LECTURE 11 - THE DOCTRINE OF FRUSTRATION - CONTRACT Issues: - Nature of the doctrine - origins and rationale - What can 'frustrate' a contract? - Limitations on the doctrine - Effects under common law - The Law Reform (Frustrated Contracts) Act 1943 Nature of Doctrine - Frustration = renders performance of contract impossible, beyond the control of both parties - What happens if an unforeseen event seriously affects a contract, after it has been made but before it has been performed? - what are the rights and liabilities of the parties? - Similarities with common mistake - analogy emphasised by The Great Peace - But deals with events occurring subsequent to the contract coming into existence Origins/Rationale - Paradine v Jane (1647) - freedom of contract o Too harsh? - Taylor v Caldwell (1863) - implied term o Logically problematic? - Davis Contractors Ltd v Fareham UDC (1956) - theory of construction o 'frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstance in which performance is called for would render it a thing radically different from that which was undertaken by the contract' " Lord Radcliffe - National Carriers Ltd v Panalpina (Northern) Ltd (1981)- endorsed by the H of L - The question then is what situations will render performance 'radically different' and therefore frustrate a contract? - The question is a matter of interpretation Scope of Frustration - Performance becoming difficult/delay/interruption- Tsakiroglou & Co v Noble Thorl GmbH - Allocation of Risk and Force majeure- The Super Servant Two; Metropolitan Water Board v Dick Kerr and Co; Amalgamated Investment & property v John Walker & sons What can Frustrate a Contract?
1. Destruction of subject-matter/Impossibility Taylor v Caldwell (1863); Asfar v Blundell (1896); Jackson v Union Marine Insurance Co Ltd; Section 7 Sale of Goods Act 1979 2. Illness/Death/Incapacity Notcutt v Universal Equipment Co Ltd [1986] 3. Non-occurrence of event/frustration of purpose Krell v Henry (1903); Herne Bay Steamboat Co v Hutton (1903) " Contrasting cases, discuss both 4. Illegality Metropolitan Water Board v Dick Kerr (1918) Frustration of Leases - National Carriers Ltd v Panalpina Limits: Self-Induced Frustration - Maritime National Fish v Ocean Trawlers (1935) - The Super Servant Two (1990) o No frustration Effects of Frustration - Common Law o Contract is automatically brought to an end o Future obligations are removed- Krell v Henry o Past obligations remain - Chandler v Webster (1904) o Note effect of 'total failure of consideration' - Fibrosa Spolka Ackyjna v Fairbairn Lawson Combe Barbour Ltd (1942) o note Appleby v Myers [1867] Law Reform (Frustrated Contracts) Act 194ff - Section 1(2) - o Money paid or payable is recoverable Expenses may be retained - at the discretion of the court - where it is 'just' to do so o Gamerco v ICM (1995) Operation of s1(2) - A contract with B to paint A's house for £3,000 - A pay £500 as