⇒ Frustration occurs if after formation, performance is:
⇒ It is similar to 'common mistake'
⇒ Consequences of frustration: Both parties are discharged from any unperformed obligations
⇒ When can frustration be pleaded?
⇒ There is no frustration doctrine historically: the court was not bothered about a contract that could not be fulfilled due to matters outside their control (Paradine v Jane (1647))
⇒ The doctrine of frustration began to develop in Taylor v Caldwell (1863)
⇒ NOW, frustration has a greater focus on the construction of the obligation, rather than implied obligations: Davis Contractors Ltd v Fareham UDC (1956)
⇒ Leases can be frustrated, but it is rare: National Carriers Ltd v Panalpina (Northern) Ltd (1981)
1) SUPERVENING IMPOSSIBILITY:
⇒ If the subject matter is destroyed: Taylor v Caldwell (1863)
⇒ Death or illness of a party
⇒ Temporary impossibility
⇒ The subject matter is unavailable (Bank Line Ltd v A Capel & Co Ltd (1919)) even if the unavailability is only temporary (Jackson v Union Marine Insurance Co (1874))
2) SUPERVENING ILLEGALITY:
⇒ If the purpose of the contract becomes illegal after formation of the contract that is frustration → this is usually seen as excusing the contract because the obligations have radically changed
⇒ Often supervening illegality occurs because the government has made the activity illegal: see, for example, Fibrosa Spolka Akcyjna v Fairbairn (1943) and Denny, Mott & Dickson v James B Fraser & Co Ltd (1944)
⇒ If the commercial purpose of the contract no longer exists, then the contract may be frustrated. See, for example, Krell v Henry (1903). However, contrast this case with Herne Bay Steamboat Co v Hutton (1903)
⇒ Mere commercial inconvenience will not frustrate the contract: Davis Contractors Ltd v Fareham UDC (1956)
⇒ Just because the obligations have to take longer or more expensive to fulfil does not necessarily frustrate: Tsakiroglou v Noblee Thorl GmbH (1962)
4) EVENT UNFORESEEN/UNFORESEEABLE:
⇒ Force majeure or hardship clauses → these exclude the parties from liability if there is an event beyond the control of both parties e.g. Great Elephant Corp v Trafigura Beheer BV (2013)
⇒ Why have force majeure clauses?
5) SELF INDUCED FRUSTRATION IS NO FRUSTRATION:
⇒ If one party could have controlled the situation, then there is no frustration and breach of contract can be claimed
⇒ So if the frustration is self-induced then the contract cannot be frustrated e.g. The Eugenia (1964)
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⇒ Parties are automatically discharged from the obligations under the contract: Hirji Mulji v Cheung Yue Steamship Co (1926)
⇒ Obligations under the contract before frustration must be performed because the contract is not void ab initio - If these obligations are not performed then damages for breach will be available
⇒ Loss lay where it fell: Chandler v Webster (1904)
⇒ Chandler v Webster was overruled by Fibrosa Spolka Akcyjna v Fairbairn (1943): money paid prior to frustration is recoverable ONLY IF there is a “total failure of consideration”
⇒ Aim: to give courts discretion to award losses caused by frustration by making orders of financial adjustments between the parties
⇒ The reason for this is to prevent unjust enrichment, for example:
⇒ S 1(2): this is about recovering money that has been paid/payable before the frustrating event occurs
⇒ o S 1(3): compensation for a valuable benefit obtained (partial performance)
⇒ Para 1: “All sums paid and payable to any party in pursuance of the contract before the time when the parties were discharged shall, in the case of sums so paid, be recoverable from him as money received by him for the use of the party by whom the sums were paid, and, in the case of sums so payable cease to be so payable…”
⇒ Para 2: “Provided that if the party to whom the sums were so paid or payable incurred expenses before the time of discharge in, or for the purpose of, the performance of the contract, the court may, if it considers just to do so, having regard to all the circumstances of the case, allow him to retain or, as the case may be, recover the whole or any part of the sums so paid of payable, not being an amount in excess of the expenses so incurred”
⇒ S 1(3): compensation for when there has been partial performance of the contract by one party, providing a benefit to the other party
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