Elements in a Contract 33
If for some reason, once a contract has come into existence,
the parties in the contract are unable to fulfill their obligations then the
contract comes to an end as a result of frustration. It is impossible to
compile an exhaustive list of circumstances that will result in a contract
coming to an end because of frustration and nothing illustrates the matter more
eloquently than case law.
In Taylor v Caldwell (1863), the plaintiffs (claimants) went
to great lengths to organize a concert and spent quite a large sum of money in
getting the concert hall organized. A week prior to the concert, there was a
fire and the concert hall was burnt to the ground. The plaintiffs sued the
owners of the hall for a breach of contract. It was held that the contract came
to an end due to the fault of neither party i.e. frustration.
In Knight v Ashton Edridge & Co. (1901), a contract was
entered into for the sale and purchase of cotton seeds. The ship carrying the
consignment left from Alexandria but sank while it was en-route to the
destination. The buyer sued the plaintiff for breach of contract but the courts
held that the contract came to an end because of unavoidable circumstances and
it was no longer possible to fulfill the terms of the contract.
In Krell v Henry (1903) the plaintiff hired his flat out to
the defendant so that he could view the coronation procession from his flat
window. The defendant paid a deposit but did not pay the full amount that was
due because the coronation procession was subsequently cancelled. The plaintiff
sued for the outstanding amount but the court held that the defendant was not
liable because the object of the contract could no longer be satisfied or
fulfilled.
In Herne Bay Steam Boat v Hutton (1903) the plaintiff rented
out his steamship and later made arrangements to ferry passengers to watch the
naval review during the coronation of King Edward VII. The coronation was later
cancelled and the defendant refused the use of the ship. The plaintiff sued for
the outstanding amount but was unsuccessful because the courts deemed that the
contract had been frustrated.
In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour
(1943) a company in England entered into a contract with a company in Poland to
supply machines. The buyer agreed to make partial payment prior to delivery on
the understanding that the full amount would be settled once the machines were
delivered. Subsequently Germany invaded Poland and the machines could not be
delivered. It was held that the contract had come to an end because it was no
longer possible to fulfill the terms in the contract.
In Condor v Baron Knights (1966) the plaintiff, a drummer,
was employed by the defendants to play in their band. The plaintiff
subsequently suffered a mental breakdown that made it impossible for him to
continue. The defendants dismissed him and the plaintiff brought an action for
wrongful dismissal. It was held that the subsequent change to the plaintiff’s
health rendered the contract impossible to fulfill and hence the plaintiff was
unsuccessful.
In Maritime National Fish Ltd. v Ocean Trawlers Ltd. (1935)
(Privy Council) however, the charterers of a ship were running five ships that
required licenses to operate them and the charterers had been granted three
licenses. The charterers later claimed that the contract was frustrated by the
government’s refusal to make available more licenses and sought to end the contract.
The owners of the ship sued and it was held that the charterers had been
granted three licenses and that they only needed one to operate the ship.
Therefore, the contract had not been frustrated.
Likewise, in Davis Contractors v Fareham UDC (1956) the
defendants agreed to purchase a certain number of houses from Davis
Contractors. Under the terms of the contract the houses were to be completed by
a certain time. Subsequently there was a shortage of materials and manpower and
the houses took longer to complete than anticipated and the cost of the houses
also increased. The defendants agreed to take hold of the houses but refused to
pay the additional costs. The plaintiffs (Davis Contractors) sued. It was held
that the contract had not been frustrated. It is not hardship or economic
difficulties that leads to a contract being frustrated but rather a change in
circumstances, so significant that, if the contract were to be performed it
would be substantially different to what was contracted.
Copyright © 2019 by Dyarne Ward and Kathiresan
Ramachanderam
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