Gamerco SA v ICM [1995] 1 WLR 1226 Case Summary

KEY POINTS

Frustration occurs when a contract becomes impossible to perform due to unforeseen events, and both parties are released from their obligations.
Justice Garland considered Section 1(2) of the Law Reform (Frustrated Contracts) Act, which deals with the recovery of money paid or payable under a frustrated contract. In his judgment, three potential methods for offsetting expenses were discussed:
1. The Total Retention approach argued that all expenses incurred by the payee (the band) should be deducted from the sum to be reclaimed.
2. The Equal Apportionment suggested that the payee could offset the sum paid to them by the value of half of their expenses. In other words, the losses suffered by both parties would be equally shared.
3. The Broad Discretion approach posited that the court should have the flexibility to "do justice" in situations where the parties hadn't foreseen or provided for the circumstances.

The plaintiffs, a Spanish corporation, were pop concert promoters, and the second defendants, Missouri Storm Incorporated, represented the band Guns 'n' Roses. The band planned a European tour in 1992, with concerts in various countries. The first defendant, I.C.M. Fair Warning Agency Limited, organized the tour. The plaintiffs were selected to promote the Madrid concert, scheduled for July 4th.
However, the Vincente Calderon Stadium, the chosen venue, was deemed unsafe due to construction issues. Attempts to find an alternative venue failed, and the concert was canceled on July 3rd, causing financial losses to both parties.
The tour involved specialized contractors, transport, and staff, and the plaintiffs were responsible for setting up the stage and preparing the venue. The Vincente Calderon Stadium's inability to safely host the event led to the cancellation of the Madrid concert. Both parties incurred expenses in preparation for the concert, and the plaintiffs had paid the defendants $412,500 on account. They were also due to pay a balance of $362,500.
The cancellation prompted attempts to find an alternative venue, but none were suitable due to size or condition. As a result, the concert was officially canceled. The plaintiffs sought the return of the paid sum due to the concert's cancellation.

This case showcases the court's attempt to navigate the complexities of frustrated contracts and monetary recovery. It underscores the significance of a flexible and context-sensitive approach in achieving a balanced outcome when parties are confronted with unanticipated circumstances.

A was promoting a concert at which B would play. When the venue was declared unsafe (neither’s fault) they both lost money and the contract was frustrated. The promoters sued to reclaim the sum paid to the band and the court had to ask how much should be taken off due to band’s expenses.

Said that the burden was on the payee (here, the group) to say that the courts should exercise their discretionary ability to reduce the amount by the payee’s expenses (s.1(2)).
He said there were 3 possible ways of offsetting expenses in cases of reclaiming money paid:
1. “Total retention”. This approach was taken by Goff J (above) who claimed that the act was giving effect to a recognition of “change of position”, so that all expenses should be deducted from the amount to be reclaimed;
2. “Equal apportionment” i.e. payee can offset the amount paid to him by the value of half his expenses;
3. “broad discretion” where the court would “do justice in a situation which the parties had neither contemplated nor provided for, and to mitigate the possible harshness of allowing all loss to lie where it has fallen”.
He endorses the “broad discretion” approach, saying there was nothing in the act that supported Goff’s contention of recognition of a “change in position”.

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