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Frustration of Contract- Frustra(on explains what a3tude the law takes when ma7ers change, o;en
unexpectedly, a"er the contract has been concluded.
The Doctrine of Frustra1on:
A contract may be frustrated where there exists a change in circumstances, a1er the
contract was made, which is not the fault of either of the par7es, which renders the
contract either impossible to perform or deprives the contract of its commercial purpose.
- Where a contract is found to be frustrated, each party is discharged from future
obliga1ons under the contract and neither party may sue for breach.
- The alloca(on of loss is decided by the Law Reform (Frustrated Contracts) Act 1943.
Origin of frustra1on:
Paradine v Jane
- At one stage in the development of the doctrine, English law never allowed
contrac(ng par(es to escape from a contract by reason of change of circumstances
a;er the (me of contrac(ng
Taylor v Caldwell (1863) – The founda.on of the Doctrine
Facts:
- The claimant hired out a music hall in Surrey for the purpose of holding four grand
concerts.
- The claimant went to great expense and effort in organising the concerts.
- However, a week before the first concert was due to take place the music hall was
destroyed by an accidental fire.
- The claimant sought to bring an ac(on for breach of contract for failing to provide
the hall and claiming damages for the expenses incurred.
Held:
- The claimant's ac(on for breach of contract failed.
- The contract had been frustrated as the fire meant the contract was impossible to
perform.
- This change in circumstance happened a;er the contract was made and was not the
fault of either of the par(es.
- Therefore, the breach of contract ac1on failed.
The test for Frustra1on:
1) Was the risk assigned by the contract?
, 2) Was either party at fault?
3) Has the performance of the contract become ‘radically different’?
Frustra1on and common mistake:
- The doctrine of frustra(on and common mistake are very similar.
- However, they differ in (ming.
(a) If the contract becomes impossible to perform before the contract = mistake
(b) If the contract becomes impossible to perform aOer the contract = frustra7on
Amalgamated Investment & Property v John Walker & Sons [1977]:
Facts:
- D adver(sed a warehouse for sale, sta(ng that it was suitable for redevelopment.
- P agreed to buy the warehouse on 25 September.
- On 27 September, the warehouse was listed as being of special architectural or
historic interest, so that the redevelopment could no longer take place.
Held:
- If the lis(ng had taken place before the sale, the issue would have been whether the
contract was void for common mistake.
- However, since it took place a"er the sale, the issue was whether the contract was
frustrated.
Instances of Frustra1on:
1) Physical Impossibility:
- When it is physically impossible for the contract to be performed and makes the
contract radically different, the contract is frustrated.
Jackson v Union Marine Insurance Co (1879) LR 10 CP 125
Facts:
- P chartered a ship to carry iron rails from Newport to San Francisco.
- On 2 January, before reaching Newport, the ship ran aground.
- It needed repairs that lasted un(l the end of August.
Held:
- The contract was frustrated.
- The par(es had intended to undertake a spring voyage, which was now impossible.
- An autumn voyage would have been a different venture en(rely.
Taylor v Caldwell (1863)
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