The leading cases in Frustration 2010

This post was written by William on May 17, 2010
Posted Under: Contract,Uncategorized

Force Majeure:
Commonly in commercial contract, a clause allocate the risks of the party in relation to the mischief event such as terrorism, war and ‘Act of God’, this clause could override common law or LR(FC)A 43 by express or unambiguous provision.

Taylor v Caldwell (1863) 3 B&S 826
P: frustration could be a defence (end absolute obligation rule, Paradine v Jane)
F: Taylor contract to use Music Hall from Caldwell. Hall was destroyed by Fire. Taylor seeks performance of contract and damage for wasted expenditure. Held that the contract was discharged. No further obligation. => a rule of implied term, which is rejected by HL case: Davis Contractor v Fareham, and apply to Great Peace v Tsavliris Salvage 2002 on common mistake

Krell v Henry [1903] 2 KB 740
P: the common purpose no longer be achieved, frustration is possible, but rarely succeed. – ESP in partial failure of consideration
F: Henry hired a flat from Krell to see the procession of Edward VII, but VII’s ill so can not do coronation. Henry paid 25 deposit, but refused to pay remains. Krell sued for balance. Held: procession on the day is regarded a foundation of the contract for both party, Frustrated. – it is not enough if it is more difficult or expensive(speculative) to achieve(Davis Contractor v Fareham; Tsakiroglou v Noblee Thorl )

Chandler v Webster
P: same as Krell v Henry, paid can’t recovered, unpaid ceased to be payable. At common law, the total failure of consideration situation, rule is overruled by LR(FC)A43, but still apply in partial failure
F: Chandler hired a room from Webster for a client, but client’s relative died, so 10June Chandler wrote to Webster advise Webster sell the room, if not pay Webster after procession. 19June Chandler paid 100. Held: Chandler could not get 100 back, but the contract is frustrated, so remains is not payable.

Herne Bay Steamboat Co Ltd v Hutton [1903] 2 KB 683
P: where no common purpose, no frustration
F: Hutton contract to hire boat from Herne Bay for the Naval Review on the coronation day and a day’s cruise round the fleet. Herne Bay sued for damage. Held hiring vessel is Hutton’s purpose alone, so the Naval Review was not the foundation of the contract. No frustration.

Cricklewood Property v Leighton’s Investment Trust
P: Lease is more than contract, can not frustrated even building was demolished. But it is not conclusive.
F: HL case, lease of a shop for 99 years, due to WWII, Cricklewood claim for frustration. Held not frustrated, 90 years left.

National Carriers v Panalpina (Northern) Ltd [1981] 1 All ER 161
P: No frustration in lease as it creates interest in land, never vanish; might be frustrated, but rare. – > possible principle
F: Panalpina let from National Carriers for 10 years. After 5 years, road blocked for 20 Month, so not pay rent. National carrier sued for non-payment. Held: not frustration, Panalpina had to pay rent.

BP Exploration Co (Libya) Ltd v Hunt (No2) [1982] 1 All ER 925
P: court could assess the just sum if a valuable benefit gained by the party replies on frustration. S1(3) LR(FC)43applies. 1 party obtained ‘valuable benefit’, prior to a frustrating event, the benefit is recovered.
F: BP fund exploration of oil to Hunt in Liya for the oil as reimbursement. Government interference. Frustration. Goff LJ – 1) step one: identify and value the benefit – oil 2) must be a tangible benefit, (Appleby v Myers, benefit destroyed by fire) 3) benefit received. Goff J the principle purpose of the S1(3) was to prevent the unjust enrichment of one party at another’s expense, it is at courts’ discretion to fix a ‘just’ sum.

Hochster v De La Tour
P: Anticipatory breach case. If contract is repudiated before date of performance, damages may be claimed immediately after breach, even before date of performance
F: DLT employ Hochster for tour. DLT wrote to Hochster who was no long needed. No compensation so Hochster sued. Held by court, damages awarded.

Vitol SA v Norelf ( The Santa Clara) .HL
P: Right of Election after breach gained by the aggrieved party, must give notice
F: N sell goods to Vitol. Goods was loaded one day later, Vitol telex Norelf to repudiate the contract as it can not been shipped on time. Both V and N have done nothing. N sold the goods and suffered loss. N sued Vitol for damages. The appeal was allowed in HL as 1) innocent party’s act conveyed unequivocal acceptance 2) it is not on N to provide certificate before damage.

Howard v Pickford Tool
P: No right of election after affirmation like a writ in water (Asquith LJ)
F: Pickford employed Howard, Pickford repudiated the contract, but Howard affirm it, so Howard lost right to terminate, but to carry on the contract.

Stocznia Gdanska v Latvian Shipping
P: The innocent party is allowed a period of time to decided the election. In periodical instalment contract, affirm is revocable by innocent party where there is continuing or renewed anticipatory breach.
F: Stocznia built 6 ships for Latvian. Latvian did not pay the first, second instalments. Stocznia sued for compensation. Latvian argued S has affirmed, so lost the right to terminate. Held: There is a continuing breach, so innocent party has fresh right of election.

White and Carter v McGregor
P: The innocent party could carry on his duty to perform the contract after the wrongful repudiation.
F: White and Carter council ads for McGregor for 3 years, McGregor’s manager signed for the new contract and repudiate the next day. W.C. carried out the contract for 3 years and sued for debt. Held: Allowed. Affirmation of contract doesn’t require obligation of mitigation (part of remedy).

Clea v Bulk Oil ( The Alaskan Trader)
P: Except to the general rule to affirm(White Carter v McGregor), where there is no legitimate interest(eg adequate damage), mitigation is required after affirmation, no interest for injured party to insist the contract.
F: Bulk Oil high hired ship from Clea, then it is not required. Clea keep the ship, but fully crewed. Held: there’s no legitimate interest to keep fully crewed. Burden of proof is on the breacher to show there is no interest to affirm.

Ocean Marine v Koch (The Dynamic) 2003
P: Except to general rule (right of election except no legitimate interest for third party) in extreme case, where damages are adequate and affirm the contract is unreasonable. – can’t affirm.
F: Ocean owner of a ship, chartered to Koch, Koch arrest it 15 days (14 days extra) for various performance. O claims ship is on hire until release from arrest, and then claim the duty on charter party instead of damages.

The Simona (HL)
P: Repudiating party may escape liability if the innocent party affirm the anticipatory breach; if the innocent party fails to comply the obligation, they will be in breach of contact while the repudiating party can escape the liability
F: charterparty, carry of steel, if ship is not ready to load before July 9, charterer could cancel, owner request an extension to 13 July, Charterer substitute another ship(anticipatory breach), owner did not accept the breach, state ready at 8 July(invalid, not ready to load steel)(owner will breach the contract as he affirmed), charterer tried to cancel the charterparty. Held: injured party affired, that party still has his own obligation, the charterer retained the right to cancel before 9July. HL added, if owner relied on the breach, then could sue for damage. Hence charterer escaped the liability.

Avery v Bowden
P: contract could be frustrated after affirmation (as if no breach)
F: Bowden chartered a ship from Avery, Bowden told Avery, he could not load, sail away ( breach), if Avery accept the breach, could sue for damage. But he ignored advice, and a war broke, frustration tool over, contract discharged.

Hounslow London BC v Twickenham Garden Developments
P: Affirmation condition 2: no need cooperation. (condition 1, legitimate interest, White & Carter v McGregor, The Alaskan Trader)
F: Twickenham works on Hounslow council premises, Hounslow anticipatory breach, Twickenham said I would like to continue, can they affirm? Held Twickenham could not affirm as it requires Hounslow co-operation. This is issue is diminished to White & Carter v McGregor legitimate interest, as at least passive co-operation is required from the other party (Jill)

Appleby v Myers
P: common law, frustration example, benefit provided prior to frustrating event could be claimed.
F: Appleby install machine for Myers, half-completed, machinery was destroyed by fire, Held: Appleby could not claim half-completed work.

Gamerco SA v ICM
P: S1(2) LR(FC)A 1943. Money paid before frustration is recoverable, payable money ceases to be payable. However in expense condition, court has broad discretion, but up to limit of paid/owed
F: Gamerco promote a rock concert in a stadium, for safety the stadium was withdrawn, no other suitable place. Garland J held: Applies S2(2), but court has broad discretion to reduce the expense occurred by ICM.

Morgan v Manser; Robinson v Davidson
P: Impossibility renders frustration, death, illness or unavailability
F: Morgan v Manser: Music hall artist was called to army 1940, contract was frustrated; Robinson v Davidson: pianist booked for concert could not perform on a particular day due to illness.

Condor v The Barron Knights
P: See Robinson v Davidson
F: the drummer was ill and could not perform 3 days instead of 7 days per week. Frustrated.

Bank Line v Arthur Capel;
P: Unavailability in shipping contract.
F: a ship is requisitioned for the remaining period of its charter, frustrated

Jackson v Union Marine Insurance
P: (even) Temporary unavailability could discharge the contract
F: a ship from Liverpool to Newport, then to San Francisco, grounded outside of Liverpool for 8 months. Held: discharged, 8 month is a long delay.

Tamplin v Anglo Mexican Petroleum;
P: whether it is disproportionate to discharge the contract for unavailability?
F: Due to war, a ship was requisitioned, until Dec 1917, discharge? Held: Not, as court was optimistic that the war will end soon. Actually it is wrong.

The Sea Angel (Edwinton v Tsavliris)
P: Another unavailability case: not only consider the time remaining, but other factors
F: A ship is hired for salvage for 20 days, job done, but seized for 3 month, frustrated? Held it is foreseeable of seizure due to pollution, and the contract has been performed, hence not discharged.

Fibrosa v Fairbairn
P: Government supervening and illegality renders the contracted frustrated.
F: war broke, can not trade with enemy, frustrated.

Metropolitan Water Board v Dick Kerr
P: Government Intervention frustrated the contract.
F: Dick Kerr contract to build reservoir for Metropolitan Water Board for 6 years, then a government order stopped the work and sold MWB’s plant. It was held the contract is frustrated, although there is delay clause, which only cover temporary difficulties, government intervention is fundamental issue.

Tsakiroglou v Noblee Thorl
P: limitation to doctrine of frustration, not enough if it is more onerous to do.
F: on sale of peanuts, both parties expected shipment would be made via Suez Canal, but no express stipulation, the Canal was closed. Seller could go via more costly route through Cape of Good Hope. Held: no frustration.

Amalgamated Investment v John Walker
P: No defence of frustration for unexpected event made the one party in disadvantage.
F: John Walker ads for a properties available for redevelopment, prior to purchase Amalgamated Investment did ask if it has historic value. Unknown to both parties, it is included in the protection list, no potential redevelopment, value from 1.5 M less from 1.71M (0.21M only). Held: No common mistake (William v Cambridgeshire) –mistake was after contract, 2) buyer aware( Caveat Emptor)

Joseph Constantine v Imperial Smelting
P: Limitation to frustration 2: Self –induced by one the parties, it is his fault
F: ship of cargo, explosion without clue, it is on the party reply on self-induced to prove is it fault of other party or no fault its own on balance of probability.
Maritime National Fish v Ocean Trawlers
P: Self-induced prevent defence of frustration
F: Martime Fish charger steam trawler from Ocean Trawler, Ocean applied 5 licence, but granted 3, and choose give other 3 ship not include MF’s ship. Held: No defence of frustration, as Ocean Trawler chosen not to give licence.

The Super Servant II
P: self – induced ( still possible from ½ )
F: Contract of drilling rig using either Super Servant I or II, SS II was sank, SS I was on another contract. Held As SS I is available according to the terms of contract, it is defendant’s fault not to use. Self-induced.

Walton Harvey Ltd v Walker & Humfreys Ltd [1931] 1 Ch 274
P: If Foreseeable, no frustration. Limitation 3
F: Walker & Homfrays ads for Walton Harvey in their hotel for 7 years. Local authority demolished the hotel. Walton Harvey sued for damage. Held: no frustration as Walker & Homfrays could foresee the event, so liable for damage.

The Sea Angel
P: Apart from unavailability issue, if foreseeable, no frustration
F: salvage contract, foresee of seizure due to pollution. See above.

Force Majeure
P: limitation 4
A term of contract allocates the contractual relationship between parties in sets of circumstances.

Davis contractor v Fareham
P: More onerous will not discharge the contract.
F: Davis built house for Fareham council, due to short labour took 22 months to complete, Davis argues it is frustrated, so to claim quantum meruit, Held: not frustrated. Short of labour only make the contract more onerous. (Tsakiroglou v Noblee)

Poussard v Spiers
P: Breach of term, which is root of contract (Blackburn J), that’s breach of condition.
F: Poussard was going to play in an opera for Spiers, due to illness she was replaced by Miss Lewis. Held: as she was so ill, she can not perform the first night was a condition to the contract, which entitled the Spiers to repudiate.

Reichman v Beveridge 2006
P: In debt case, no obligation to mitigate
F: Tenant left premises 3/5 years lease, is there a duty for landlord to find a replacement tenant? Held it is debt case, no mitigation. I) not wholly unreasonable to affirm( The Dynamic) ii) damage not be adequate for the future rent, as no authority allow the landlord to get compensation from the expired lease.

Paradine v Jane
P: Absolute obligation rule in contract.

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