Discharge by frustration

• Taylor V Caldwell- the concert hall burnt down, was not the owner's fault the contract couldn't be completed so the contract ended and he did not have to pay any expenses.
• Lord Simon defined frustration as 'frustration of a contract takes place when there supervenes an event which so significantly changes the nature or obligations from what the parties could reasonably have contemplated at the time of its execution it wold be unjust t hold them to the literal sense of its stipulations.'
• force majeure clause- a clause often found in commercial contracts, it excludes liability for parties for delay in performance if there are extraordinary events.
• Impossibility of performance: Jackson V Union Marine Insurance

  The subject matter become unavailable through no fault of the contracting parties.
• Robinson V Davidson- unavailability of the party to perform because of illness.
• Failure to perform on medical advice- Baron Knights
• The contract becoming illegal to perform:

  Denny, Mott and dickinson

  Re Shipton
• Frustration of the common venture:

  A radical change in circumstances meaning the essential purpose of the contract cannot be achieved.

  Krell V Henry- man hired hotel room to watch the coronation, King became ill and courts said this was the main purpose of the contractso was frstrated.
• Frustration of the common venture: Herne Bay

  Hired a boat to see fleet and the King, King became ill but the event still occurred, contract was not frustrated because the main reason for the contract remained.
• When frustration cannot apply:

  • self induced frustration
  • contract becoming less profitable
  • event being a foreseeable risk or mentioned in contract
• Self-induced frustration: Maritime National Fish

  Frustration will not apply when the frustrating event is within the control of one party.
• Contract becoming less profitable: Davis Contractors

  Builders contracted to build some houses for an amount of money but when they found out it would cost them more to do so, they claimed frustration. Didn't work because the contract had just become less profitable.
• The event being foreseeable or mentioned in contract: Amalgamated Investment
• Remedies for frustration:

  Law Reform (frustrated contracts) Act 1943

  s1(2):

  • money paid before the frustrating event occurs is recoverable
  • money payable before the frustrating event ceases to be payable, no longer an obligation to pay the price agreed for goods or services under a frustrated contract.
  • if the party to whom such sums are paid or are payable, court may award such expenses. Sum is limited to a maximum sum of the money paid before frustrating event.
• Remedies for frustration:

  s1(3):

  • if one party has obtained a valuable benefit from the contract before the frustrating event, the court may order them to pay a sum in respect of it.
  • that sum is what the court considers just- BB exploration V Hunt
• Remedies for frustration:

  s1(4):

  Provides that in estimating the amount of any expenses incurred by any party to the contract, the court may include such sum as appears to be reasonable in respect of:

  • overhead expenses
  • any work or services performed personally by a party to the contract.

  This explains the nature of expenses mentioned in s1(2) and is subject to the limit stated in that section of maximum of the sum of money paid or payable before the frustrating event