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Law Notes Contract Law Notes

Doctrine Of Frustration Notes

Updated Doctrine Of Frustration Notes

Contract Law Notes

Contract Law

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Contract law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB contract law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Hong Kong or Malaysia (University of London).

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Doctrine of Frustration

Has the change of circumstances make performance radically different from that which was originally undertaken?

  • Davis Contractors v Fareham UDC [1956]:

    • Lord Radcliffe:

      • Courts first examine contracts and the circumstances in which they were made

        • In order to see whether or not from the nature of the parties must have made their bargain on the footing that a particular thing or state of things would continue to exist.

          • If they must have done so, a term will thereby be implied that this is the case.

      • Court will then ask whether or not literal enforcement of obligations in new circumstances

        • Will lead to radically different performance than that originally promised

          • owing to this non-existence of the thing contemplated at formation that it would continue to exist.

What makes performance radically different?

1. Legal impossibility

  • Metropolitan Water Board v Dick Kerr [1918]: M contracted with D to build dam. Subsequently while work taking place, D banned from continuing work by Ministry of War.

    • Lord Atkinson:

      • Parties can be excused when conditions anticipated at contract formation have completely changed since then,

        • making performance entirely different (i.e. b/c illegal).

        • Or if contract continued, they would be bound for indeterminate length of time.

2. Physical impossibility

  • Death and Serious Incapacity in personal service contracts

  • Destruction of Subject Matter

    • Taylor v Caldwell [1863]: Music hall hired for concerts by D, subsequently destroyed accidently be fire before concerts performed.

      • Blackburn J:

        • Where parties knew something had to exist in order for the contract to be performed at contract formation

          • But subsequently that thing disappeared without their fault

            • Parties have implied condition that they intend to be excused if performance thereby becomes impossible.

  • Failure of Supplies

    • S.7 Sale of Goods Act:

      • Where agreement to sell specific goods

        • Without any fault of seller or buyer

          • Goods perish before risk transferred to buyer

          • Contract is avoided

    • But where goods are unascertained, then risk will normally be on the seller to find alternative supplier, meaning contracts here rarely frustrated.

  • Delay and Hardship of finding substitute

    • Must be caused by new and unforeseen event, however, not just within commercial risks undertaken

      • Davis Contractors v Fareham [1965]:

        • Lord Radcliffe:

          • Lack of Provision for shortages/delays within contract which are foreseeable in the trade do not make contract radically different.

            • Can’t just use frustration to get out of bad bargain.

    • Performance in new circumstances must radically alter the rights and obligations originally undertaken (question of degree)

      • Jackson v Marine Insurance Co Ltd [1879]: Ship meant to end up in San Francisco w/ cargo, ran aground and was delayed for several months. Z pulled out of charterparty, C could only claim insurance from D if contract frustrated, not for breach.

        • Bramwell B:

          • Although trip agreed could be made eventually, time gap between two trips indicated that latter trip was a new adventure

            • a voyage which Z and C had no intention of making when the contract was made

              • Thus, contract frustrated by delay leading to new obligations.

      • The Eugenia: D, if hadn’t broken war clause by entering Suez Canal, would have had to take ship round Cape of Good Hope rather than through canal, leading to 30 day longer journey.

        • Lord Denning MR:

          • Goods carried not needed at market place at exact time – could be delayed w/ little effect to price

          • Delay of 30 days capable of being performed by ship, and not unreasonable delay.

            • Therefore, performance different and longer, but not radically different from that originally agreed.

3. Purposeless

  • Contract, while not impossible to perform or leading to unreasonable hardship

    • can still be frustrated when the intervening event has so undermined the purpose of the contract

      • that it should be discharged

  • Krell v Henry [1903]: Rooms advertised as having view of coronation procession hired out to D, but procession cancelled before contract performance.

    • Vaughan Williams LJ:

      • First must ask: What is the substance of the contract?

        • If substantial contract needs for its foundation the assumption of the existence of a particular state of things.

          • Then contract is limited to performance if that state of things exists.

  • BUT Herne Bay Steam Boat Company v Hutton: C hired to D a ship to take D’s customers to tour naval parade for coronation, but coronation and naval parade cancelled (fleets remained in place). D refused to pay.

    • Vaughan Williams LJ:

      • D had two objects to the contract:

        • Taking people to see the naval review

        • Taking people around the fleet

          • But just because these purposes became impossible does not mean that these were the foundation of the contract formation so as to frustrate the contract.

  • Four different explanations for these Contrary decisions:

    • Chen Wishart: purpose of contract must be common to both parties –

      • in Krell rooms specifically hired out b/c location overlooked procession + hired for that reason

        • in Hutton hiring out of boat irrelevant to what purposes (touring w/ customers) D had in hiring it.

      • Vaughan Williams LJ in Krell:

        • Flat was linked to the purpose of the contract – the position of the flat and the procession under it is the foundation of the contract

          • Goold: price hike is significant here – ought to be looking at what each party has said (assumption of responsibility) – not just the broad purpose.

    • Stirling LJ in Hutton:

      • Not all purposes of contract frustrated – D can still take customers to tour fleet – it hasn’t gone anywhere.

    • Brownsword: Krell had a consumer disappointed, Hutton a businessman. Courts more likely to favour the consumer over the businessman.

Exceptions to Frustration Applying

  • Construction: Where risk of the change of circumstances was expressly or impliedly allocated...

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