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The burning down of the Surrey music hall in Taylor v Caldwell deemed a contract for its

hire frustrated

Early cases such as Paradine v Jane[5]  show the historical line that the courts took toward

a frustration of purpose in contract; here, the courts held that where land under lease tothe defendant had been invaded by Royalist forces, he was still under obligation to pay

rent to the land owner.[6] It was not until the case of Taylor v Caldwell that a doctrine of frustration was formally recognized, alleviating the potential harshness of previous

decisions.[7] Here, two parties contracted on the hire of a music hall, for the performance

of concerts. Subsequent to contracting, but prior to the dates of hire, the music hall burned down. It was held the contract was impossible to perform;[2] Judge Blackburn 

stated that the absolute liability set forth in Paradine v Jane would not apply in the

instant case, as there was an implied condition that the music hall would be in existenceat the date of the planned concerts.[2] This had the effect of excusing the parties from the

contract. The implied term test was explained by Lord Loreburn:

In most of the cases it is said that there was an implied condition in the contract which

operated to release the parties from performing it, and in all of them I think that was at bottom the principle upon which the court proceeded.[8]

Subsequent development occurred in the case of  Krell v Henry,[9] a case arising out of the

coronation of King Edward VII. The defendant here agreed by contract to rent a flat

located at Pall Mall from the plaintiff, for the purpose of watching the coronation procession of Edward VII scheduled for June 26 and 27.[10] Despite the fact that there was

no mention of the coronation ceremony in any of the parties written correspondence, the

court held the contract frustrated in purpose by the cancellation of the coronation. It could

 be inferred from the dealings of the parties that the principal aim of the hiring was thewitnessing of the coronation.[11] This result can be contrasted with that of   Herne Bay

Steamboat Co v Hutton,[12] another coronation case. In this case, an individual hired asteamboat for the purposes of travelling to Spithead to cruise round an assembled fleet,

and to witness the naval review of King Edward's coronation. The courts subsequently

held that following the cancellation of the coronation, the entire purpose of the contract

had not been frustrated, as the cruise was still possible.[13]

The test used in these two cases - finding a radical change in the intentions of contracting

 parties - has found favour over the implied term test, which has been criticised to the

extent of being called a "grave threat to the sanctity of contract."[14] A common objection

to this test was that it was 'artificial'; in many cases, such as Davis Contractors v Fareham UDC ,[15] it would not be true to say that both parties would intend for an

implied term to cover particular situations. Thus an implication of a term to discharge a

contract may run contrary to the intentions of the contracting parties.[16] As a result, a testof contractual purpose is preferred, as laid out in Davis Contractors v Fareham UDC , in

the judgment of Lord Reid:

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The question is whether the contract which they did make is, on its true construction,

wide enough to apply to the new situation: if it is not, then it is at an end.[17]

[edit] Frustrating events

[edit] Destruction of the subject matter

Where an item or building essential to the contract - which has been expressly identified -is destroyed, through no fault of either party, it can be set aside as impossible to perform,

as established in Taylor v Caldwell . Such principles differ however when considering the

sale of goods. The agreement of the parties is important when considering whether it has been frustrated.[18] If it is agreed that goods from a specific source will be provided, the

contract falls under Section 7 of the Sale of Goods Act 1979:[19]

Where there is an agreement to sell specific goods and subsequently the goods, without

any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the

agreement is avoided.

However, where a contract does not provide 'specific' goods, as required for the Act to

operate, it will fall under common law rules. A contract will not be frustrated if generic

goods are destroyed - or rendered commercially non-viable. The risk is assumed to passwith the seller.[2]

[edit] Supervening illegality

Where a law subsequent to contracting is passed, which renders the fundamental principle of contracting illegal, the contract will be found to be frustrated.[20] There are

several situations in which this may occur. Events such as war may render certain trading

or actions illegal, as was the case in Denny, Mott & Dickinson v James Fraser .[21]

Changes in the law may render building work illegal, or the use of certain materials

illegal. A contract for the construction of a reservoir was held to be frustrated following

wartime building regulations.[22]

Such principles apply equally where contractual obligations become illegal in foreigncountries, if this is where they are to occur. [23]

[edit] Incapacity or death

A contract may become frustrated where a person or group under contract become

unavailable (either through death, illness or unavailability). This generally occurs only

for the performance of personal services,[2] and not for generic commercial services suchas building work, which could be performed by numerous individuals.[2]  Robinson v

 Davison[24]  involved a piano player who became ill prior to a concert he was contracted to

 play in; the contract was held to be frustrated. A similar result can be seen in Condor vThe Baron Knights.[25]

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There has been more difficulty for the courts in deciding when contracts for employment

may be frustrated.[26]  Notcutt v Universal Equipment Co[27]  shows that the inability of an

employee to perform contractual duties - due to, in this case, a heart attack - frustrates hiscontract of employment. Such a principle terminates a contract for employment

immediately; the employee is not entitled to the same protection under employment

 protection legislation, as demonstrated in Notcutt , where Mr Notcutt was not allowed to pursue sick pay under the Employment Protection (Consolidation) Act 1978.[28]

[edit] Limits of the doctrine

The case of  Maritime National Fish Ltd v Ocean Trawlers Ltd  demonstrates that afrustrating event cannot be in any way self induced

The courts have imposed several limits on where contracts will be frustrated, so as - in

the interests of certainty - not to release parties from their contractual obligations too

easily. An important limitation is that economic hardship, or a 'bad bargain', will notrender a contract frustrated.[29] Thus in  Davis Contractors v Fareham UDC  the courts

declined to render a contract for building work frustrated purely because the price of 

labour and materials had increased.[30] Lord Reid explained the distinction between acontract becoming more onerous, and being of a different kind:

“ In a contract of this kind the contractor undertakes to do the work for a definite

sum and he takes the risk of the cost being greater or less than he expected. If 

delays occur through no one's fault that may be in the contemplation of thecontract, and there may be provision for extra time being given: to that extent the

other party takes the risk of delay. But he does not take the risk of the cost being

increased by such delay. It may be that delay could be of a character so differentfrom anything contemplated that the contract was at an end, but in this case, in my

opinion, the most that could be said is that the delay was greater in degree than was

to be expected. It was not caused by any new and unforeseeable factor or event: the

 job proved to be more onerous but it never became a job of a different kind fromthat contemplated in the contract.[31] ”

Of importance in deciding whether a contract is frustrated is that the event cannot have

 been in any way induced by either of the parties.[32] For example, a claim of frustration

was denied in Ocean Tramp Tankers Corporation v V/O Sovfracht ,[33] where a charterer 

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for a ship allowed it to travel through the Suez Canal, and subsequently become stuck 

(following the closure of the canal during war time). Additionally, where a frustrating

event is foreseeably induced, a claim of frustration may be denied. [34]  Maritime National  Fish Ltd v Ocean Trawlers Ltd [35]  exemplifies this principle. Maritime National Fish

contracted to hire a steam trawler fitted with an otter trawl, from Ocean Trawlers Ltd.

Both parties knew that the use of such a vessel without a license was illegal.Subsequently, Maritime National Fish applied for five licenses from the Canadian

government, however, only three were granted. Maritime National Fish did not name the

hired vessel from Ocean Trawlers as one of the licensed vessels, and refused to gothrough with the hire, on the grounds the contract was frustrated. Their appeal was

rejected on the grounds that they themselves had taken on the risk that some licenses may

 be denied, and by thereby not allocating a license to their chartered steam trawler, the

frustration was self induced.[3]

[edit] Apportionment of losses

A contract rendered frustrated ends obligations following the frustrating event.[36] Under  previous common law rules, this had the effect of producing potentially inequitable

results, for example if a pre-payment was paid by one party to the other, it could not berecovered.[37] Such a rule was generally agreed to be contrary to the principles of equity.[38] Chandler v Webster [39]  demonstrates a classical establishment of this, where recovery

of a pre-payment for the hiring of a flat under contract (which was subsequently deemedimpossible) was unrecoverable. Additionally here, it was decided that as a further 

obligation to pay the entire balance had occurred prior to the frustrating event, this was

also due. This rule was not effectively reconsidered until Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd  ,[40] where the House of Lords ruled that payments

made in return for no consideration should be recoverable:

“ It is clear that any civilized system of law is bound to provide remedies for cases of 

what has been called unjust enrichment or unjust benefit, that is to prevent a manfrom retaining the money of or some benefit derived from another which it is

against conscience that he should keep.[41] ”

This judgment was not however a complete solution to the problem.[42] A remaining

 problem could be found in Whincup v Hughes,[43] where a watch maker died after 

 performing one year of his contractual obligations. None of the £25 paid could berecovered, despite just a small portion of the contractual obligations being fulfilled.

[edit] Law Reform (Frustrated Contracts) Act 1943

Main article: Law Reform (Frustrated Contracts) Act 1943

The issue of financial obligation and recovery of pre-payments was effectively put to restwith the enactment of the Law Reform (Frustrated Contracts) Act 1943, a result of the

Law Reform Commission's Seventh Interim Report.[44] Under the act, payments can be

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recovered in full or in part, in a manner which the courts deem equitable. Additionally, as

demonstrated in BP Exploration Co (Libya) Ltd v Hunt (No. 2),[45] where a party has had

a considerable benefit conferred upon them prior to the frustrating event, the courts canapportion some or all of this benefit to the other party, again where it is deemed

equitable.

[edit] See also

•  Paradine v Jane

• Taylor v Caldwell 

•  Krell v Henry

• Cooper v Phibbs [1867] UKHL 1, (1867) LR 2 HL 149

• Law Reform (Frustrated Contracts) Act 1943

• English contract law

[edit] Notes

1. ^ Taylor v Caldwell (1863) 3 B & S 826

2. ^ a b c d  e  f  Koffman, Macdonald, p. 520

3. ^ a b Halson, p. 419

4. ^ Pioneer Shipping Ltd v BTP Tioxide Ltd  [1982] AC 724, p. 752

5. ^ Paradine v Jane (1647) Aleyn 26

6. ^ Halson, p. 417

7. ^ Beale (2002) p. 6118. ^ F.A. Tamplin in S.S. Co Ltd v Anglo-Mexican Petroleum Products Co Ltd  

[1916] 2 AC 397, 403-404

9. ^ Krell v Henry [1903] 2 KB 740

10. ^ Beale (2002) p. 612

11. ^ Beale (2002) p. 614

12. ^ Herne Bay Steamboat Co v Hutton [1903] 2 KB 683

13. ^ Beale (2002) p. 617

14. ^ McElroy, Williams (April, 1941), p. 243

15. ^ Davis Contractors v Fareham UDC  [1956] AC 696

16. ^ Halson (2001) p. 422

17. ^ [1956] AC 696, p. 72118. ^ Koffman, Macdonald, p. 528

19. ^ Sale of Goods Act 1979 c. 54

20. ^ Koffman, Macdonald, p. 526

21. ^ Denny, Mott & Dickinson v James Fraser  [1944] AC 265

22. ^ Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] AC 119

23. ^ Ralli Bros v Compania Naviera Sota y Aznar  [1920] 2 KB 287

24. ^ Robinson v Davison (1870-71) LR 6 Ex 269

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25. ^ Condor v The Baron Knights [1966] 1 WLR 87

26. ^ Brodie 2006, p. 4

27. ^ Notcutt v Universal Equipment Co [1986] 1 WLR 641

28. ^ Employment Protection (Consolidation) Act 1978 (c 44)

29. ^ Poole (2008) p. 575

30. ^ Koffman, Macdonald, p. 52431. ^ [1956] AC 696, p. 724

32. ^ Poole (2008) p. 562

33. ^ Ocean Tramp Tankers Corporation v V/O Sovfracht [1964] 2 QB 226

34. ^ Halson, p. 418

35. ^ Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524

36. ^ Halson, p. 427

37. ^ Koffman, Macdonald, p. 539

38. ^ McElroy, Williams (June, 1941), p. 243

39. ^ Chandler v Webster  [1904] 1 KB 493

40. ^ Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] AC

32

41. ^ [1942] AC 32, p. 61

42. ^ Halson, p. 428

43. ^ Whincup v Hughes (1870-71) LR 6 CP 78

44. ^ Seventh Interim Report, Cmd. 6009 of 1939

45. ^ BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783

[edit] References

Books

• Beale, Hugh (2002). Contract Law (Common Law of Europe). Hart Publishing.ISBN 1-84113-237-3.

• Halson, Roger (2001). Contract Law. Longman. ISBN 0-582-08647-7.• {{cite book|last1=Koffman|first1=Laurence|last2=Macdonald|first2=Elizabeth|

title=The Law of Contract|publisher=Oxford University Press|year=20

• Poole, Jill (2008). Casebook on Contract Law. Oxford University Press. ISBN 0-19-923352-7.

Articles

• D Brodie, 'Performance issues and frustration of contract' (2006) 71 Employment

Law Bulletin 4• A Chandler, J Devenney and J Poole, 'Common mistake: theoretical justifications

and remedial inflexibility' [2004] Journal of Business Law 34

• McElroy, R; Williams, Glanville (1941). "The Coronation Cases. I". The Modern

 Law Review (Blackwell Publishing) 4 (4).• McElroy, R; Williams, Glanville (1941). "The Coronation Cases. II". The Modern

 Law Review (Blackwell Publishing) 5 (1).

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