Effect of Contract Frustration
The defendant appellants contended that their construction contract was frustrated because adequate supplies of labour were not available to it because of the war.
Held: The court considered how the frustration of the performance of a contract affected the obligations under it.
Lord Ratcliffe said: ‘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. Non haec in foedera veni. It was not this that I promised to do.’ and ‘it might seem that the parties (to the contract) themselves have become so far disembodied spirits that their actual persons should be allowed to rest in peace. In their place there rises the figure of the fair and reasonable man. And the spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself.’
Lord Reid said: ‘It appears to me that frustration depends, at least in most cases, not on adding any implied term, but on the true construction of the terms which are in the contract, read in light of the nature of the contract and of the relevant surrounding circumstances when the contract was made.’ and ” there is no need to consider what the parties thought or how they or reasonable men in their shoes would have dealt with the new situation if they had foreseen it. The question is whether the contract which they did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end’.
Lord Somervell concluded that: ‘A party contracting in the light of expectations based on data of that or any other kind must make up his mind whether he is prepared to take the risk of those expectations being disappointed. If not, then he will refuse to contract unless protected by some specific provision. There is no such provision here. The appellants took the risk under the contract, and it seems to me impossible to maintain that the contract did not apply in this situation as it remained, the expectations on which the estimate was based not having been realised.’
Viscount Radcliffe, Lord Reid, Lord Somervell
[1956] AC 696, [1956] UKHL 3, [1956] 2 All ER 145
Bailii
England and Wales
Citing:
Cited – Bank Line Ltd v Arthur Capel and Co HL 12-Dec-1918
The defendant ship-owners contracted to lease the ship on charter to the plaintiffs. Before the term, the ship was requisitioned for the war effort. The plaintiffs did not exercise the contractual right given to them to cancel the charterparty. The . .
Cited – British Movietone News Limited v London and District Cinemas Limited HL 26-Jul-1951
Film distributors contracted to supply newsreels at a cinematic theatre. The contract was for a minimum of 26 weeks, and after on termination by the distributors on four weeks notice thereafter, but by the cinema on four weeks after the first month. . .
Cited by:
Cited – William Sindall Plc v Cambridgeshire County Council CA 21-May-1993
Land was bought for development, but the purchaser later discovered a sewage pipe which very substantially limited its development potential. The existence of the pipe had not been disclosed on the sale, being unknown to the seller.
Held: . .
Cited – Badger v The Ministry of Defence QBD 16-Dec-2005
The widow of the deceased sought damages after his exposure to asbestos whilst working for the defendant. He had contracted lung cancer. The defendant argued that the deceased had continued to smoke knowing of the risks, and that he had made a . .
Approved – National Carriers Ltd v Panalpina (Northern) Ltd HL 11-Dec-1980
No Frustration of Lease through loss of access
The tenant’s access to the premises was closed by the local authority because it passed by a derelict and dangerous building. The tenant argued that its tenancy was frustrated.
Held: The lease was not frustrated. The lease had a term of ten . .
Cited – Gold Group Properties Ltd v BDW Trading Ltd TCC 3-Mar-2010
The parties had contracted for the construction of an estate of houses and flats to be followed by the interim purchase by the defendants. The defendants argued that the slump in land prices frustrated the contract and that they should not be called . .
Cited – Gold Group Properties Ltd v BDW Trading Ltd TCC 3-Mar-2010
The parties had contracted for the construction of an estate of houses and flats to be followed by the interim purchase by the defendants. The defendants argued that the slump in land prices frustrated the contract and that they should not be called . .
Cited – Atwal and Another v Rochester TCC 9-Jul-2010
The claimants had engaged the defendant to carry out building works. He became ill part way through and the works were not completed. They now said he was in repudiatory breach of the contract. The defendant said that the contract was frustrated, . .
Cited – Healthcare at Home Ltd v The Common Services Agency SC 30-Jul-2014
The court asked how to apply the concept in European law of ‘The reasonably well-informed and diligent tenderer’. The pursuer had had a contract for the delivery of healthcare services, but had lost it when it was retendered.
Held: When an . .
Cited – Blankley v Central Manchester and Manchester Children’s University Hospitals NHS Trust CA 27-Jan-2015
This case concerns a claimant with fluctuating capacity to conduct legal proceedings. At a time when she had capacity, she retained a firm of solicitors under a conditional fee agreement. The issue was whether the CFA terminated automatically by . .
Cited – Gamerco Sa v ICM Fair Warning (Agency) Ltd and Another QBD 31-Mar-1995
The plaintiff Spanish concert promoter, and the defendant rock group, Guns ‘n’ Roses, agreed to provide a concert at the stadium of Atetico Madrid, but shortly before it was due to take place, the stadium was deemed unfit, and its licence withdrawn. . .
Lists of cited by and citing cases may be incomplete.
Contract
Leading Case
Updated: 09 November 2021; Ref: scu.185674