Lecture 12 - Discharge and Remedies: Frustration

These VOCABULARY flashcards cover core terms, principles, landmark cases, and statutory rules related to frustration in contract law as presented in the notes.

Frustration

A legal doctrine whereby a contract, after formation, becomes impossible to perform or its obligations become radically different due to a supervening event, automatically discharging the parties from further performance.

Radical change in obligations

A key trigger for frustration; a change in the parties’ contractual obligations as interpreted by the court, not merely hardship or a change in circumstances.

Modern test for frustration (Davis Contractors)

An objective assessment of whether, in light of the contract and surrounding circumstances, performance has become impossible due to a supervening event, creating a radical change in obligations.

Destruction of subject matter

A ground for frustration where the subject matter is physically destroyed, making performance impossible (e.g., Taylor v Caldwell).

Non-occurrence of event

If a contract’s purpose depends on a specific event, the non-occurrence can frustrate the contract (e.g., Krell v Henry; Herne Bay Steamboat Co. v Hutton).

Inability to comply with manner of performance

Frustration can occur when a contract requires a specific manner of performance and that manner becomes impossible.

Unavailability

Frustration arising when essential performance is unavailable, not strictly impossible (e.g., Gemerco v ICM; The Sea Angel – multi-factorial approach).

Force majeure

An express clause in a contract allocating risk for supervening events; if it covers the event, frustration does not apply; the clause must be clear and comprehensive.

Self-induced frustration

Frustration cannot be relied on if the triggering event is caused by the party seeking to rely on it (e.g., Maritime National Fish; Lauritzen example shows non-automatic end).

Law Reform (Frustrated Contracts) Act 1943 (LR(FC)A 1943)

Statute governing the consequences after a contract is frustrated, including financial adjustments and recovery of money paid; does not determine whether frustration occurred.

Section 1(2) Law Reform Act 1943 — recovery of money paid

All sums paid before frustration are recoverable; sums payable before frustration cease.

Section 1(2) Law Reform Act 1943— expenses incurred

Payee may recover reasonable expenses incurred in performance before/frustration, up to the amount actually incurred.

Section 1(3) Law Reform Act 1943 — just sum for benefits conferred

Court may award a just sum for benefits conferred, not exceeding the value of the benefit received; factors include circumstances, expenses, and effects of the event.

Chandler v Webster (1904)

Principle that frustration does not operate ab initio; performance already due must be performed, and the contract ends from the time of the frustrating event.

Fibrosa Spolka Akcyjna v FLCB (1942)

Overruled Chandler on some points; allowed recovery where there was total failure of consideration, supporting recovery of money paid.

Paradine v Jones (1647)

An early rule that promisor must perform despite events; historically relevant as a backdrop to the development of frustration doctrine.

Davis Contractors v Fareham (1956)

Establishes radical change in obligations as the test for frustration under the construction of the contract.

National Carriers Ltd v Panalpina (Northern) Ltd (1981)

Frustration occurs when a supervening event without fault and without contractual provision significantly changes the rights/obligations, making it unjust to enforce literal terms.

Krell v Henry (1903)

Coronation case where the cancellation of the event frustrated the contract because the event was central to the contract’s purpose.

Herne Bay Steamboat Co. v Hutton (1903)

Naval review cancellation did not frustrate; contract not primarily conditioned on the event itself.

Tsakiroglaou & Co Ltd v Noblee & Thorl GmbH (1962)

If performance can continue via an alternative route, lack of one route does not automatically frustrate the contract.

Ocean Tramp Tankers Corp. v Sovfracht (1966)

War clause presence; no frustration because the risk was anticipated and allocated; explicit provisions govern the outcome.

The Sea Angel (2007) (multi-factorial approach)

A guide to assessing frustration: contract terms, context, knowledge/assumptions about risk, nature of the event, and likely future performance.

Condor v Baron Knights (1966)

Frustration can arise from personal incapacity (illness) preventing performance; contract may be frustrated in such circumstances.

Temporary frustration (BNY Cine-UK) (2021)

There is no concept of temporary frustration; frustration discharges the contract rather than merely suspends obligations.

Supervening illegality

Performance becomes illegal after formation; contract can be frustrated; if illegality existed at contract formation, different rules apply.

Brexit Canary Wharf v EMA (2019) (BREXIT case)

UK withdrawal from the EU was not found to frustrate the lease; supervening illegality not a trigger for frustration in that scenario.

Force majeure clause construction

Clauses must be clear; if they comprehensively cover the event, frustration is inapplicable; ambiguities may be construed against the drafter.

Metropolitan Water Board v Dick Kerr (1918)

Force majeure clauses are construed narrowly, often covering temporary obstacles rather than permanent impediments.