M chartered a boat off O and applied to X for 5 fishing boat licences, but only received 3, which it gave to other boats in its command. It sought to frustrate the contract with O on the grounds that there was no point it having a boat that cold not be used, since it had no licence. Privy Council held that there was NO frustration since the fact that O’s boat would be useless to M was a result of M’s own decision. It could have given the licence to O’s boat but chose not to.
Lord Wright: Krell v Henry is a much criticised case and should certainly not be extended to cases where the “the possibility of the event relied on as constituting a frustration of the adventure (here the failure to obtain a licence) was known to both parties when the contract was made”. (NB It is wrong to say that Krell only related to cases where the possibility of the frustrating event was unknown to both parties. In that case they must have been aware that there was a possibility, however remote, that the event would be cancelled, as events often are). M freely elected that it should be O’s boat that should be rendered incapable of performance. “event relied on as constituting a frustration of the adventure (here the failure to obtain a licence) was known to both parties when the contract was made” and “Reliance cannot be placed on a self-induced frustration”.