8. FRUSTRATION
1. DEFINITION/TYPES OF FRUSTRATION
The doctrine of frustration discharges both parties from their contractual obligations where following the formation of
the contract, performance of the contractual obligations become either (1) impossible, (2) radically different or (3) illegal.
In order for frustration to be successfully pleaded, three requirements must be met:
1) an event must have occurred after the contract has been made (but before the date of performance) which
makes the performance “impossible”; and
2) the event was neither provided for in the contract nor foreseen by the parties; and
3) the event was not the result of the “fault” of either party.
1.1 IMPOSSIBILITY
Taylor v Caldwell (1863)
Facts The case centred on a musical hall which the claimant agreed to hire from the defendant. The hall was to
be used for ‘grand concerts’ and fetes. However, before the performance that the music hall was to be used
for; there was a fire and the hall was destroyed. Neither party was at fault for this destruction. The claimant
sued for breach of contract.
Issue Whether because the hall that the claimants had contracted to use could no longer be used, this excuses
the rights and liabilities of the parties’ obligations under the agreement?
Held Under the doctrine of absolute obligations the defendants would be liable to the claimants because under
the agreement they would no longer be able to perform their obligations which had been contracted for;
namely the use of a music hall for four days. In the case, Justice Blackburn notes[4] the harshness of this
obligation and therefore, it was held that the defendant was released from their obligations under the
doctrine of frustration. The reasoning behind this is that this was the most just solution and the one that
made the most sense in terms of contract law. If the parties were forced to continue their obligations under
the contract even though the music hall was on longer in use then this performance would be very different
from the ones that the parties had originally contracted to undertake. The burnt down musical hall renders
the contract undoable under the current terms
Reason “… there is an implied condition of the continued existence of the life of the contractor, and, perhaps, in the
case of the painter of his sight…”
1.2 RADICALLY DIFFERENT
Krell v Henry (1903)
Facts By contract in writing of 20 June 102, the defendant agreed to hire from the plaintiff a flat in Pall mall on 26
June and 27 June, on which days it had been announced that the coronation procession would take place
and pace along Pall Mall. The contract didn’t contain any express terms on the coronation processions or
any other purposes for which the fat was to be hired. The defendant paid the deposit upon signing the
contract. The processions, however, did not take place on the announced dates. As a result, the defendant
declined to pay the balance on the agreed rent.
Issue Was the defendant obliged to pay the rent despite the fact that the procession did not take placed as
planned?
Held The decision was in favour of the defendant.
Reason 1. Applying Taylor v Caldwell, as both parties recognised that they regarded the taking place of the
coronation procession on the days originally fixed as the foundation of the contract, the words of the
obligation on the defendant to pay for the use of the flat for the days named were not used with
reference to the possibility that the processions might not take place
2. The plaintiff was not entitled to recover the balance of the rent fixed by the contract.
Amalgamated Investments v John Walker & Sons Ltd (1977)
Facts The defendant, John Walker & Sons Ltd, advertised their warehouse for sale, either for occupation or
redevelopment of the property. It had been previously used for making whiskey. Th complainants,
Amalgamated Investment & Property Co Ltd, bought his warehouse for $1,710,000. In the process of the
Chloe T 42
, sale, the complainants had asked the defendants whether the warehouse was registered as an architectural
or historic interest building. The defendants had told them that it was not. However, ti became a listed
building on 22 August 1983 and the contract was signed on 25th September 1973. The defendant was
informed that it had become a listed building.
Issue The complainants argued that the contract should be set aside over the common mistake of the building
being listed as historic. Alternatively, they argued for frustration of the contract. The issue in this case was
whether the contract could be set aside for common mistake or whether there was frustration of the
contract.
Held The appeal from the complainant was dismissed. It was held that the building was listed on the 27th
September 1973 and the contract had not been frustrated nor would it be set aside. The Court of Appeal
stated that the complainants had taken on the risk of the ware house becoming or being listed as an
architectural or history building and this was demonstrated by their enquires prior to the sale. In order for
a contract to be set aside, there must be a common mistake made during the formation of the contract and
sale; this was not the case here.
Herne Bay Boat Co v Hutton (1903)
Facts A royal naval review was planned to take place in Spithead on 28 June 1902. The plaintiff and the defendant
agreed in writing that the plaintiff’s steamship Cynthia would be at the defendant’s disposal on 28 and 29
June to take passengers from HereneBay for the purposes of viewing the naval review and for a day’s cruise
around the fleet. This was subject to a specified deposit and rental fee. On signing of the agreement, the
defendant paid the deposit. On 25 June, the review was cancelled. The plaintiffs contracted the defendant
for instructions and informed him that the ship was ready to start and they demanded a payment. The
plaintiffs received no reply, so they decided to use this hip for their own purposes on 28 and 29 June and
made a profit from this use. On 29 June, the defendant repudiated the contract in whole. The plaintiff took
an action against the defendant to recover the balance for the rent less of the profits they made by use of
the ship during the two days.
Issue We’re the plaintiffs entitled to recover the rent due for the two days despite the fact that Royal naval review
was cancelled?
Held The decision was in favour of the plaintiffs
Reason 1. The venture was the defendant’s and therefore, the risk was his alone;
2. The taking place of the Royal naval review was not the sole basis of the contract, so there had been no
total destruction of the subject matter of the contract.
It was held further that the contract didn’t operate as a demise of the ship
Wong Lai-Ying v Chinachem Investment Co (1980)
Facts Two tower blocks were to be built named University heights which would hold 144 flats. Chinachem sold 24
contracts for sale for flats to Wong Lai Ying and the other purchasers. An unforeseen landslide stopped work
completely for 5 months and destroyed all work already done on the building foundation. Then the
government conducted investigations for the next 3 ½ years about feasibility to build on the site. This was
a major commercial loss for Chinachem. Time was of the essence, and the building was meant to be
complete by 17 May 1973. It could not have been completed before 1 October 1976, and even that was
uncertain.
Issue Was there a frustrating event making performance on the contract impossible? Did the agreement provide
for the frustrating event, so that it was not frustration by definition.
Held The construction was still frustrated because it would have been unjust to hold the developer still liable,
performance was radically different to what was agreed. Clause 22 did not cover for this situation as it
cannot be reasonably supposed to have been in the contemplation of the contracting parties when the
contract was made.
Reason Wong Lai Ying applied the following principles from the English case law:
1. “Frustration occurs whenever the law recognises that without default of either party a contractual
obligation has become incapable of being performed because the circumstances in which performance
is called for would render it a thing radically different from that which was undertaken by the contract”:
Davis Contractor Ltd v Fareham Urban District Council
2. It must be “of such a character and duration as to make the contract when resumed a different
contract”: Metropolitan Water Board v Dick, Kerr & Co Ltd (1918)
3. The occurrence of the event must make it “positively unjust to hold the parties bound to” not merely
“more onerous or more expensive”: “The Eugenia” (1964)
Chloe T 43
1. DEFINITION/TYPES OF FRUSTRATION
The doctrine of frustration discharges both parties from their contractual obligations where following the formation of
the contract, performance of the contractual obligations become either (1) impossible, (2) radically different or (3) illegal.
In order for frustration to be successfully pleaded, three requirements must be met:
1) an event must have occurred after the contract has been made (but before the date of performance) which
makes the performance “impossible”; and
2) the event was neither provided for in the contract nor foreseen by the parties; and
3) the event was not the result of the “fault” of either party.
1.1 IMPOSSIBILITY
Taylor v Caldwell (1863)
Facts The case centred on a musical hall which the claimant agreed to hire from the defendant. The hall was to
be used for ‘grand concerts’ and fetes. However, before the performance that the music hall was to be used
for; there was a fire and the hall was destroyed. Neither party was at fault for this destruction. The claimant
sued for breach of contract.
Issue Whether because the hall that the claimants had contracted to use could no longer be used, this excuses
the rights and liabilities of the parties’ obligations under the agreement?
Held Under the doctrine of absolute obligations the defendants would be liable to the claimants because under
the agreement they would no longer be able to perform their obligations which had been contracted for;
namely the use of a music hall for four days. In the case, Justice Blackburn notes[4] the harshness of this
obligation and therefore, it was held that the defendant was released from their obligations under the
doctrine of frustration. The reasoning behind this is that this was the most just solution and the one that
made the most sense in terms of contract law. If the parties were forced to continue their obligations under
the contract even though the music hall was on longer in use then this performance would be very different
from the ones that the parties had originally contracted to undertake. The burnt down musical hall renders
the contract undoable under the current terms
Reason “… there is an implied condition of the continued existence of the life of the contractor, and, perhaps, in the
case of the painter of his sight…”
1.2 RADICALLY DIFFERENT
Krell v Henry (1903)
Facts By contract in writing of 20 June 102, the defendant agreed to hire from the plaintiff a flat in Pall mall on 26
June and 27 June, on which days it had been announced that the coronation procession would take place
and pace along Pall Mall. The contract didn’t contain any express terms on the coronation processions or
any other purposes for which the fat was to be hired. The defendant paid the deposit upon signing the
contract. The processions, however, did not take place on the announced dates. As a result, the defendant
declined to pay the balance on the agreed rent.
Issue Was the defendant obliged to pay the rent despite the fact that the procession did not take placed as
planned?
Held The decision was in favour of the defendant.
Reason 1. Applying Taylor v Caldwell, as both parties recognised that they regarded the taking place of the
coronation procession on the days originally fixed as the foundation of the contract, the words of the
obligation on the defendant to pay for the use of the flat for the days named were not used with
reference to the possibility that the processions might not take place
2. The plaintiff was not entitled to recover the balance of the rent fixed by the contract.
Amalgamated Investments v John Walker & Sons Ltd (1977)
Facts The defendant, John Walker & Sons Ltd, advertised their warehouse for sale, either for occupation or
redevelopment of the property. It had been previously used for making whiskey. Th complainants,
Amalgamated Investment & Property Co Ltd, bought his warehouse for $1,710,000. In the process of the
Chloe T 42
, sale, the complainants had asked the defendants whether the warehouse was registered as an architectural
or historic interest building. The defendants had told them that it was not. However, ti became a listed
building on 22 August 1983 and the contract was signed on 25th September 1973. The defendant was
informed that it had become a listed building.
Issue The complainants argued that the contract should be set aside over the common mistake of the building
being listed as historic. Alternatively, they argued for frustration of the contract. The issue in this case was
whether the contract could be set aside for common mistake or whether there was frustration of the
contract.
Held The appeal from the complainant was dismissed. It was held that the building was listed on the 27th
September 1973 and the contract had not been frustrated nor would it be set aside. The Court of Appeal
stated that the complainants had taken on the risk of the ware house becoming or being listed as an
architectural or history building and this was demonstrated by their enquires prior to the sale. In order for
a contract to be set aside, there must be a common mistake made during the formation of the contract and
sale; this was not the case here.
Herne Bay Boat Co v Hutton (1903)
Facts A royal naval review was planned to take place in Spithead on 28 June 1902. The plaintiff and the defendant
agreed in writing that the plaintiff’s steamship Cynthia would be at the defendant’s disposal on 28 and 29
June to take passengers from HereneBay for the purposes of viewing the naval review and for a day’s cruise
around the fleet. This was subject to a specified deposit and rental fee. On signing of the agreement, the
defendant paid the deposit. On 25 June, the review was cancelled. The plaintiffs contracted the defendant
for instructions and informed him that the ship was ready to start and they demanded a payment. The
plaintiffs received no reply, so they decided to use this hip for their own purposes on 28 and 29 June and
made a profit from this use. On 29 June, the defendant repudiated the contract in whole. The plaintiff took
an action against the defendant to recover the balance for the rent less of the profits they made by use of
the ship during the two days.
Issue We’re the plaintiffs entitled to recover the rent due for the two days despite the fact that Royal naval review
was cancelled?
Held The decision was in favour of the plaintiffs
Reason 1. The venture was the defendant’s and therefore, the risk was his alone;
2. The taking place of the Royal naval review was not the sole basis of the contract, so there had been no
total destruction of the subject matter of the contract.
It was held further that the contract didn’t operate as a demise of the ship
Wong Lai-Ying v Chinachem Investment Co (1980)
Facts Two tower blocks were to be built named University heights which would hold 144 flats. Chinachem sold 24
contracts for sale for flats to Wong Lai Ying and the other purchasers. An unforeseen landslide stopped work
completely for 5 months and destroyed all work already done on the building foundation. Then the
government conducted investigations for the next 3 ½ years about feasibility to build on the site. This was
a major commercial loss for Chinachem. Time was of the essence, and the building was meant to be
complete by 17 May 1973. It could not have been completed before 1 October 1976, and even that was
uncertain.
Issue Was there a frustrating event making performance on the contract impossible? Did the agreement provide
for the frustrating event, so that it was not frustration by definition.
Held The construction was still frustrated because it would have been unjust to hold the developer still liable,
performance was radically different to what was agreed. Clause 22 did not cover for this situation as it
cannot be reasonably supposed to have been in the contemplation of the contracting parties when the
contract was made.
Reason Wong Lai Ying applied the following principles from the English case law:
1. “Frustration occurs whenever the law recognises that without default of either party a contractual
obligation has become incapable of being performed because the circumstances in which performance
is called for would render it a thing radically different from that which was undertaken by the contract”:
Davis Contractor Ltd v Fareham Urban District Council
2. It must be “of such a character and duration as to make the contract when resumed a different
contract”: Metropolitan Water Board v Dick, Kerr & Co Ltd (1918)
3. The occurrence of the event must make it “positively unjust to hold the parties bound to” not merely
“more onerous or more expensive”: “The Eugenia” (1964)
Chloe T 43
