Frustration, Impracticality, Hardship and Social Force Majeure
Frustration; Impracticality, Hardship and Social Force Majeure
- Frustration and Mistake
Krell v Henry [1903] 2 KB 740
Griffith v Brymer (1903) 19 TLR 434 (contract void for mistake because made upon a ‘missupposition of the state of facts’)
2 History of Frustration
Paradine v Jane (1647) Aleyn 26 and Style 47 (the ‘no excuses’ rule)
‘the contractor must perform it or pay damages for not doing it, although in consequence of unforeseen accidents, the performance of his contract has become unexpectedly burdensome or even impossible’.
Taylor v Caldwell (1863) 3 B&S 826
‘in contracts in which the performance depends upon the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance’.
Impracticability: Jackson v The Union Marine Insurance Co Ltd (1874-75) LR 10 CP
Three stage test: National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675
‘Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/ or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances’.
3 Theoretical Underpinnings
3.1 Implied Terms
Taylor v Caldwell (1863) 3 B&S 826
Ertel Bieber & Co v Rio Tinto Co Ltd [1918] AC 260
Dahl v Nelson, Donkin & Co Ltd (1880-1881) LR 6 App Cas 38
‘the meaning of the contract must be taken to be, not what the parties did intend (for they had neither thought nor intention regarding to it), but that which the parties, as fair and reasonable men, would presumably have agreed upon’.
3.2 Just Solution
J Lauritzen A/S v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1
‘The object of the doctrine was to… achieve a just and reasonable result… as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances’.
Davis Contractors v Fareham Urban District Council [1956] AC 696
British Movietowns Ltd v London and District Cinemas Ltd [1952] AC 166
3.3 Radical Change
Davis Contractors v Fareham Urban District Council [1956] AC 696
‘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’.
4 Frustrating Events
4.1 Overlapping Categories
- Legal impossibility
- Physical impossibility
- Impossibility of purpose
M Chen-Wishart, Contract Law (OUP Oxford 2008)
‘The catastrophic destruction of the Twin Towers in New York on 11 September 2001 would frustrate any contract to provide cleaning services on the premises; performance would be illegal (entry being barred), physically impossible, and purposeless’.
4.2 Legal Impossibility
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Acquisition:
Baily v De Crespigny (1868-1869) LR 4 QB 180 (land)
Bank Line Ltd v Arthur Capel & Co [1919] AC 435 (ships)
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1983] 2 AC 352 (oil fields)
Radical change?
Metropolitan Water Board v Dick, Kerr & Co Ltd [1918] AC 119
Cricklewood Property & Investment Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221 (‘the length of the interruption so caused is presumably a small fraction of the whole term’)
4.3 Physical Impossibility
4.3.1 Death or Incapacity
Whincup v Hughes (1871) LR 78 (death)
FC Shepherd & Co v Jerrom [1987] QB 301 (imprisonment)
Notcutt v Universal Equipment Co [1986] 3 All ER 582 (illness)
Phillips v Alhambra Palace Co Ltd [1901] 1 QB 59
Destruction of Subject Matter
Taylor v Caldwell (1863) 3 B&S 826
Appleby v Myers (1866-1867) LR 2 CP 651
Partial destruction: Asfar v Blundell [1895] 1 QB 126
Jackson v The Union Marine Insurance Co Ltd (1874-75) LR 10 CP (‘practical commercial destruction’)
- Failure or Disruption of Supplies
S 7 SGA 1979: ‘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’.
Unascertained goods:
Blackburn Bobbin Co Ltd v TW Allen Ltd [1918] 2 KB 467
Howell v Coupland [1876] 1 QBD 258
Re Badische Co Ltd [1921] 2 Ch 331
Partial failure of commonly intended source: HR Sainsbury Ltd v Street [1972] 1 WLR 834
- Delay and hardship
Davis Contractors v Fareham Urban District Council [1956] AC 696 (‘any new and unforeseeable factor or event’?)
Thiis v Buyers (1876) 1 QBD 244 (charterer must ‘take the risk of any ordinary vicissitudes’)
Jackson v The Union Marine Insurance Co Ltd (1874-75) LR 10 CP
Bank Line Ltd v Arthur Chapel & Co Ltd [1919] AC 435
Codelfa Construction Pty Ltd v State Railway Authority of New South Wales (1982) 41 ALR 367
Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 QB 226 (cargo not affected by delay and ‘no evidence that the early arrival of the cargo in India was of particular importance’)
4.4 Impossibility of Purpose
Krell v Henry [1903] 2 KB 740 (must be common purpose; ‘assumed by the parties to be the foundation or basis of the contract’)
Herne Bay Steamboat Co v Hutton [1903] 2 KB 683
National Carriers Ltd v Panalpina (Northern Ltd) [1981] AC 675
Denny, Mott & Dickson Ltd v James B Fraser & Co Ltd [1944] AC 265
Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd [1977] 1 WLR 164
Contractual Interpretation
5.1 Express Terms
Metropolitan Water Board v Dick Kerr & Co Ltd [1918] AC 119 (delay clause not apply because ‘delay was so abnormal, so pre-emptive, as to fall outside what the parties could possibly have contemplated’)
5.2 Implied Allocation of Risk: Highly Foreseeable?
WJ Tatem Ltd v Gamboa [1939] 1 KB 132
6 Fault
6.1 Breach
Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 QB 226
Monarch SS Co Ltd v A/B Karlshamns Oljefabriker [1949] AC 196
6.2 Anticipatory Brach
J Lauritzen A/S v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1
‘The possible varieties are infinite, and can range from the criminality of the scuttler who opens the sea cocks and sinks his ship, to the thoughtlessness of the prima donna who sits in a draught and loses her voice’.
FC Shepherd & Co v Jerrom [1987] QB 301
6.3 Election
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
J Lauritzen A/S v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1
7 Consequences of Frustration
7.1 Contract Discharged
7.2 Partially Executed Contracts
- Common Law
(i) Money
Chandler v Webster [1904] 1 KB 493
Fibrosa Spolka Ackcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 (recovery where total failure of consideration)
(ii) Non-Money Benefits
Appleby v Myers (1866-1867) LR 2 CP 651 (no recovery because payment fell due on completion)
- Law Reform (Frustrated Contracts) Act 1943
S 2(3) (Act regulates the consequences of frustration, unless express provision in contract)
(i) Money
S 1(2):
- Prior payments recoverable by payer;
- Relief for payer from sums due prior to discharge;
- If just given the circumstances, judicial power to set off whole or part of payee’s expenses (if incurred before discharge in or for the purpose of performance) against sum paid or payable.
Gamerco SA v ICM/ Fair Warning (Agency) Ltd [1995] 1 WLR 1226
(ii) Non-Money Benefits
S 1(3) ‘just sum’ awarded to conferrer of valuable benefit; not exceed value of benefit conferred. Fixed having regard to all of the circumstances and in particular:
- Expenses of benefitted party;
- Effect in relation to the said benefit of circumstances giving rise to frustration.
BP Exploration Co (Libya) Ltd v Hunt (No 2) [1983] 2 AC 352
