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Elements in a Contract - Frustration

Updated on July 31, 2017

If for some reason, once a contract has come into existence, the parties in the contract are unable to fulfill their obligations then the contract comes to an end as a result of frustration. It is impossible to compile an exhaustive list of circumstances that will result in a contract coming to an end because of frustration and nothing illustrates the matter more eloquently than case law.

In Taylor v Caldwell (1863), the plaintiffs (claimants) went to great lengths to organize a concert and spent quite a large sum of money in getting the concert hall organized. A week prior to the concert, there was a fire and the concert hall was burnt to the ground. The plaintiffs sued the owners of the hall for a breach of contract. It was held that the contract came to an end due to the fault of neither party i.e. frustration.

In Knight v Ashton Edridge & Co (1901), a contact was entered into for the sale and purchase of cotton seeds. The ship carrying the consignment left from Alexandria but sank while it was en-route to the destination. They buyer sued the plaintiff for breach of contract but the courts held that the contract came to an end because of unavoidable circumstances and it was no longer possible to fulfill the terms of the contract.

In Krell v Henry (1903) the plaintiff hired his flat out to the defendant so that he could view the coronation procession from his flat window. The defendant paid a deposit but did not pay the full amount that was due because the coronation procession was subsequently cancelled. The plaintiff sued for the outstanding amount but the court held that the defendant was not liable because the object of the contract could no longer be satisfied or fulfilled.

In Herne Bay Steam Boat v Hutton (1903) the plaintiff rented out his steamship and later made arrangements to ferry passengers to watch the naval review during the coronation of King Edward VII. The coronation was later cancelled and the defendant refused the use of the ship. The plaintiff sued for the outstanding amount but was unsuccessful because the courts deemed that the contract had been frustrated.

In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour (1943) a company in England entered into a contract with a company in Poland to supply machines. The buyer agreed to make partial payment prior to delivery on the understanding that the full amount would be settled once the machines were delivered. Subsequently Germany invaded Poland and the machines could not be delivered. It was held that the contract had come to an end because it was no longer possible to fulfill the terms in the contract.

In Condor v Baron Knights (1966) the plaintiff, a drummer, was employed by the defendants to play in their band. The plaintiff subsequently suffered a mental breakdown that made it impossible for him to continue. The defendants dismissed him and the plaintiff brought an action for wrongful dismissal. It was held that the subsequent change to the plaintiff’s health rendered the contract impossible to fulfill and hence the plaintiff was unsuccessful.

In Maritime National Fish Ltd v Ocean Trawlers Ltd (1935) (Privy Council) however, the charterers of a ship were running five ships that required licenses to operate them and the charterers had been granted three licenses. The charterers later claimed that the contract was frustrated by the government’s refusal to make available more licenses and sought to end the contact. The owners of the ship sued and it was held that the charterers had been granted three licenses and that they only needed one to operate the ship. Therefore, the contract had not been frustrated.

Likewise, in Davis Contractors v Fareham UDC (1956) the defendants agreed to purchase a certain number of houses from Davis Contractors. Under the terms of the contract the houses were to be completed by a certain time. Subsequently there was a shortage of materials and manpower and the houses took longer to complete than anticipated and the cost of the houses also increased. The defendants agreed to take hold of the houses but refused to pay the additional costs. The plaintiffs (Davis Contractors) sued. It was held that the contract had not been frustrated. It is not hardship or economic difficulties that leads to a contract being frustrated but rather a change in circumstances, so significant that, if the contact were to be performed it would be substantially different to what was contracted.

© 2017 Kathiresan Ramachanderam and Dyarne Jessica Ward

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