LLB170 Lecture 4: Week 4 – Gap Filling – Frustration
Week 4 – Gap Filling – Frustration
An excuse for non-performance
The performance of a contract is sometimes disrupted by events outside the control of the
parties. The doctrine of frustration provides an excuse for non-performance in these cases.
Frustration discharges a contract where events occurring after the contract was made
render performance “radically different from that which was undertaken by the contract”
When is a contract frustrated?
Modern test – Lord Radcliffe in Davis Contractors Ltd v Fareham UDC [1956] AC 696, 729:
“frustration occurs when 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 different from that which was undertaken
by the contract. Non haec in fodera veni. It was not this that I promised to do.
• Where the events that have occurred go beyond the contemplated scope of the
contract
• When performance is literally impossible
• Performance has been rendered commercially unfeasible
• Will not be frustrated because a party has made a bad bargain, or because the
results are not those that a party had hoped for or due to hardship, inconvenience or
material loss
In essence:
• A court’s declaration that a contract has been frustrated is a declaration that the
contract automatically came to an end upon the happening of the frustrating event.
• Frustration thus provides an excuse for a party’s failure to perform and can be used
as a defence against a claim by the other party for remedies for breach of contract.
What will amount to a frustrating event?
1. Event must have a ‘substantial impact’
- Destruction of subject matter (Taylor v Caldwell)
- Disappearance of a state of affairs essential to performance (Compare
Tsakiroglou v Noblee; Davis Contractors; Codelfa)
- Disappearance of the basis of the contract (Krell v Henry; BCC v Group Projects;
Scanlan’s New Neon Ltd v Tooheys)
- Change in the law (Gamerco v ICM; Fibrosa v Spolka)
2. Event must occur after contract formed
3. Risk of event not provided for by contract
4. Event must occur without fault of party seeking to rely on it
5. Event not reasonably foreseeable
See Codelfa; Brisbane CC v Group Pro
Illegality
A contract may be frustrated where performance becomes illegal e.g. changes with the law
Delay
• A contract may be frustrated by events that cause an excessive delay in performance
– the delay must be serious
• Courts have taken the approach that parties should not have to wait and see how
long the delay will play out for
• See Bank Line Ltd v Arthur Capel and Co (principles 370)
- Probable length of delay
Destruction of subject matter
• Where the subject matter of the contract is destroyed
Sale of Goods Act – an agreement to sell specific goods is avoided where goods perish
before the risk passes to the buyer
Disappearance of the basis of the contract
• Where the event destroys the foundation of the contract
Taylor v Caldwell [1863] EWHC QB J1
Facts
Parties entered into a contract for the use of a music hall for the purpose of giving a series of concerts and
night fetes. After the contract was made, before the concerts had started, the hall was destroyed by fire. The
plaintiffs lost money paid by them in preparing for the concerts, including advertising. The plaintiffs sought to
recover expenditure, alleging the defendants had breached the contract.
Held
The court held the contract was frustrated. The owners of the hall weren’t liable for breach of contract for
failing to make the hall available
• The hall was essential to the contract
Krell v Henry [1903] 2 KB 740
Facts
Parties entered into a contract for the hire of two rooms on Pall Mall on two dates. These dates were on which
the coronation procession of King Edward VII would take place and pass Pall Mall. The coronation was
postponed due to the King’s illness. The party hiring the rooms declined to pay hire for them.
Held
The English Court of Appeal held the contract was frustrated and no hire was owing. The court considered the
procession was “regarded by both the contracting parties as the foundation of the contract”
Document Summary
The performance of a contract is sometimes disrupted by events outside the control of the parties. The doctrine of frustration provides an excuse for non-performance in these cases. Frustration discharges a contract where events occurring after the contract was made render performance radically different from that which was undertaken by the contract . Modern test lord radcliffe in davis contractors ltd v fareham udc [1956] ac 696, 729: What will amount to a frustrating event: event must have a substantial impact". Destruction of subject matter (taylor v caldwell) Disappearance of a state of affairs essential to performance (compare. Disappearance of the basis of the contract (krell v henry; bcc v group projects; A contract may be frustrated where performance becomes illegal e. g. changes with the law. Delay: a contract may be frustrated by events that cause an excessive delay in performance. Destruction of subject matter: where the subject matter of the contract is destroyed.
