Frustration

It is often the case that whilst some risks have been foreseen and catered for in the contract, there may be some unforeseen 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.

Some key cases on mistake and frustration

ell v !ever ros !td "#$% Solle v utcher "#&'. (avis )ontractors case "#&*

A possible definition of frustration is:

+ contract is frustrated where after the contract was concluded unforeseen events occur which make performance of the contract impossible, illegal or something radically different from that which was in the contemplation of the parties at the time they entered the contract and neither party must be at fault.

Origins and justification of frustration

,aradine v -ane "*./ 0aylor v )aldwell "1*$ 2ational )arriers !td v ,analpina 32orthern4 !td "#1"

Why the courts are reluctant to allow 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() "#&*.

Why the courts are reluctant to allow frustration to be a successful defence

(ue to the ability to insert a force ma8eure clause into the contract. 9ith one of these the 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 ma8eure clause is that the contract S0I!! S0+2(S 5 I0 IS 2:0 6;7S0;+0<(.

Three broad categories of frustration

impossibility of performance illegality of performance radically different performance from that contracted for.

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/"

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.

adically different performance

0wo contrasting cases are >rell v ?enry "#'$ and ?erne ay Steam oat )o v ?utton "#'$.

Instances when frustration will not apply!

@ when the alleged frustrating event is self induced @ when the contract has specifically provided for the alleged frustrating event, and @ when the alleged frustrating event was foreseen by the parties at the time the contract was made

"aurit#en AS $ Wijsmuller %& 'The Super Ser$ant Two( )**+!

0he courts have not ruled on the degree of fault that amounts to self induced frustration but it is likely that a negligent act by the defendant will amount to self induced frustration because when someone is negligent and an adverse event happens it cannot be said that the alleged frustrating event was altogether outside the control of either party, nor unforeseen. 0his case also eAplores the issue of the defendant having a choice in what he does in relation to frustrating the contract.

Where the contract e,pressly pro$ides for the alleged Frustrating e$ent
If a clauseBterm in the contract actually eApressly makes reference to the alleged frustrating 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

Where the alleged frustrating e$ent was foreseen by the parties when the contract was made
+n event is foreseeable and will prevent the contract being frustrated only where it is one which any person of ordinary intelligence would regard as likely to occur when the contract was initially made.

-ffects of frustration
!aw ;eform 36rustrated )ontracts4 +ct "#.$. )handler v 9ebster "#'. 6ibrosa case "#.$

A claim to reco$er .O/-0 that was paid or was payable before the frustrating e$ent happened
Section "3%4 states that any sums ,+I( before the frustrating event are recoverable and 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 claim to reco$er the $alue of 1oods Supplied or Ser$ices pro$ided before the frustrating e$ent happened
Section "3$4 is quite complicated but means that where one party had conferred a valuable 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 "#/#

Appleby $ .yers )234

In +ppleby v Cyers "1*/ the plaintiffs agreed to erect machinery on the defendants premises for E.&#. 9hen the work was nearly finished there was a fire on the premises that totally destroyed all the work done to date. 0he plaintiffs brought an action for E."# for work done and materials supplied. It failed. 0he contract was frustrated and so both parties were eAcused from their obligations under the contract. +s such the defendants did not have to pay for services already rendered.

Sections 5'6( and 5'7(

7nder section %3$4 the +ct will not be applied where the parties to the contract have included in the contract a clause detailing what is to happen if a frustrating event occurs. 7nder section % 3.4 if a contract can be broken down into bits and some of the bits have been performed, then these performed bits can be severed from the contract and the frustrating event and the +ct will only apply to the unsevered bits.