Lecture 10

Termination and Frustration

Requirements for election

1. Unequivocal words or conduct

2. Communication to the promisor

Election to continue

1. Unequivocal words/conduct indicating choice to continue

2. Must know of the facts giving rise to the right to terminate

Estoppel as restriction

1. Representation made to other party

2. Other party relied on it

3. Unconscionable to go back on it

Effect of termination

• all parties are discharged

• all substantive terms become unenforceable; procedural terms, such as an agreement to seek mediation, are enforceable

• all future obligations are unenforceable

• all unconditionally accrued rights remain on foot (eg damages for breach)

Concept

“[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. Non haec in foedera veni. It was not this that I promised.”

- Lord Radcliffe, Davis Contractors Ltd v Fareham UDC [1956] AC 696 at 729

Effect of Frustration

1. Contract stops automatically at point where frustration occurred

2. Future obligations unenforceab;e

3. Uncondtionally accrued rights remain on foot

4. Right to damages survives if breach occurs prior to frustration

Total Failure of Consideration

‘There is failure of consideration if a promisor does not receive the performance (agreed return) which was promised as the price of (in return for) a money payment made by the promisor.’

Carter, Peden and Tolhurst, Cases and Materials on Contract Law in Australia at 789.