Frustration: Types Of Frustrating Event – Impossibility Of Performance; Supervening Illegality; Change Of Circumstance Making Performance Pointless

Introduction To Frustration

Meaning Of Frustration

• Frustration occurs when:
  • A contract has been formed.
  • A supervening event occurs after formation.
  • The event is not the fault of either party.
  • The event makes performance impossible, illegal or radically different from what was originally agreed.
• When frustration occurs:
  • Contract automatically ends.
  • Future obligations are discharged.
  • Parties are released from further performance.

Purpose Of The Doctrine

Fairness

• Prevents parties being bound by obligations they can no longer perform.

Justice

• Recognises that unforeseen events may fundamentally alter contractual obligations.

Commercial Reality

• Contracts are made on assumptions.
• If those assumptions disappear, performance may become impossible or meaningless.

Nature Of Frustration

Automatic Operation

• Frustration operates automatically.
• Neither party needs to terminate the contract.
• Contract ends by operation of law.

No Fault Doctrine

• Neither party must be responsible for event.
• If one party causes the event:
  • Frustration does not apply.

Historical Development

Original Common Law Position

• Early law was extremely strict.
• Parties remained liable regardless of difficulties.

Case: Paradine v Jane (1647)

Facts

• Tenant dispossessed by enemy forces.
• Could not use land.
• Refused to pay rent.

Decision

• Tenant remained liable.

Legal Principle

• Contractual obligations remained despite difficulties.

Significance

• Demonstrates harsh original approach.

Judicial Change

• Courts later recognised need for flexibility.
• Development of frustration doctrine followed.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Requirements For Frustration

Requirement 1: Contract Must Exist

• Valid contract already formed.

Requirement 2: Event Occurs After Formation

• Event must arise after contract made.

Requirement 3: Event Must Be Beyond Parties’ Control

• Neither party responsible.

Requirement 4: Event Must Not Be Foreseen Or Provided For

• Event not dealt with by contract.

Requirement 5: Performance Becomes Impossible, Illegal Or Radically Different

• Mere inconvenience insufficient.

Requirement 6: No Self-Induced Frustration

• Party cannot rely on own conduct.

Types Of Frustrating Event

Three Main Categories

Impossibility Of Performance

Supervening Illegality

Change Of Circumstances Making Performance Pointless

Impossibility Of Performance

Meaning

• Performance becomes physically or legally impossible.
• Contract cannot be performed in any practical sense.

Common Situations

Destruction Of Subject Matter

Death Or Incapacity

Non-Occurrence Of Essential Event

Destruction Of Subject Matter

Meaning

• Subject matter essential to contract ceases to exist.

Leading Case: Taylor v Caldwell (1863)

Facts

• Music hall hired for concerts.
• Before concerts:
  • Hall destroyed by fire.

Issue

• Was contract still binding?

Decision

• Contract frustrated.

Legal Principle

• Destruction of essential subject matter frustrates contract.

Significance

• Foundation of modern frustration doctrine.

Why Contract Was Frustrated

Subject Matter Destroyed

• Hall no longer existed.

Performance Impossible

• Concerts could not be held.

No Fault

• Neither party responsible.

Importance Of Taylor v Caldwell

Established Implied Condition Theory

• Parties assumed continued existence of hall.

Created Modern Frustration Doctrine

• Major turning point in contract law.

Death Or Incapacity

General Rule

• Frustration may occur where personal performance is essential and individual dies or becomes incapable.

Reason

• Personal service contracts depend upon particular individual.

Examples

Singer

• Dies before performance.

Artist

• Suffers incapacitating illness.

Professional Consultant

• Becomes incapable of performing duties.

Case: Condor v The Barron Knights Ltd (1966)

Facts

• Drummer employed by band.
• Medical condition prevented performance.

Decision

• Contract frustrated.

Principle

• Incapacity may frustrate personal service contracts.

Significance

• Important illustration of personal incapacity.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Unavailability Of Essential Subject Matter

Meaning

• Subject matter not destroyed.
• But unavailable for contractual purpose.

Example

• Ship requisitioned by government.
• Essential equipment unavailable.

Effect

• May frustrate contract if unavailability fundamental.

Case: Jackson v Union Marine Insurance (1874)

Facts

• Ship damaged before voyage.
• Extensive repairs required.

Decision

• Contract frustrated.

Legal Principle

• Excessive delay making performance radically different may frustrate contract.

Significance

• Demonstrates impossibility through delay.

Supervening Illegality

Meaning

• Contract becomes illegal after formation.

General Principle

• Law does not require illegal performance.

Effect

• Contract automatically frustrated.

Why?

Public Policy

• Courts will not enforce illegal obligations.

Legal Necessity

• Performance prohibited by law.

Types Of Supervening Illegality

Change In Legislation

Example

• New law prohibits transaction.

Government Action

Example

• Export ban imposed.

War

Example

• Trading with enemy becomes illegal.

Licensing Changes

Example

• Required licence revoked.

Leading Case: Metropolitan Water Board v Dick Kerr & Co Ltd (1918)

Facts

• Construction contract entered.
• Government wartime order halted work.

Decision

• Contract frustrated.

Legal Principle

• Government intervention making performance unlawful may frustrate contract.

Significance

• Important authority on supervening illegality.

Case: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (1943)

Facts

• Machinery ordered from England.
• War broke out.
• Trading with Polish company became illegal.

Decision

• Contract frustrated.

Principle

• Supervening illegality frustrates contract.

Significance

• Major frustration authority.

Importance Of Supervening Illegality

Protects Parties

• No obligation to break law.

Maintains Public Policy

• Courts avoid enforcing illegal contracts.

Provides Certainty

• Clear legal basis for discharge.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Change Of Circumstance Making Performance Pointless

Meaning

• Physical performance still possible.
• However:
  • Contract’s entire purpose disappears.
  • Commercial foundation collapses.
  • Performance becomes radically different.

Also Known As

• Frustration of purpose.
• Failure of common purpose.

Key Principle

• Mere inconvenience insufficient.
• Mere loss of profit insufficient.
• Mere difficulty insufficient.
• Change must destroy foundation of contract.

Leading Case: Krell v Henry (1903)

Facts

• Room hired overlooking coronation procession route.
• Purpose:
  • Viewing coronation procession.
• Coronation cancelled due to King’s illness.

Decision

• Contract frustrated.

Legal Principle

• Contract’s common purpose destroyed.

Significance

• Leading frustration of purpose case.

Why Contract Frustrated

Entire Purpose Lost

• Viewing procession impossible.

Foundation Destroyed

• Both parties understood purpose.

Performance Pointless

• Room still existed.
• Yet contract’s purpose disappeared.

Case: Herne Bay Steam Boat Co v Hutton (1903)

Facts

• Boat hired to view naval review and cruise around fleet.
• Naval review cancelled.
• Cruise still possible.

Decision

• Contract not frustrated.

Legal Principle

• Contract still retained substantial purpose.

Significance

• Important contrast with Krell v Henry.

Difference Between Krell And Herne Bay

Frustration Must Make Performance Radically Different

Leading Case: Davis Contractors Ltd v Fareham UDC (1956)

Facts

• Construction contract.
• Labour shortages.
• Costs increased significantly.
• Project took longer than expected.

Decision

• Contract not frustrated.

Legal Principle

• Increased difficulty or expense is insufficient.

Famous Test

• Performance must become radically different from what was undertaken.

Significance

• Modern leading authority on frustration.

Importance

Frustration Is Narrow

• Courts apply doctrine cautiously.

Commercial Risk

• Ordinary business risks remain with parties.

Increased Expense

• Usually insufficient.

Reduced Profit

• Usually insufficient.

Hardship

• Usually insufficient.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course

Situations That Do NOT Usually Frustrate Contracts

Increased Cost

Case

• Davis Contractors.

Rule

• More expensive performance insufficient.

Reduced Profit

Rule

• Loss of profitability does not frustrate contract.

Commercial Difficulty

Rule

• Business difficulties insufficient.

Foreseeable Events

Rule

• Foreseeable risks usually allocated to parties.

Self-Induced Frustration

Rule

• Party cannot rely on own actions.

Case: The Eugenia (1964)

Facts

• Ship entered blocked canal despite known risks.
• Delay occurred.

Decision

• No frustration.

Principle

• Self-induced frustration not recognised.

Significance

• Important limitation.

Effect Of Frustration

Automatic Discharge

• Contract automatically terminated.

Future Obligations End

• Parties released from future duties.

No Breach Occurs

• Frustration is not breach.

Neither Party At Fault

• Contract simply discharged by law.

Strengths Of Frustration Doctrine

Fairness

• Prevents injustice.

Flexibility

• Responds to unforeseen events.

Commercial Reality

• Recognises changed circumstances.

Public Policy

• Avoids illegal performance.

Weaknesses Of Frustration Doctrine

Narrow Scope

• Difficult to establish.

Uncertainty

• Radical difference test sometimes difficult.

Unpredictability

• Outcome often fact-sensitive.

Judicial Restriction

• Courts reluctant to apply doctrine broadly.

Key Cases To Memorise

Paradine v Jane (1647)

• Original strict approach.

Taylor v Caldwell (1863)

• Destruction of subject matter.

Condor v The Barron Knights (1966)

• Incapacity.

Jackson v Union Marine Insurance (1874)

• Delay causing impossibility.

Metropolitan Water Board v Dick Kerr (1918)

• Government intervention.

Fibrosa v Fairbairn (1943)

• Supervening illegality.

Krell v Henry (1903)

• Frustration of purpose.

Herne Bay v Hutton (1903)

• Purpose not entirely destroyed.

Davis Contractors v Fareham UDC (1956)

• Radical difference test.

The Eugenia (1964)

• Self-induced frustration.

Quick Revision Table

Examination Evaluation Points

• Frustration occurs when a supervening event makes performance impossible, illegal or radically different.
• The event must occur after contract formation and without fault of either party.
• Impossibility of performance includes destruction of subject matter and incapacity.
• Taylor v Caldwell established modern frustration doctrine.
• Supervening illegality automatically frustrates contracts because courts will not enforce unlawful obligations.
• Fibrosa and Metropolitan Water Board illustrate supervening illegality.
• Frustration of purpose occurs where the common foundation of the contract disappears.
• Krell v Henry is the leading authority on frustration of purpose.
• Herne Bay demonstrates that partial loss of purpose is insufficient.
• Davis Contractors established that performance must become radically different.
• Increased cost, inconvenience or hardship usually do not amount to frustration.
• The doctrine balances fairness with commercial certainty and remains narrowly applied by courts.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total Personal A Grades, 7 Distinctions and 11 World Records For Educate A Change A Level Law Full Scale Course