BP agreed to carry out oil exploration for H and site development on H’s oil concession and to give H certain farm-in contributions (cash + oil). In return, H agreed top let BP have 50% share of an oil concession that he owned and to repay over time 125% of BP’s farm-in contributions and half the cost of exploration etc. Hunt agreed that he would give BP 3/8 of his own shares in the concession until he had repaid BP. Later, both parties had their interests in the concession expropriated by the Libyan govt, after BP had only been repaid by 1/3. BP claimed that this frustrated the contract and that under s.1(3) Law Reform (Frustrated Contracts) Act 1943 they were entitled to a “just sum”. At first instance the judge awarded money for the farm-in cash and oil received by the defendant and for the services rendered by the plaintiffs. QBD dismissed an appeal against this sum.
Goff J:The “fundamental principle” of ss.1(2) and 1(3) is prevention of unjust enrichment. The act is not designed to restore the parties to their position prior to the contract but to prevent unjust enrichment. It is also not for apportioning loss between the parties, and expenses are only relevant to the proviso of 1(2) and in working out the net benefit in 1(3). Further, it is not to put the parties in the position they would have been in had the contract been performed. If P pays D money for a return and the contract is frustrated before D has incurred any expense and before the return is given, P can reclaim all the money he has paid.