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Contract Law: Discharge 2, Frustration
?????If frustration is found: the contract falls away from the date of the frustrating event. Intro
?????Modern definition of frustration, Lord Radcliffe, Davis Contractors v Fareham Urban District Council (1956): o '[F]rustration occurs whenever the law recognises that, without default of either party, a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. ...It was not this that I promised to do.'
?????The frustrating event which renders performance 'radically different' must occur after the formation of the contract.
?????More unforeseeable = more likely to render the contract 'radically different'
?????IF contract frustrated ? brought to an end automatically, parties have no choice in the matter.
?????Frustration can be raised as a defence to an action for breach of contract---eg Taylor v Caldwell (1863) Frustrating event---definition
?????A supervening event
?????Unforeseeable: o Amalgamated Investment v John Walker (1977): was not unforeseeable ? no frustration.
?????At no fault of either party o The Eugenia (1964) o Ship transporting goods from England to India. Wants to sail through Suez canal. Risky because often Suez is closed due to war. o Didn't contact the owners before entering the Suez canal (was in terms they should have contacted the owner). o Eugenia gets stuck in the Suez when it closes due to war. o Charterers tried to argue: the contract with the owners is frustrated. They want to argue this, because in a shipping contract you have to pay a hire charge; and there is always a delivery date, by which time you have to get the ship back. o HELD: not frustrated, the charterers took it upon themselves to put themselves in that position, it was the charterers fault that they ended up landlocked in the Suez.
?????Renders further performance of the contract: o Impossible; o Illegal
1 o OR radically different: the whole contract must be completely changed in nature. o (Davis Contractors v Fareham UDC (1956)) o HELD: not frustration. You have a contract to built a plot of houses. Even if takes much longer, and is more costly, that doesn't make the contract radically different. So Davis Contracts had to carry on and finish the job.
?????By operate of law, in case of frustration, all future obligations are discharged from the date of the frustrating event. History of the doctrine
?????At first, rule of absolute obligations (Paradine v Jane, 1647): idea that there is no doctrine of excuse for breach. You enter into the contract-no getting out of it; if you breach it, no defence. o Paradine v Jane: Paradine leased land to Jane; Jane farmed the land and lived on it; paid rent to Paradine; rent stopped coming. Paradine took Jane to court for non-payment of rent. o D argued: arrears not due because had been forced off the land by a hostile army. o HELD: defence should fail--. HELD: no, rule of absolute obligations, pay the rent anyway. Where a party by their own contract creates a duty on themselves, he is bound to make it good, notwithstanding any accident after contract is formed. o Where a party assumes an obligation under a contract, where it is not qualified in any way, then even if circumstances make performance impossible, they are still liable for breach---the obligation is absolute.
?????Then, implied term theory (idea that there must be some excuse for breach) o Taylor v Caldwell (1863): o Events organiser, a Victorian festival. Was going to advertise it, people would pay to come to the amusement park/festival. o Shortly before festival due to start, the venue, a music hall, burnt down. o Taylor sued Caldwell for breach---Caldwell unable to provide the music hall he had promise to provide, under absolute obligations rule. o HELD: although there's no doctrine of excuse for breach, we will imply a term into the contract that the music hall had to still be in existence for the contract to be a valid one. Since the music hall is no longer in existence, the contract is now at an end.
?????Now, implied term theory is 'artificial'
?????Theory underpinning frustrating today is the 'radically different' one Contracts which may be frustrated
2 ? ?? ? 'Radical difference' theory is most widely accepted theoretical underpinning of doctrine of frustration: o Impossibility o Illegal or prevented by gov intervention. o Common purpose is frustrated
?????[not an exclusive list---and a frustrating event may fit into more than one category].
Impossibility (frustration through impossibility).
(1) Unavailability of a thing or person necessary to the contract (a) Impossibly due to Destruction of: o (i) subject of contract -Taylor v Caldwell (1863): the music hall, the subject of the contract, burnt down, making performance impossible. o (ii) OR a thing necessary to contract (not the subjectmatter, but essential for performance of the contract) o Appleby v Myers (1867): the contract to install and maintain machinery in a factory; the factory burnt down, and the factory was essential to performance of the contract. (b) Unavailability of thing
??? ?Eg in shipping contracts, even temporary unavailability may discharge a contract, if the interruption is such as to make performance substantially different from that originally undertaken.
? ?? ? A matter of degree---how badly is contract affected?
? ?? ? Bank Line v Arthur Capel (1919): o Thus, where a ship was requisitioned for a period of five months out of a year's charterparty, the contract was frustrated
? ?? ? Jackson v Union Marine Insurance (1874): o Trip chartered from Liverpool to Newport and there to load a cargo to be shipped to San Francisco. o The ship ran aground, and was not ready to load until 8 months later. o Contract had not imposed any time limit for performance, but court held: there was an implied term regarding completion within a reasonable time, so contract was frustrated because of such a long delay. o HELD: unavailability of that ship ? contract is frustrated through impossibility.
3 ??? ?Question of degree---frustration of charterparty only if the delay is a disproportionate amount of time compared to the whole contract period.
? ?? ? FA Tamplin v Anglo-Mexican (1916)---shows difficulty of deciding whether frustration has occurred: o Ship requisitioned in Feb 1915; five year charterparty was to last until Dec 1917---was this frustration?
o HELD: not frustration---on the basis the war would soon be over and thus a considerable proportion of the charterparty would remain. In the circumstances, this was overly optimistic, but it shows the problems facing a court.
? ?? ? Edwinton Commercial Corp v Tsavrilis Russ, The Sea Angel (2007), CA---court will look at intention of the parties as a further factor o Court empheiased: the amount of time left to run in the contract is only the starting point in establishing frustration---all other relevant factors must be considered too. o Here, the contract involved a 20 day charterparty, out of which there was very little time left to run. However, the work under the contract had been accomplished. Purpose of the contract had been achieved---so contract not frustrated. o Ship hired for 21 days (c) Unavailability of person (in a personal contract)
??? ?In a personal contract, especially where a specified individual is engaged to render a particular service.
? ?? ? Incapacity o Morgan v Manser (1948) o Music-hall artist, called 'Cheerful Charlie Chester', was called up for military service. HELD: contract was frustrated by him being called away for military service. o Illness---Condor v The Barron Knights (1966): the drummer in a pop group was taken ill, and only capable of working 3-4 nights a week. Group had been contracted for 7 nights a week. HELD: contract frustrated, drummer not capable of performing the contract. o Illness---Robinson v Davison (1871): contract frustrated when pianist, booked to perform, couldn't perform due to illness.
? ?? ? Death o Stubbs v Holywell Railway Co: died during contract. Held: frustrated---death is a frustrating event.
Supervening Illegality & government intervention
Supervening illegality 4
??? ?Frustration where a change in law or state intervention renders performance illegal.
? ?? ? Eg war breaks out--Fibosa v Fairbairn (1943) o War broke out; to continue performance with would trading with the enemy, which is illegal. A contract for sale of machinery to be shipped to Gdynia was frustrated when that port was occupied by the enemy during WW2.
? ?? ? Denny, Mott, Dickson v Fraser (1944): o In 1944 it became illegal to trade in timber ? the contract had become illegal, so frustrated. o Lord Macmillan: 'It is plain that a contract to do what it has become illegal to do cannot be legally enforceable'. Government intervention
? ?? ? Dick Kerr & Co v Metropolitan Water Board (1918): o Contractors agreed to construct a reservoir in 6 years. o Contract provided that, in the event of delay, 'whatsoever and howsoever occasioned', the contractors were to apply to the engineer for an extension of time. o Contracts were required by a gov order to stop the work and sell the plant: HELD: contract was frustrated, because the delay clause was not intended to apply to such a fundamental change of circumstances. Clause was only intended to cover temporary difficulties. o First World War ? contract was frustrated by gov intervention, saying you can't use various materials, taking men to work in munitions factories, etc. Gov intervention had frustrated the contract.
Frustration of purpose/non-occurrence of event
? ?? ? Must be common/joint purpose of both parties: where the common purpose for which the contract was entered can no longer be carried out because of some supervening event - contract may be frustrated, despite the fact it is still physically possible to carry out the contract.
? ?? ? The 'Coronation Cases' o Krell v Henry (1903) o By a written contract, D agreed to hire a third floor flat on Pall Mal from C for 26 and 27 June 1902. o Purpose of hiring the room: to view the coronation procession that was to pas along the street below on those dates. However, no express mention of this purpose in the contract. o King Edward VII fell ill; procession didn't take place on those days.
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