Discharge II - Frustration (Categorisation - types of frustrating event…
Discharge II - Frustration
Davis Contractors v Fareham UDC - per Lord Radcliffe: "Frustration occurs whenever the law recognises that, without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing so radically different from that which was undertaken by the contract... It was not this that I promised to do."
National Carriers Limited v Panalpina (Northern) Limited - per Lord Simon: "Frustration of a contract takes place when there supervenes an event (without default of the party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance."
Breaking down the test - requirements
Radically different - Davis Contractors v Fareham UDC
Radical difference - no frustration where contract made merely more onerous
Rix LJ - The Sea Angel - "the rest of 'radically different' is important: it tells us that the doctrine is not to be lightly invoked; that mere incidence of expense or delay or onerousness is not sufficient; and that there had to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstance"
Commercial impracticability/onerousness insufficient
Davis Contractors v Fareham UDC
Tsakiroglou v Noblee Thorl
For which the contract makes no sufficient provision
Force Majeure clauses
Boiler plate drafting
Express provision for what happens on the occurrence of certain events
May count as parties providing for the risk = frustration difficult to argue if the clause covers the risk
Unforeseeable - Amalgamated Investment v John Walker
No frustration where event is foreseeable
Walton Harvey Ltd v Walker & Homfrays ltd
The Sea Angel - "The less that an event is foreseeable, the more likely it is to lead on to frustration"
Armchair Answercall v People in Mind Limited
The Flying Music Company Limited v Theater Entertainment SA
At no fault of either party - The Eugenia
No frustration where event is self-induced/due to fault
Party at fault - The Eugenia
Self-induced - frustration as result of own choices
Maritime National Fish v Ocean Trawlers
"The Super Servant Two"
Burden of proof on the party alleging fault - Joseph Constantine Steamship Line v Imperial Smelting Corporation
The Multi Factorial Approach - The Sea Angel (Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd) - per Lord Rix: "In my judgement, the application of the doctrine of frustration requires a multi factorial approach."
Categorisation - types of frustrating event
Impossibility - destruction of subject matter, unavailability of thing or person
1) Destruction of...
i) Subject of contract - Taylor v Caldwell, OR
ii) A thing necessary to contract - Appleby v Myers
2) Unavailability of thing - a matter of degree - how badly is the contract affected?
Jackson v Union Marine Insurance Co
FA Tamplin v Anglo-Mexican
Bank Line v Arthur Capel
Edwinton Commercial Corporation v Tsavliris Russ (The Sea Angel)
3) Unavailability of person
Incapacity - Morgan v Manser
Death - Stubbs v Holywell Railway Co
Fibrosa v Fairbairn - "a contract to do what has become illegal to do cannot be legally enforceable"
Denny, Mott, Dickson v Fraser - government intervention
Metropolitan Water Board v Dick Kerr
Frustration of common purpose
Must be common purpose of both parties
The "Coronation Cases"
Krell v Henry
Chandler v Webster
Herne Bay Steamboat v Hutton
Armchair Answercall v People in Mind Limited
Frustration of leases
Can leases be frustrated?
Never - Paradine v Jane
Never/hardly ever - Cricklewood Property v Leighton's Investment Trust
In principle, yes - in rare circumstances - National Carriers v Panalpina
Consider ratio - unavailability of property: length of lease (i.e. how badly contract affected)
Consequences of frustration
All future obligations discharged by operation of law from date of frustrating event
Monies paid or accrued amounts payable before frustration
If total failure of consideration - advance payment recoverable/ceases to be payable - Fibrosa v Fairbairn
If partial failure of consideration - advance payment not recoverable/remains payable - Chandler v Webster
Law reform (Frustrated Contracts) Act 1943
Act now applies unless excluded - s1(2)
Money paid before frustrating event if recoverable AND
Money payable before frustrating event ceases to be payable
Party that incurred expenses must show it is "just" for them to retain the money they spent
Any just sum awarded is...
At the "broad discretion" of the court
Capped at limit of money paid/payable before frustrating event
Gamerco SA v ICM/Fair Warning
S1(3) - "valuable benefit"
Where one party has provided a non-monetary "end product" prior to frustrating event
Other party may have to pay "just sum" for that "end product"
BP Exploration v Hunt
(3) Parties can contract out of act
(4) Multiple obligations e.g. leases
(5) Contracts excluded from act e.g. carriage of goods by sea/insurance products