Law Of Contract: Discharge Of A Contract: Frustration: Limitations On The Doctrine Of Frustration – Contractual Provision; Inconvenience Or Additional Expense; Foreseen Or Reasonably Foreseeable Event; Self-induced (Copy)
Limitations on the Doctrine of Frustration
General Principle
Judicial Approach
- Courts apply frustration narrowly.
- Frustration automatically discharges a contract.
- Because the consequences are serious, courts are reluctant to find frustration unless the legal requirements are clearly satisfied.
Examination Rule
Before concluding that frustration exists, always consider whether one of the recognised limitations prevents the doctrine from operating.
Limitation 1: Contractual Provision
General Principle
Legal Rule
- Frustration will not apply where the contract itself already provides for the event that has occurred.
- If parties have allocated the risk in advance, the contract governs the situation.
- The court will enforce the contractual provision rather than apply frustration.
Examination Application
Ask:
- Does the contract contain a force majeure clause?
- Does the contract allocate responsibility for the event?
- Has the event already been provided for contractually?
If yes:
- Frustration generally does not apply.
Metropolitan Water Board v Dick Kerr & Co Ltd [1918] AC 119
Facts
- Contractors agreed to build a reservoir.
- Government wartime order required work to stop.
- Contract contained a clause dealing with temporary delays.
Judgment
- Contract frustrated.
Legal Principle
- Contractual provisions only prevent frustration if they actually cover the supervening event.
- The clause dealt with temporary interruptions, not indefinite government prohibition.
Application
- Leading authority showing that the contractual provision must truly cover the event.
The Eugenia [1964] 2 QB 226
Facts
- Charterparty contained provisions dealing with voyage risks.
- Ship entered prohibited waters and became trapped.
Judgment
- Contract not frustrated.
Legal Principle
- Courts examine whether risks were already allocated by the contract.
Application
- Frequently cited regarding contractual risk allocation.
Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep 323
Facts
- Commercial agreement affected by operational difficulties.
Judgment
- Contractual arrangements already dealt with relevant risks.
Legal Principle
- Frustration unavailable where parties have contractually addressed the issue.
Application
- Important modern authority.
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
Limitation 2: Inconvenience or Additional Expense
General Principle
Legal Rule
- Increased difficulty, inconvenience, hardship or expense does not frustrate a contract.
- Performance must become radically different, not merely more burdensome.
Examination Application
One of the most frequently tested limitations.
Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696
Facts
- Building contract expected to take eight months.
- Labour shortages increased completion time to twenty-two months.
- Costs rose significantly.
Judgment
- No frustration.
Legal Principle
- Greater difficulty and expense are insufficient.
- Contract must become radically different.
Application
- Leading authority.
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93
Facts
- Contract required shipment of goods.
- Suez Canal closed.
- Alternative route around Cape of Good Hope remained available.
- Alternative route was significantly longer and more expensive.
Judgment
- No frustration.
Legal Principle
- Increased cost and inconvenience do not amount to frustration.
Application
- Classic examination authority.
The Eugenia [1964] 2 QB 226
Facts
- Ship became trapped after entering restricted waters.
Judgment
- No frustration.
Legal Principle
- Commercial hardship is insufficient.
Application
- Frequently cited alongside Davis Contractors.
Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964]
Additional Principle
- Mere delay and increased expense do not fundamentally alter contractual obligations.
Application
- Important support authority.
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
Limitation 3: Foreseen or Reasonably Foreseeable Event
General Principle
Legal Rule
- Frustration is less likely where the event was foreseen or reasonably foreseeable when the contract was made.
- If parties could reasonably anticipate the risk, they should allocate it contractually.
Examination Application
Questions:
- Was the event foreseeable?
- Did the parties contemplate the possibility?
- Could they have provided for it in the contract?
The Eugenia [1964] 2 QB 226
Facts
- Parties were aware of political instability affecting the Suez Canal.
Judgment
- No frustration.
Legal Principle
- Foreseeability strongly undermines frustration.
Lord Denning’s Principle
- Frustration should not relieve parties from risks they knowingly accepted.
Application
- Leading foreseeability authority.
Walton Harvey Ltd v Walker & Homfrays Ltd [1931] 1 Ch 274
Facts
- Room hired to view a procession.
- Unknown to hirer, organiser had already decided to cancel the event.
Judgment
- No frustration.
Legal Principle
- Frustration unavailable where the relevant risk already existed or was known.
Application
- Important authority.
Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd [1977] 1 WLR 164
Facts
- Parties entered agreement subject to planning permission risks.
Judgment
- No frustration.
Legal Principle
- Foreseeable commercial risks generally remain with the parties.
Application
- Modern commercial example.
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
Limitation 4: Self-Induced Frustration
General Principle
Legal Rule
- A party cannot rely on frustration where that party caused the frustrating event.
- Frustration must occur without fault of either party.
Examination Application
One of the most important limitations.
Ask:
- Who caused the event?
- Was the event voluntary?
- Was fault involved?
If yes:
- Frustration unavailable.
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
Facts
- Company operated several trawlers.
- Government issued fewer licences than required.
- Company chose to allocate available licences elsewhere.
- Claimed frustration regarding the unlicensed vessel.
Judgment
- No frustration.
Legal Principle
- Party cannot rely on a situation created by its own decision.
Importance
- Leading authority on self-induced frustration.
Application
- Frequently examined.
Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd [1942] AC 154
Facts
- Ship exploded before performance.
- Question arose whether fault caused the event.
Judgment
- Frustration available because fault was not established.
Legal Principle
- Frustration requires absence of fault.
Application
- Important House of Lords authority.
The Super Servant Two [1990] 1 Lloyd’s Rep 1
Facts
- Contractor owned two vessels capable of performing obligations.
- One vessel sank.
- Contractor voluntarily allocated the other vessel elsewhere.
- Claimed frustration.
Judgment
- No frustration.
Legal Principle
- Self-induced inability to perform cannot amount to frustration.
Application
- Leading modern authority.
Bank Line Ltd v Arthur Capel & Co [1919] AC 435
Facts
- Government requisitioned vessel during wartime.
Judgment
- Contract frustrated.
Legal Principle
- Frustration available where inability to perform is not self-induced.
Application
- Frequently contrasted with Maritime National Fish.
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
Examination Comparison Table
| Limitation | Leading Case | Principle |
|---|---|---|
| Contractual Provision | Metropolitan Water Board v Dick Kerr | Frustration excluded if contract already covers event |
| Contractual Provision | Channel Island Ferries v Sealink | Risk allocation prevents frustration |
| Additional Expense | Davis Contractors v Fareham | Increased cost insufficient |
| Additional Expense | Tsakiroglou v Noblee Thorl | Longer route and expense insufficient |
| Foreseeability | The Eugenia | Foreseeable events rarely frustrate |
| Foreseeability | Walton Harvey v Walker | Known risks prevent frustration |
| Self-Induced Frustration | Maritime National Fish v Ocean Trawlers | Party cannot create frustration |
| Self-Induced Frustration | The Super Servant Two | Voluntary conduct prevents frustration |
| Absence of Fault | Joseph Constantine Steamship | Frustration requires absence of fault |
| Genuine Frustration | Bank Line v Arthur Capel | External event may frustrate |
Essential Examination Authorities
| Case | Principle |
|---|---|
| Davis Contractors v Fareham UDC | Increased expense not frustration |
| Tsakiroglou v Noblee Thorl | Alternative performance prevents frustration |
| The Eugenia | Foreseeability and commercial hardship |
| Metropolitan Water Board v Dick Kerr | Contractual provision limitation |
| Channel Island Ferries v Sealink | Contractual allocation of risk |
| Walton Harvey v Walker | Known risks prevent frustration |
| Amalgamated Investment v John Walker | Foreseeable commercial risks |
| Maritime National Fish v Ocean Trawlers | Self-induced frustration |
| Joseph Constantine Steamship | No fault requirement |
| The Super Servant Two | Voluntary conduct prevents frustration |
| Bank Line v Arthur Capel | Genuine external frustration |
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
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