Related topics

Breach of Contract


Frustration and Common Mistake

Frustrating Delay

Frustrating Event

Fundamental Breach

Law and Sea.
Multi-factorial approach.

…application of the doctrine of frustration often raises complicated questions with probable answers, concerned to the matter of the allocation of risks, lying at diametrically opposite sides, and therefore produces not always entirely satisfactory results.

Frustration and Fundamental Breach
Last updated: 21-Jun-2015

Diplock LJ. stated the test distinguishing Frustration and Fundamental breach in Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474 at p.484:

Every synallagmatic contract contains in it the seeds of the problem: in what event will a party be relieved of his undertaking to do that which he has agreed to do but has not yet done?  The contract may itself expressly define some of these events, as in the Cancellation Clause in a charterparty, but, human prescience being limited, it seldom does so exhaustively and often fails to do so at all. In some classes of contracts, such as sale of goods, marine insurance, contracts of affreightment evidenced by bills of lading and those between parties to bills of exchange, Parliament has defined by statute some of the events not provided for expressly in individual contracts of that class; but, where an event occurs the occurrence of which neither the parties nor Parliament have expressly stated will discharge one of the parties from further performance of his undertakings, it is for the court to determine whether the event has this effect or not.

The test whether an event has this effect or not has been stated in a number of metaphors all of which I think amount to the same thing: does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?

This test is applicable whether or not the event occurs as a result of the default of one of the parties to the contract, but the consequences of the event are different in the two cases. Where the event occurs as a result of the default of one party, the party in default cannot rely on it as relieving himself of the performance of any further undertakings on his part and the innocent party, although entitled to, need not treat the event as relieving him of the performance of his own undertakings. This is only a specific application of the fundamental legal and moral rule that a man should not be allowed to take advantage of his own wrong. Where the event occurs as a result of the default of neither party, each is relieved of the further performance of his own undertakings, and their rights in respect of undertakings previously performed are now regulated by the Law Reform (Frustrated Contracts) Act, 1943.

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