FRUSTRATION

General Reading: E McKendrick, Contract Law: Text, Cases and Materials (6th edn
OUP, Oxford 2014), ch 21
M Chen-Wishart, Contract Law (4th edn OUP, Oxford 2012), 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
- effect of frustration releases the 2 parties from their contractual obligations
- excused from performing their contractual obligation
- a contract is frustrated when there is some unforeseen event which makes contractual
performance by one or both of the contractual parties extremely difficult
- narrowly confined and usually a contract is frustrated where either performance
would be illegal, physically impossible or would require something of the contracting
parties which is radically different from what they initially undertook to do

Frustration and Mistake

deal with the same problem
the facts are radically different from what the parties imagined or assumed them to be
when they entered into the contract
the difference timing
mistake mismatch at the time the contract is entered into (void or voidable)
frustration a frustrating event happens after the contract has been entered into
what they thought the world is going to be like after the contract turns out to be false
misprediction
if the difference makes the contract very hard to perform, the contract brings the
contract to the end the contract ends later, not at the time it was entered
important consequences from the point of view of remedies

Krell v Henry [1903] 2 KB 740

- rented a flat in order to view the Kings coronation procession
- after having done that it was announced that the King fell ill and the procession will
no longer take place

the courts said that in these circumstances the contract was frustrated entered into
under the common assumption that the procession would take place that assumption
was untrue

Griffith v Brymer (1903) 19 TLR 434 (contract void for mistake because made upon a
missupposition of the state of facts)
- similar contract to rent a flat entered into at 11 am procession has be cancelled at
10 am
- the court said that there was no contract because of mistake the contract was void
- frustration future regarding implications for damages
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.
-

no doctrine of frustration
she could not pay rent anymore driven out of his premises by an enemy invasion
court said that nevertheless, she had to pay the rent

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.
-

important case relaxed the doctrine

C hired from T a music hall for 4 nights
the music hall had been burnt down after the first night and the question was should
C have to pay the cost of hire?
courts said that C was no liable the contract was frustrated
idea of implied term birth of frustration

Impracticability:
-

there could be cases where performance is literally possible but extremely

burdensome

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

even when performance became more burdensome, that too could frustrate the
contract
charted a ship from Liv to San Fran
it was to be carrying a cargo of iron rails
ship got stranded for 3 months
the court said that that fact, because of how long it would have taken to repair the
ship, defeated the commercial scope of the transaction unfair to make him pay the
higher cost

Three stage test: National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675
TEST
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.
-

if one party was at fault breach of contract not frustration

if there was a provision the risk of the event would have already been allocated by the
parties

Theoretical Underpinnings

3.1

Implied Terms

what the party really meant

problems
1. tiger no milk turns out where is my milk - a tiger escaped and eat the milk girl
contract is frustrated
unrealistic to say that an implied term was that if a tiger escaped and eat the milk girl
there would be no obligation
objection difficult to say that frustration is provided for unforeseen
2. even if the party did foresee the events, its un likely that they would have agreed
that the parties wanted to set aside the contract frustration implication are that the
contract is set aside but that is not the only possibility
3. many parties do actually provide for what should happen force major clauses

Taylor v Caldwell (1863) 3 B&S 826 (see above)

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.

Denny, Mott & Dickson Ltd v James B Fraser & Co Ltd [1944] AC 265
On the contrary, they would almost certainly on the one side or the other have
sought to introduce reservations or qualifications or compensations.
-

led the court to change their explanation for frustration what reasonable parties
would have wanted, even though the actual parties did not want this (below)
Ertel Bieber & Co v Rio Tinto Co Ltd [1918] AC 260
Dahl v Nelson, Donkin & Co Ltd (1880-1881) LR 6 App Cas 38
the meaning of the contract must be taken to be, not what the parties did intend
(for they had neither thought nor intention regarding to it), but that which the
parties, as fair and reasonable men, would presumably have agreed upon.
3.2
-

Radical Change
the new theory contracts are set aside when there is a significant chance because
is so burdensome, even though the parties agreed to it, they should be released
because its unfair to oblige them to respect the contract

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.
- 3 criteria- 1. have they allocated the risk, explicitly or impliedly, 2. is the party
(the claimant) at fault? if they are, they are in breach of contract 3. does the event
make the performance of the contract radically different?
4

Frustrating Events

4.1
Overlapping Categories
- three different types of frustrating event overlapping sometimes

Legal impossibility
Physical impossibility
Impossibility of purpose (controversial)

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
- build reservoir over 6 yrs period
- gov ordered the builders to stop the work and to remove and sell the plant
- contract did contain a term which provided for extension of time whatsoever and
howsoever occasion
- the provision could not apply to the facts of the case
- clear conflict between the implied terms theory and the new theory (unfair)
Cricklewood Property & Investment Trust Ltd v Leightons Investment Trust Ltd [1945]
AC 221 (the length of the interruption so caused is presumably a small fraction of the
whole term)
- effects of the unforeseen events were not sufficiently serious to frustrate the contract
- 99 yrs lease frustrated when the gov issued some restrictions on buildings even
after the restriction on buildings still 90 yrs left on the lease
- court said that in those circumstances the restrictions caused an interruption which
only affected a small fraction of the contract
4.3

Physical Impossibility

3 categories:
4.3.1

Death or Incapacity

Whincup v Hughes (1871) LR 78 (death) promisor dies, frustrates the contract

FC Shepherd & Co v Jerrom [1987] QB 301 (imprisonment) whole or significant
portion is frustrated only promisee can rely the one who is not in prison can claim
frustration
Notcutt v Universal Equipment Co [1986] 3 All ER 582 (illness) heart attack
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?
-

the effect that the illness has on the ability of the promisee to perform his duties
matter of degree

range of factors in deciding if the performance would be significantly different

Phillips v Alhambra Palace Co Ltd [1901] 1 QB 59

- proprietor of musical died did not frustrate because the other proprietors could
perform the contract

Destruction of Subject Matter

Taylor v Caldwell (1863) 3 B&S 826

Appleby v Myers (1866-1867) LR 2 CP 651
- supply and install machinery in a factory
- became impossible because the factory burnt down
Partial destruction:
Asfar v Blundell [1895] 1 QB 126
- cargo of dates submerged in water for 2 days dates became something
significantly different for their commercial purpose
- could still be sold for alcohol distillation or sold cheaper
Jackson v The Union Marine Insurance Co Ltd (1874-75) LR 10 CP (practical
commercial destruction)
- ship is not repaired for 6 months courts said that that delay amounted to commercial
disruption
- performance after that period was of no use

Delay and hardship

- is there a radical change in the duties the parties have undertaken

- the courts look at whether the event was foreseeable then, potentially the parties
allocated the risk of that event
Davis Contractors v Fareham Urban District Council [1956] AC 696 (any new and
unforeseeable factor or event?)
- labour shortages, difficulties in obtaining supplies that was not sufficient to frustrate
de contract it is well known that building has the risk of this eminently
foreseeable
- even though it was greater in degree no new of unforeseeable factor
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
- delay problem because the contract had to sail with all possible dispatch time was of
the essence for that contract crucial difference which had the effect of frustrating the
contract

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)
- charter during the suez crisis suez canal was blocked
- alternative route was available
- that was going to increase the journey time by 20 days - that delay did not affect the
cargo, there was no evidence that the arrival was of any particular importance not
frustrated
4.4
Impossibility of Purpose
- the contract has no point because of the frustrating, unforeseen event
- it has to be assumed that that purpose is the foundation of the contract in order for the
contract to be frustrated on that reason
- a particular event does not take place
Krell v Henry [1903] 2 KB 740 (must be common purpose; assumed by the parties to be
the foundation or basis of the contract)
- contract was frustrated the purpose of the room was seeing the royal procession
- higher rooms for the purpose of seeing that inferred from 3 facts: position of flat,
the flat owner has advertised the flat as a flat that one could use to view the
procession, the contract had unusual higher rates (let out just for 2 days, exluding
nights)
- frustration would not be found because the impossibility of the purpose:
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
- hire a pleasure boat viewing the naval review King got ill
- it did not frustrate the contract because the boat did not have certain feature which
made it particularly useful for seeing the royal procession
- 2nd ground why it was not frustrated H purpose was not entirely defeated you
could still see the fleet, although not the king reviewing the fleet
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.

5.1

Contractual Interpretation
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 Lloyds 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 Lloyds Rep 1
7

Consequences of Frustration

7.1

Contract Discharged

7.2

Partially Executed Contracts

Common Law

(i)

Money

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)

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