]

Answer 8

• The closure of the Suez Canal forced sellers to ship goods from Port Sudan to Hamburg via the Cape of Good Hope at double the freight costs.
• House of Lords held that the contract was not frustrated as the extra expense and time did not make the performance something fundamentally different

Question 9

Zuphen v. Kelly Technical Services [2000]

Answer 9

• Failure to Provide for Ordinary Commercial Risks
• Loss of a client is an ordinary commercial risk and not a ground for frustration