Force Majeure v Frustration
Peter CassidyIntroduction
From the recent Russian invasion of Ukraine to the “once in 500-year” weather events which
seem to be occurring somewhere in the world almost every week, as well as the ongoing supplychain disruptions caused by the Covid-19 pandemic, the possibility of the planned performanceof a contract being interrupted by an event which is beyond the party’s control seems to beincreasing all the time.
But can such a party claim “force majeure” and be excused from their contractual obligations?
As I will explain below, if the contract’s governing law is a common law jurisdiction, it may not
be so easy. I will also briefly introduce the common law concept of frustration, which also deals
with the problem of being unable to perform a contractual obligation but is a very different issue.

Common Law BackgroundI think that most readers will be aware of the concept of force majeure (不可抗力) in Japaneselaw, which excuses a party from their failure to perform a contractual obligation if such failure
is due to reasons not attributable to them. This was traditionally defined in court precedent andhas more recently been added to the Civil Code.
On the other hand, unlike Japan’s traditional judicial precedents, the English courts were not sokind to parties. Once a party made a contractual promise to do something, they were absolutely
bound to perform the promise and were liable to compensate the other party if they failed toperform, regardless of the reason for the failure. Perhaps the best illustration of this rule was a1646 case called Paradine v Jane, which ruled that the tenant was obliged to pay rent eventhough a foreign army had seized possession of the land. It was not until 1863 that some relief
was provided against this strict rule, which led to the development of the doctrine of frustration.
The doctrine will be discussed in detail below, but for now, it is important to note that it is adifficult principle for a party to rely upon. Therefore, parties need to protect themselves via aforce majeure clause in the contract.

Defining Force Majeure in a Contract
Similar to the meaning of the Japanese word, “force majeure” comes from French and means“irresistible force” or “superior force”. However, because there is no precise definition in thecommon law, it is normal for the parties to define what circumstances will be considered as aforce majeure event. Parties are free to negotiate what events are included (or excluded) in thedefinition of force majeure under a particular contract, but usually both natural events (e.g. fireor flood) and man-made events (e.g. war or labour strike) are included. Some precision isrequired, as a clause which said “the usual force majeure clauses to apply” has been held to be
void due to uncertainty. But on the other hand, it is possible to refer to a definition that exists
outside the contract, such as the clause published by the International Chamber of Commerce.

It is also necessary to identify what the effect of the force majeure clause is. In other words, isthe affected party excused from performing the contract, or is the obligation to perform merely
suspended while the event exists? In commercial contracts, there is often an initial period whereperformance is suspended, with an option to terminate the contract if performance is still
prevented after a certain period of time. Other practical elements which are often seen in aforce majeure clause are a notice requirement and a duty to mitigate the effect of the event.
Ultimately, the important part to remember is that the clause is defined by the parties, so careshould be given to what the clause does or does not say.

Frustration – the opposite
So, if force majeure is a purely contractual concept in common law jurisdictions, how about thedoctrine of frustration? The basic principle of frustration is that the contract may be discharged
when something occurs after the formation of the contract which either (a) makes the contract
impossible to perform, or (b) transforms a party’s obligation into a radically different obligationfrom that agreed to when entering the contract. The four highlighted portions above should be
noted as follows.
Discharge of the contract: Unlike a force majeure clause in a contract, which may allow
performance to be suspended, frustration will have the effect of discharging both parties fromthe entirety of the contract.
After the formation of the contract: A party cannot rely upon a pre-existing event or cause inorder to claim a contract has been frustrated.
Impossibility: The contract may be physically impossible to perform, or commercially impossible
to perform.
Radically different obligation: This is a more recent version of the test of frustration, which
requires the type of obligation to be different, not just the cost or difficulty of it.
An example of how the doctrine applies is the 1863 case referred to above. In that case, thedefendant agreed to let the plaintiff use a music hall for a concert, but the hall was destroyed
by a fire after the contract was made. In this particular case, the court held that there was animplied condition in the contract that the hall should continue to exist on the day of the concert.
Under the “impossibility” test which was developed in subsequent cases, it was impossible toperform the contract because the hall ceased to exist. Or, to use the more recent “radicallydifferent obligation” test, it would have been unfair to require the defendant to build a new hall
before the day of the concert, as that was very different to the original obligation of letting theplaintiff use a hall that already existed.
It is important to note that the doctrine of frustration is applied very strictly and narrowly, inorder to maintain the basic principle that a party should not be able to escape contractual
obligations just because it turns out to be unprofitable or difficult to perform. It should also be
noted that if a contract contains a force majeure clause that lists a specific type of event, thenthe terms of that clause will apply and the affected party will unlikely be able to rely on
frustration.
Finally, from a practical perspective, a party to a contract should not rush to claim frustration
unless they are confident that the doctrine will definitely apply. Otherwise, they may be accusedof repudiating the contract and liable to compensate the other party. Therefore, legal advice
should be sought about a particular situation before making a claim based on frustration.