Frustration

CON.11 Frustration

Core idea. A contract is frustrated when, after formation, something happens — without the fault of either party — that makes performance impossible, illegal, or radically different from what was undertaken. The contract then automatically terminates at the moment of the frustrating event. No election is required; it is not a remedy a party chooses.

The test. The classic formulation (Davis Contractors v Fareham UDC [1956]): frustration occurs only where performance becomes "radically different" from what the parties bargained for. The bar is high — mere increased cost, difficulty or delay is not enough.

Categories (with leading cases):

• Impossibility — destruction of the subject matter: Taylor v Caldwell (1863) (music hall burned down); death/incapacity in personal-service contracts.
• Illegality (supervening) — performance becomes unlawful, e.g. by outbreak of war: Fibrosa v Fairbairn [1943].
• Frustration of common purpose — the event removes the whole point: Krell v Henry [1903] (coronation cancelled). Contrast Herne Bay v Hutton [1903] — purpose only partly defeated, not frustrated.

What does NOT frustrate (common traps):

• Self-induced frustration — caused by a party's own choice/breach: no relief (Maritime National Fish v Ocean Trawlers [1935]).
• Mere hardship / bad bargain / more expensive performance (Davis Contractors; Tsakiroglou v Noblee Thorl [1962] — Suez closure, alternative route still possible).
• Foreseen/foreseeable events, or risks the contract expressly allocates (e.g. a force majeure clause covering the event ousts frustration).
• A merely temporary interruption usually does not frustrate (assess against contract length).

Consequences — Law Reform (Frustrated Contracts) Act 1943:

• s.1(2): money paid before discharge is recoverable; money payable ceases to be payable. The court may allow the payee to retain/recover expenses incurred, up to the sum paid or payable before discharge (discretionary).
• s.1(3): where one party gained a valuable non-money benefit before discharge, the court may order a just sum for it.
• 1943 Act does not apply to certain contracts (e.g. carriage of goods by sea, insurance, s.7 SGA perished specific goods).

Distinctions to nail: frustration = post-formation event; common mistake = facts wrong at formation. Don't confuse the Davis "radically different" test with breach — frustration is no-fault and automatic.