National Carriers v Panalpina [1981] 1 All ER 161

• Plaintiff rented a warehouse to Defendant for 10 years, but the council close a street for works for 20 months preventing access to the warehouse.

• Defendant stopped paying rent on the basis that the contract had been frustrated, and Plaintiff sued for unpaid rent.

• HL allowed Plaintiff’s claim and said that frustration did not apply on the facts. 

Lord Hailsham

• He agrees with Lord Radcliffe’s formulation of frustration rather than the implied terms approach (above).

• He says that frustration can “hardly ever” apply to leases. 

• There are ways other than that of Lord Radcliffe of conceptualising frustration: Implied terms (not as good), exceptions to absolute liability “where justice demands”, total absence of consideration etc. 

Lord Wilberforce

• It doesn’t matter which approach to frustration is used - it should simply be the one most appropriate in the circumstances.

• In principle a lease is capable of frustration: when a contract fails to so provide, the court can decide on whom it is most appropriate for the risk to lie.

• However it will be rare, since generally the lessee will have that for which he bargained leasehold). 

Lord Simon

• He rehashes Lord Radcliffe’s understanding of frustration in a slightly different way. There are several arguments FOR allowing frustration to apply to lessees;

  1. Frustration is a useful expedient for avoiding injustice, as much in this area as in any other;

  2. The law should try to be comprehensive. Being compartmentalised decreases the law’s clarity and involves arbitrary distinctions that create different conclusions for fundamentally analogous situations, which is unfair;

  3. The only theory incompatible with lease situations is the “total failure of consideration” theory, which is not really used an y longer anyway. The theories used are the implied terms theory (Lord Blackburn’s theory) or the more commonly used “radical change/construction” theory of Lord Radcliffe;

  4. There have been no problems arising from the application of frustration to leases in other common law jurisdictions.

• The counter argument that a lease is more than merely a contract i.e. that it is a whole transfer of legal estate is irrelevant: a lease is executory, not fully executed, and therefore, as long as obligations and rights remain outstanding, there is no sense in refusing the applicability of the frustration doctrine. 

Lord Russel

• He does not believe that frustration can apply to leases at all. 

Lord Roskill

• There is no justification of treating differently leases to, say, charterparties, and it is bad for the law to create anomalous compartments of law.

• Therefore frustration should be as applicable to leases as to any other area of law. 

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Conclusion: 2 say that frustration is fully applicable to leases, 2 say only “rarely” or “hardly ever”, 1 says never. CW: we can now see the law on frustration as having a 3-stage approach:

1. Construction. Was the risk allocated to one of the parties? If so there is no frustration;

2. Was P at fault? If so there is no frustration;

3. Fundamentality: Does the change in circumstances make performance radically different from that originally undertaken (physical or legal impossibility or loss of purpose in performance)? If not then there is no frustration.