Discharge- Frustration Flashcards

• The contract between X and Y may have been frustrated
  -This is where the contract becomes impossible to perform, due to a frustrating event. Frustration require performance as envisaged in the contract to become impossible as a result of outside events beyond the control and contemplation of the parties.

The strict rule is that parties will be bound to perform their duties regardless of what happens (Paradine vs Jane)
- Apply strict rule to the scenario

Stage 2- identify the possible grounds for frustration.
1- Impossibility of performance
2- Subsequent illegality
3- Radical change in circumstances

• Impossibility of performance- The contract will be frustrated if the contract is impossible to perform (Taylor vs Caldwell). This can be due to the place, the person, or the “thing” becoming unavailable.
• Side rule- In a contract for services, the frustrating event may be the unavailability of the party who is to perform the service (Robinson vs Davidson)

2- Subsequent Illegality- The contract will be frustrated if a change in law makes the contract illegal to perform (Denny, Mott&Dickinson Ltd)

3- Radical change in circumstances- The contract will be frustrated if the essential purpose of the contract cannot be achieved, meaning there is now no point in the contract (Krell vs Henry)

• Identify the possible counter- arguments to frustration:
  1- Self- Induced Frustration (Maritime National Fish Ltd vs Ocean Trawlers Ltd)
  2- Contract becoming les profitable/ more difficult to complete (Davis Contractors Ltd)
  3- Foreseeable Risk (Amalgamated Investment vs Walker&Sons)

-Remedies for Frustration:
-At common law, the frustrating event automatically terminates the contract and any obligations already existing must be completed but future obligations are terminated.
-Under section 1 of the Law Reform (Frustrated contracts) act 1943:
-S1(2)- money already paid is recoverable
-S1(2)Money outstanding is not payable
-S1(2)- The court can order compensation for work done and expenses incurred- to a just amount of what was put into the contract

• If there is a counter- argument to frustration, and as a result it is not granted, then that party will be in breach of their contract.
• Fully explain and apply breach
  -This stage is conditional so only apply if frustration will not be granted