Discharge through frustration (Force majeure clause (involves some level…
Discharge through frustration
frustration - doctrine offering relief in circumstances where a contract cannot be performed or had become radically different from that contemplated, and this was neither of the parties' fault.
common law approach - the contract is absolute and binding even if it became impossible to perform (
Paradine v Jane
Taylor v Caldwell
Impossibility of performance
a contract if fully discharged by frustration if it is no longer possible to complete it.
occurs where the subject matter of the contract has been destroyed or is unavailable.
Davies Contractors Ltd v Fareham Urban District Council
- The contract was not frustrated. The fact that a contract becomes more difficult to perform or not so profitable is not sufficient to amount to frustration. It was still possible to perform the contract.
Tsakiroglou & Co Ltd v Noblee Thori GmBH
- he contract was not frustrated. It was still possible to perform the contract without any damage to the peanuts. The fact that it was more difficult or costly to perform is not sufficient to amount to frustration.
Krell v Henry
- The contract was frustrated as cancellation of the procession deprived it of its commercial purpose. The claimant's action for breach of contract was thus unsuccessful.
Herne Bay Steamship Co v Hutton
- The contract was not frustrated. The contract had not been deprived of its sole commercial purpose as it was still possible to perform the days cruise. The Naval Review was not the only commercial purpose of the contract.
Force majeure clause
involves some level of foreseeability as to the possible frustrating event; and
the event was in the contemplation of the parties at the time of contracting
if an event is provided for in the contract, then usually it will not be deemed to be frustrated and will continue.
discharge by frustration cannot occur where the parties have foreseen problems and a provision is included in the contract, or where the event is caused by one of the parties.
the law changes so that the completion of the contract would be illegal
the contract is discharged with no liability attaching to either party
if either party to a contract for personal services dies or becomes seriously ill
Condor v Barron Knights
The claimant's action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated.
the frustrating event must not be self-induced
Maritime National Fish Ltd v Ocean Trawlers Ltd
- The contract was not frustrated since the claimant had chosen to keep the three licences granted for himself rather than using one to fulfil his contractual obligation. He had therefore induced the frustrating event and was therefore in breach of contract.
The Impact of Frustration
contract is terminated immediately, but the contract is not void ab anition and at commen law, losses arising from a frustrated contract were take to lie where they fell
whatever payment had been made before the contract was frustrated were not recoverable
Fibrosa Case - the contract was frustrated as it was no longer possible to perform the contract because of the supervening illegality. Only deposit had to be repaid
Law Reform (Frustrated Contracts) Act 1943
where the money has been paid under a contract which has been frustrated it can be recovered, subject to the deductions of such expenses as the court thinks just in all the circumstances
all monies still owing under the contract ceases to be due;
all sums actually paid at the time can be recovered;
the money returned includes deposits and expenses;
any valuable benefit gained has to be compensated for.
the Act does not apply to contracts for carriage of goods by sea, insurance contracts and contracts for the sale of specific goods. In these cases the common law rules apply.
the Act can be specifically excluded by a clause in the contract which makes specific provision for potential frustration of the contract.