Source: https://www.lawteacher.net/free-law-essays/contract-law/the-doctrine-of-frustration-contract-law-essay.php
Timestamp: 2019-04-21 20:20:59+00:00

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The principle of freedom to contract is a founding principle upon which the world of commercial contracts operates. This strictly means that the parties to a contract are free to agree on their own rights and obligations to be included in their agreement.
Problems can occur however, when the bargain struck is no longer possible to achieve, or, in other words, where one party is prevented from, or unable to, carryout his/her obligations under the contract due to a supervening event beyond their control. As a result, a doctrine has accordingly emerged in the law of contract to provide for situations where such an eventuality occurs.
Under the doctrine of frustration, a promisor is relieved of any liability under a contractual agreement in the event of a breach of contract where a party to the agreement is prevented from, or unable to, perform his/her obligations under the agreement, due to some event which occurs, which was outside of their sphere of control. In such circumstances, the law deems it unfair to compel the injured party to comply with the terms of the agreement. Hence, the law relieves this person from their obligations by regarding the contract as frustrated for all purposes.
This essay first explores the development of the doctrine of frustration before providing the circumstances which qualify the doctrine of frustration. The work shall also proceed to explain the implications of a decision that a contract has been frustrated. Finally, the Conclusion summarizes the information pertaining to the doctrine of frustration and considering the information in light of Lord Simon’s dictum outlined above.
The doctrine of frustration in contract law was initially defined by two points, namely: (i) the doctrine was to be only permitted where it was raised as a defence to a primary assumption on which the agreement was reached; and (ii) the parties were entitled to insert provisions as a contingency measure to provide for the occurrence of the same.
“from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel”  .
Evidently, this position provided a more objective approach to that hitherto taken, as it included considerations other than those of the parties’ sole intentions: see Shirlaw v. Southern Foundries (1926) Ltd  2 KB 206.
The law in this area was extended further by the case of Liverpool City Council v. Irwin  2 All ER 39, in which it was subsequently found that in circumstances in which the courts regarded it as necessary to imply a term into a contract, resulting in a contract becoming frustrated, it shall do so only by law. The doctrine accordingly became a question of law for the courts to determine, as opposed to one of fact.
Further developments came in National Carriers Ltd v. Panalpina (Northern) Ltd  AC 675, where the courts devised a ‘modern test’ for assessing whether or not the doctrine of frustration ought to apply  . In accordance with this test, the courts adopt an approach whereby they seek to interpret the contract in light of the surrounding circumstances. This approach is aimed at discerning the parties’ true intentions when entering the contract. The rationale is that the court shall then be better placed to conduct an assessment of contract in order to conclude whether or not the supervening events had changed.
It ought to also be mentioned here that it is not the change in circumstances so much that invokes the doctrine of frustration, but it is the ‘radical’ change in the obligations, as found in the form of the terms of the contract, which instigates the application of the doctrine.
The application of the doctrine of frustration can arise in a variety of situations. The body of case law on the subject, however, illustrates that there are typical situations in which the doctrine arises. Most commonly, the doctrine arises in situations in which there is an inability to perform the contract due to the subject-matters destruction or unavailability: see Taylor v. Caldwell (1863) 3 B & S 826.
In circumstances which adversely affect the availability of the subject-matter required to perform the contract, the period of its unavailability is of paramount importance in assessing whether or not the doctrine of frustration is applicable. For instance, a lengthy period would result in the doctrine applying, whereas a short period is unlikely to result in the doctrine becoming applicable. However, it ought to be mentioned that in the case of Conder v. The Baron Knights Ltd  1 WLR 87, the court found that frustration had occurred despite there being no actual breach of contract, and therefore no incidence of unavailability. The facts of the case were that a musician was contracted to perform seven days a week, but feel ill, and contrary to professional advice, he continued to perform seven days a week. The court found that due to his precarious state of health, his health could have deteriorated at any time, which would have necessitated the acquisition of another musician.
A further example of the approach the court shall take when considering the effect of a delay in the ability to perform a contract due to a supervening event, can be observed in The Evia  1 AC 736  .
Furthermore, if there is a non-occurrence of an event, which is integral to the contract, and this renders the contract pointless, then the court is likely to find that a frustration has occurred. In order for this to be satisfied, however, it is essential that a distinction is drawn between the incident directed to the object of the contract and the motive for entering the contract: see Krell v. Henry  2 KB 740  . Furthermore, if a party is under an obligation to perform specified tasks in accordance with the terms of the contract, and they are unable, or it becomes impossible, to do so, the contract is deemed to be frustrated. Albeit, it ought to be mentioned that under this requirement, only a failure to comply with a obligatory expression in the form of a term is going to amount to a frustration, as opposed to a mere intimation that a performance is expected.
In Tsakiroglou & Co. Ltd v. Noblee Thorl GmbH  AC 93  , it was held that the freight contracts were not frustrated as the specific manner of the performance of the contract, specifically pertaining to the route to be taken by ships through the Suez Canal, which had been closed, had not been expressly stipulated in the contract.
There are a variety of issues which can prevent the doctrine of frustration from occurring. Firstly, where one party is found to have been negligent, the doctrine shall not apply. However, negligence per se does not strictly prevent frustration from occurring, as it is for the person claiming frustration to provide proof of the same.
In addition, if it is found that the incident which is supposed to have been outside of the control of the parties was, in fact, a consequence of the actions of a party, the doctrine cannot apply: see Maritime National Fish Ltd v. Ocean Trawlers Ltd  AC 524  .
Finally, in circumstances in which the event giving rise to the frustration is anticipated and provided for by inserting a force majeure clause into a contractual agreement, frustration shall not apply. This is the case, however, only if the said clause adequately covers all eventualities, if the supervening event should occur: see Jackson v. Union Marine insurance Co. Ltd (1874) LR 10 CP 125.
Having considered the rules pertaining to the doctrine of frustration, Lord Simon’s obiter dictum in British Movietonews Ltd. v. London and District Cinemas  is correct only in so far as the requirements for the doctrine of frustration do not apply in the case at hand. As noted above, if the ‘test’ is satisfied, and the rules of frustration apply, the implication for the contract is that it is terminated forthwith, thereby relieving the parties of their former contractual obligations.
In the case where frustration is found, the injured party does not benefit from having the option to select whether or not to opt for a breach of contract or otherwise (see Hirji Mulji v. Cheong Yue Steamship Co.  AC 497). The decision is arbitrary and automatic in that frustration renders a contract terminated forthwith.
At common law, the situation regarding the law pertaining to frustration is somewhat in a state of flux. In Chandler v. Webster  1 KB 493, the court relieved the parties form all future contractual obligations from the date when the supervening event first arose. However, this decision was overruled by the House of Lords in Fibrosa Spoika Akcyjna v. Fairbairn Lawson Combe Barbour Ltd  AC 32, who shifted the burden of the onus of the frustration from the appellant, to the respondent, by finding that there had been a total failure of consideration and allowing the appellant’s claim.
The passing of the Law Reform (Frustrated Contracts) Act 1943 has, however, gone some way to addressing the unsatisfactory state of the law. However, it ought to be noted that the Act only applies to the consequences of a frustration, once found, and deals specifically with the following: the recovery of money paid or payable under the agreement; compensation payable for expenses incurred in performing the contract; and, financial readjustment where a party has received a valuable benefit despite not having made any payment  .
Finally, Lord Simon’s comments are correct that unanticipated events alone do not ‘affect the bargain which they have made…’  and, as Lord Radcliffe rightly pointed out in the Davis case, ‘it is not hardship, or inconvenience or material loss itself which calls the principle of frustration into play’, but it can categorically be said that once a contract is found to have been frustrated, the bargain between the parties is at an end.
"The doctrine of frustration." LawTeacher.net. 11 2013. All Answers Ltd. 04 2019 <https://www.lawteacher.net/free-law-essays/contract-law/the-doctrine-of-frustration-contract-law-essay.php?vref=1>.
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LawTeacher. November 2013. The doctrine of frustration. [online]. Available from: https://www.lawteacher.net/free-law-essays/contract-law/the-doctrine-of-frustration-contract-law-essay.php?vref=1 [Accessed 21 April 2019].
LawTeacher. The doctrine of frustration [Internet]. November 2013. [Accessed 21 April 2019]; Available from: https://www.lawteacher.net/free-law-essays/contract-law/the-doctrine-of-frustration-contract-law-essay.php?vref=1.

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