The appellants had agreed to sell to the respondents 300 tonnes of groundnuts. However due to the blockade of the Suez canal from November 2 1956 until April 1957, the appellants failed to deliver these goods and the respondents sued for breach of contract. The issue before the court was whether by reason of the blockade the contract became impossible of performance and could therefore be discharged as frustrated. The appellants argued that the use of an alternative route via the Cape of Good Hope to deliver the goods meant that the contract was frustrated. The arbitrator had determined a mixed question as to whether a cif contract had been frustrated.
Held: A mixed finding of fact and law by an arbitrator is open to review by a court. Though in the ultimate analysis whether a contract was frustrated is a question of law, ‘that conclusion is almost completely determined by what is ascertained as to mercantile usage and the understanding of mercantile men.’
A contract for goods to be shipped between two locations was silent as to the method of delivery. It was held that the closing of the most direct route (the Suez Canal at a time of war) did not frustrate the contract where there was an alternative, albeit longer route available. Lord Reid commented that the appellants had simply to find another ship and that the altered nature of the voyage did not mean that the contract was frustrated. His Lordship stated that it was a question of law in light of commercial considerations whether a contract was fundamentally different and was frustrated. Shipping the goods by a different route was not commercially or fundamentally different so as to frustrate the contract.
Lord Reid pointed out that it was not a case where a longer voyage would have damaged the goods or one where the buyers would suffer extraordinary losses as a result of the goods arriving later than anticipated.
Viscount Simmonds held that use of the route via the Cape did not frustrate the contract, he pointed out, at 115, that it may well have meant greater expense and reduced or eliminated the appellant’s profits but that was not a ground for frustration and the contract was not ‘fundamentally’ altered.
Lord Radcliffe, Lord Reid, Viscount Simmonds
[1962] AC 93, [1961] 2 All ER 179
England and Wales
Cited by:
Cited – 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 – Overseas Buyers v Granadex 1980
The court considered the meaning of a promise by one party to use its best endeavours.
Held: Mustill J said: ‘it was argued that the arbitrators can be seen to have misdirected themselves as to the law to be applied, for they have found that . .
Lists of cited by and citing cases may be incomplete.
Contract, Arbitration
Leading Case
Updated: 14 November 2021; Ref: scu.259072