Related topics

Coronation Cases, Frustration

Frustration and Fundamental Breach

Frustrating Delay

Frustrating Event

Implied Term of Contract

Impossibility of Performance

Inaccessibility

Non Haec in Foedera Veni

Restraint of Princes

Unforeseen Circumstances


Law and Sea.
Frustration. Brief Summary of Legal Aspects

Under the common law frustration kills the contract itself and discharges the parties from their further contractual obligations ‘forthwith, without more and automatically’.
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Frustration

Taylor v Caldwell (1863) 3 B&S 826, [1861-73] All ER Rep 24 per Blackburn J at p.27:

… as subject to an implied condition that the parties shall be excused in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor … The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.  In none of these cases is the promise other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel.

The following test of frustration  was stated in Hobson v Pattenden & Co (1903) 19 TLR 186, by Lord Alverstone CJ:

… where there was a contract to do a thing, not in itself unlawful, and the parties when entering into the contract must have con-templated the occurrence of a specified event or the continued existence of a specified thing as the foundation of what was to be done, and the performance became impossible from some cause for which neither party was responsible, and the party sued had not contracted or warranted that the event or thing, the non-occurrence or non-continued existence of which had caused the contract not to be possible of performance, should take place or continue to exist, then the parties were excused from further performance of the contract.

Per Viscount Haldane in his judgment in Bank Line v Arthur Capel & Co [1919] AC 435:

What is clear is that where people enter into a contract which is dependent for the possibility of its performance on the continued availability of the subject-matter, and that availability comes to an unforeseen end by reason of circumstances over which its owner had no control, the owner is not bound unless it is quite plain that he has contracted to be so.

Per Lord Sumner in Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497:

…the principle, that it is the event that frustrates, though time may be required in order to appreciate its effect on the contract, the event in such a case as the present being requisition for a time inconsistent with the objects of the adventure.

Per Lord Wright in Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd [1942] AC 154 at pp.183-184:

I must briefly explain my conception of what is meant in this context by impossibility of performance, which is the phrase used by Blackburn J. In more recent days the phrase more commonly used is "frustration of the contract" or more shortly "frustration." But "frustration of the contract" is an elliptical expression. The fuller and more accurate phrase is "frustration of the adventure or of the commercial or practical purpose of the contract." This change in language corresponds to a wider conception of impossibility, which has extended the rule beyond contracts which [1] depend on the existence, at the relevant time, of a specific object, as in the instances given by Blackburn J., to cases [2] where the essential object does indeed exist, but its condition has by some casualty been so changed as to be not available for the purposes of the contract either at the contract date, or, if no date is fixed, within any time consistent with the commercial or practical adventure. For the purposes of the contract the object is as good as lost. [3]Another case, often described as frustration, is where by State interference or similar overriding intervention the performance of the contract has been interrupted for so long a time as to make it unreasonable for the parties to be required to go on with it. [4]Yet another illustration is where the actual object still exists and is available, but the object of the contract as contemplated by both parties was its employment for a particular purpose, which has become impossible, as in the coronation cases. In these and similar cases, where there is not in the strict sense impossibility by some casual happening, there has been so vital a change in the circumstances as to defeat the contract. What Willes J. described as substantial performance is no longer possible. The common object of the parties is frustrated. The contract has perished, quoad any rights or liabilities subsequent to the change. [5]The same is true where there has been a vital change of the law, either statutory or common law, operating on the circumstances, as, for instance, where the outbreak of war destroys a contract legally made before war, but which, when war breaks out, could not be performed without trading with the enemy.

Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696; Lord Ratcliffe’s definition of frustrating event is a classical statement which is not disputed in the modern English law:

…frustration occurs whenever the law recognizes 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 radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this I was promised to do.

Lord Reid at p.720:

It appears to me that frustration depends, at least in most cases, not on adding any implied term, but on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances when the contract was made … On this view there is no need to consider what the parties thought or how they or reasonable men in their shoes would have dealt with the new situation if they had foreseen it. The question is whether the contract which they did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end.

Per Lord Roskill in The Nema [1982] AC 724 at p.752:

It should therefore be unnecessary in future cases, where issues of frustration of contracts arise to search back among the many earlier decisions in this branch of the law when the doctrine was in its comparative infancy. The question in these cases is not whether one case resembles another, but whether applying Lord Radcliffe’s [see Davis Contractors Ltd. Appellants v Fareham Urban District Council Respondents [1956] AC 696 above] enunciation of the doctrine, the facts of the particular case under consideration do or do not justify the invocation of the doctrine, remembering that the doctrine is not lightly to be invoked to relieve contracting parties of the normal consequences of imprudent commercial bargains.

Secondly, in some cases where it is claimed that frustration has occurred by reason of the happening of a particular event, it is possible to determine at once whether or not the doctrine can be legitimately invoked. But in others, where the effect of that event is to cause delay in performance of contractual obligations, it is often necessary to wait upon events in order to see whether the delay already suffered and the prospects of further delay from that cause, will make any ultimate performance of the relevant contractual obligations "radically different," to borrow Lord Radcliffe’s phrase [see above Davis Contractors Ltd. Appellants v Fareham Urban District Council Respondents [1956] AC 696], from that which was undertaken by the contract. But, as has often been said, business men must not be required to await vents too long. They are entitled to know where they stand. Whether or not the delay is such as to bring about frustration must be a question to be determined by an informed judgment based upon all the evidence of what has occurred and what is likely thereafter to occur. Often it will be a question of degree whether effect of delay suffered, and likely to be suffered, will be such as to bring about frustration of the particular adventure in question.

In National Carriers Ltd v Panalpina (Northern), Ltd [1981] 1 All ER 161 Lord Roskill gave the following definition to the doctrine of frustration, at p.184:

Indeed the doctrine has been described as a 'device' for doing justice between the parties when they themselves have failed either wholly or sufficiently to provide for the particular event or events which have happened. The doctrine is principally concerned with the incidence of risk: who must take the risk of the happening of a particular event, especially when the parties have not made any or any sufficient provision for the happening of that event. When the doctrine is successfully invoked it is because in the event which has happened the law imposes a solution casting the incidence of that risk on one party or the other as the circumstances of the particular case may require, having regard to the express provisions of the contract into which the parties have entered. The doctrine is no arbitrary dispensing power to be exercised at the subjective whim of the judge by whom the issue has to be determined. Frustration if it occurs operates automatically. Its operation does not depend on the action or inaction of the parties. It is to be invoked or not to be invoked by reference only to the particular contract before the court and the facts of the particular case said to justify the invocation of the doctrine.


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