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UCL FACULTY OF LAWS

LAW OF CONTRACT 2017-2018

DR PRINCE SAPRAI

FRUSTRATION

General Reading: E McKendrick, Contract Law: Text, Cases and Materials (7th edn OUP,
Oxford 2016), ch 21
Mindy Chen-Wishart, Contract Law, (5th edn Oxford University Press, 2015), ch 7
Learning Outcomes:
 Appreciate the distinction between frustration and mistake
 Understand the history and theoretical underpinnings of frustration
 Know the three main categories of frustrating event: legal, physical and impossibility of
purpose
 Appreciate implications of contractual allocation of risk and fault for frustration
 Understand the consequences of frustration and in particular how the Law Reform
(Frustrated Contracts) Act 1943 applies to partially executed contracts

1 Frustration and Mistake


Krell v Henry [1903] 2 KB 740
Griffith v Brymer (1903) 19 TLR 434 (contract void for mistake because made upon a ‘missupposition
of the state of facts’)
2 History of Frustration
Paradine v Jane (1647) Aleyn 26 and Style 47 (the ‘no excuses’ rule)
‘the contractor must perform it or pay damages for not doing it, although in consequence of
unforeseen accidents, the performance of his contract has become unexpectedly burdensome or
even impossible’.
‘if the lessee covenants to repair a house, though it be burnt by lightening, or thrown down by
enemies, yet he ought to repair it’.
Taylor v Caldwell (1863) 3 B&S 826
‘in contracts in which the performance depends upon 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’.
Impracticability:
Jackson v The Union Marine Insurance Co Ltd (1874-75) LR 10 CP
‘a voyage undertaken after the ship was sufficiently repaired would have been a different
voyage… different as a different adventure…’
Three stage test: National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675
‘Frustration of a contract takes place when there supervenes an event (without default of either
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’.
3 Theoretical Underpinnings
3.1 Implied Terms
Taylor v Caldwell (1863) 3 B&S 826 (see above)
2

James Scott & Sons Ltd v R & N Del Sel 1922 SC 592
‘[a] tiger has escaped from a travelling menagerie. The milkgirl fails to deliver the milk.
Possibly the milkman may be exonerated from any breach of contract; but, even so, it would
seem hardly reasonable to base that exoneration on the ground that “tiger days excepted” must
be held as if written into the milk contract’.
3.2 Radical Change
Davis Contractors v Fareham Urban District Council [1956] AC 696
‘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 radically different from that which was
undertaken by the contract’.
4 Frustrating Events
4.1 Overlapping Categories

(i) Legal impossibility


(ii) Physical impossibility
(iii) Impossibility of purpose
M Chen-Wishart, Contract Law (OUP Oxford 2008)
‘The catastrophic destruction of the Twin Towers in New York on 11 September 2001 would
frustrate any contract to provide cleaning services on the premises; performance would be
illegal (entry being barred), physically impossible, and purposeless’.
4.2 Legal Impossibility
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Acquisition:
Baily v De Crespigny (1868-1869) LR 4 QB 180 (land)
Bank Line Ltd v Arthur Capel & Co [1919] AC 435 (ships)
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1983] 2 AC 352 (oil fields)
Radical change?
Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] AC 119
Cricklewood Property & Investment Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221 (‘the
length of the interruption so caused is presumably a small fraction of the whole term’)
4.3 Physical Impossibility
4.3.1 Death or Incapacity
Whincup v Hughes (1871) LR 78 (death)
FC Shepherd & Co v Jerrom [1987] QB 301 (imprisonment)
Notcutt v Universal Equipment Co [1986] 3 All ER 582 (illness)
Marshall v Harland & Wolff Ltd [1972] 1 WLR 899
‘[whether] further performance of his obligations in the future would either be impossible or
would be a thing radically different from that undertaken by him and accepted by the employer
under the agreed terms of this employment?’
Phillips v Alhambra Palace Co Ltd [1901] 1 QB 59

4.3.2 Destruction of Subject Matter


Taylor v Caldwell (1863) 3 B&S 826
Partial destruction: Asfar v Blundell [1895] 1 QB 126

4.3.3 Delay and hardship

2
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Davis Contractors v Fareham Urban District Council [1956] AC 696 (‘any new and unforeseeable
factor or event’?)
‘the delay was greater in degree than was to be expected. It was not caused by any new and
unforeseeable factor or event: the job proved to be more onerous but it never became a job of a
different kind from that contemplated in the contract’.
Jackson v The Union Marine Insurance Co Ltd (1874-75) LR 10 CP
Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 QB 226 (cargo not affected by
delay and ‘no evidence that the early arrival of the cargo in India was of particular importance’)
4.4 Impossibility of Purpose
Krell v Henry [1903] 2 KB 740 (must be common purpose; ‘assumed by the parties to be the
foundation or basis of the contract’)
‘the cab had no special qualifications for the purpose which led to the selection of the cab for
this particular occasion. Any other cab would have done as well’.
Herne Bay Steamboat Co v Hutton [1903] 2 KB 683
‘Just as in the case of the hire of a cab or other vehicle, although the object of the hirer might
be stated, that statement would not make the object any the less a matter for the hirer alone, and
would not directly affect the person who was letting out the vehicle for hire’.

5 Contractual Interpretation
5.1 Express Terms
Metropolitan Water Board v Dick Kerr & Co Ltd [1918] AC 119 (delay clause not apply because
‘delay was so abnormal, so pre-emptive, as to fall outside what the parties could possibly have
contemplated’)
5.2 Implied Allocation of Risk: Highly Foreseeable?
WJ Tatem Ltd v Gamboa [1939] 1 KB 132
6 Fault
6.1 Breach
Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 QB 226
6.2 Anticipatory Brach
J Lauritzen A/S v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1
‘The possible varieties are infinite, and can range from the criminality of the scuttler who opens
the sea cocks and sinks his ship, to the thoughtlessness of the prima donna who sits in a draught
and loses her voice’.
FC Shepherd & Co v Jerrom [1987] QB 301
6.3 Election
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
J Lauritzen A/S v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1
7 Consequences of Frustration
7.1 Contract Discharged
7.2 Partially Executed Contracts

7.2.1 Common Law


(i) Money

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Chandler v Webster [1904] 1 KB 493


Fibrosa Spolka Ackcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 (recovery where total
failure of consideration)
(ii) Non-Money Benefits
Appleby v Myers (1866-1867) LR 2 CP 651 (no recovery because payment fell due on completion)

7.2.2 Law Reform (Frustrated Contracts) Act 1943


S 2(3) (Act regulates the consequences of frustration, unless express provision in contract)
(i) Money
S 1(2):
All sums paid or payable to any party in pursuance of the contract before the time when the parties
were so discharged (in this Act referred to as “the time of discharge”) 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:
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 it 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 or payable, not being an amount
in excess of the expenses so incurred.
Gamerco SA v ICM/ Fair Warning (Agency) Ltd [1995] 1 WLR 1226
(ii) Non-Money Benefits
S 1(3) Where any party to the contract has, by reason of anything done by any other party thereto in,
or for the purpose of, the performance of the contract, obtained a valuable benefit (other than a
payment of money to which the last foregoing subsection applies) before the time of discharge, there
shall be recoverable from him by the said other party such sum (if any), not exceeding the value of
the said benefit to the party obtaining it, as the court considers just, having regard to all the
circumstances of the case and, in particular,—
(a) the amount of any expenses incurred before the time of discharge by the benefited party in, or for
the purpose of, the performance of the contract, including any sums paid or payable by him to any
other party in pursuance of the contract and retained or recoverable by that party under the last
foregoing subsection, and (b) the effect, in relation to the said benefit, of the circumstances giving
rise to the frustration of the contract.
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1983] 2 AC 352