What is frustration in contract law?

Question

What is frustration in contract law?

Answer

Frustration of a contract occurs when without fault of either party, a contractual obligation is rendered impossible or radically different to that envisaged on agreement to the terms (Davis Contractors Ltd v Fareham Urban DC). The result is that both parties are discharged of their obligations (Murray, 2014).

There are well-established rules as to when frustration may occur: when the subject matter has been destroyed (Taylor v Caldwell); when the contract becomes illegal to perform, such as in the Metropolitian Water Board case where the government declared the construction illegal; and when one party to the contract is unable to complete obligations due to death/illness and the performance can only be undertaken by that individual (Hall v Wright).

The non-occurrence of an event may also frustrate a contract, but this is very circumstantial and will be dependent on the “foundation” of the contract (Krell v Henry; Herne Bay Steam Boat).

There are limitations to the doctrine, for example, if the frustration is self-induced, as in the Maritime National Fish case. The courts have been known to construe self-inducement widely. The doctrine will also not operate for a mere delay, there must be a radical change of obligations (Murray, 2014).

References

Murray, R., (2014) Contract Law. Third Edition, Sweet & Maxwell.

Davis Contractors Ltd v Fareham Urban DC [1956] AC 696

Hall v Wright (1859) 120 ER 695

Taylor v Caldwell (1863) 3 B. & S. 826

Metropolitian Water Board v Dick Kerr & Co Ltd [1918] AC 119

Krell v Henry [1903] 2 KB 740

Herne Bay Steam Boat Co v Hutton [1903] 2 KB 683

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524