Categories: Law

What is frustration in contract law?

Question

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).