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Frustration Pq Notes Notes

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Frustration
Background
Contractual liability is strict. Contract law is not concerned with fault (unlike tort) - lack of fault does not excuse breach of contract. This is because of the principle of certainty - one can rely on the promise made by another.
Frustration appears to be in tension with the strictness of contractual liability.
When is a contract frustrated?
Traditional Approach - necessity of force majeure clause
Paradine v. Jane (1646): "[W]here the law creates a duty or charge, and the party is disabled to perform it without any default in him … there the law will excuse him. … [B]ut when the party by his own contract creates a duty or charge upon himself, he is bound to make it good,
if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract."
Modern approach
Davis Contractors Ltd v Fareham Urban District Council: "Frustration 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. Non haec in foedera veni. It was not this which I promised to do."
The Sea Angel (2007): The doctrine is not to be lightly invoked; that mere incidence of expense or delay or onerousness is not sufficient; and that there has to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstances.
The Sea Angel (2007): Deciding when this arises involves a multifactorial approach. The factors include
(i)
(ii)

Terms of the contract
Context of contract (iii)
(iv)
(v)

Parties' knowledge, expectations, assumptions and contemplations, in particular as to risk, at the time of contract
Nature of supervening event
Parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances."

NB. Frustration is a binary concept - a contract is either frustrated or not. There is no middle ground: Lloyds TSB Foundation for Scotland v Lloyds Banking Group
Relevant factors
(1) Gravity of supervening event
Commercial cost
Davis Contractors Ltd v Fareham Urban District Council: Mere commercial hardship does not constitute frustration: "it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play". On the facts, an increase in the cost of work by less than 25% did not frustrate the contract, even though it had the effect of eliminating the contractor's profit margin.
Delay
The Sea Angel: "[T]he doctrine is not to be lightly invoked… mere incidence of expense or delay or onerousness is not sufficient".
Pioneer Shipping Ltd v BTP Tioxide, The Nema: Whether delay operates to frustrate the relevant contract will depend on the context; it is a question of "degree".
Davis Contractors Ltd v Fareham Urban District Council: "It may be that delay could be of a character so different from anything contemplated that the contract was at an end."
Examples of delay successfully frustrating contract: Jackson v Union Marine Insurance,
where a chartered ship ran aground and took nine months to be repaired. Examples of insufficient delays: Davis Contractors, where a building contract took twenty-two months instead of eight; The Eugenia where a voyage lasted 138 days instead of the expected 108 days.
Destruction of physical subject matter

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