SECTION A

TASK 1
Inver-almond Ladies Golf Club hires a coach from St Andrews Coach Company Ltd to take
members to watch the Open Championship Golf competition being held in St Andrews. The
cost of the coach hire for the return journey is 450 and a deposit of 100 was paid in
advance. On the morning of the trip, play at the Open Championship is cancelled, due to a
thunderstorm. Inver-almond Ladies Golf Club demands a refund of the deposit, claiming that
the contract has been frustrated.
a) Advice St Andrews Coach Company Ltd as to whether the contract has been
discharged due to frustration.
b) Explain whether your answer would be different if the Inver-almond Ladies Golf Club
had hired the coach following an advertisement by St Andrews Coach Company Ltd
for special daily rates for hiring a coach to attend the Open Championship.
SOLUTION a
The doctrine of frustration operates in situations where it is established that due to subsequent
change in circumstances, the contract is rendered impossible to perform, or it has become
deprived of its commercial purpose by an event not due to the act or default of either party.
According to the law of contract a contract can be discharged by frustration due to the
following changes in circumstances: a thing essential to its performance is destroyed or
becomes unavailable; or a fundamental change of circumstances occurs; or a party to a
contract of a personal nature dies or is otherwise incapacitated from performing it; or
performance of it is rendered illegal; or a basic assumption on which the parties contracted is
destroyed.
In this case, the facts are that both parties St Andrews Coach Company and Inver-almond
Ladies Golf Club are capable of partaking their obligated duties but there is a supervening
destruction of a basic assumption on which the parties contracted. According to the common
law, a contract is discharged by frustration if, although it is physically and legally possible
for each party to perform his/her obligation under the contract, change of circumstances has
destroyed a basic assumption on which both parties contracted.. In a similar case, Krell v
Henry (1902), henry agreed to hire a flat in Pall Mall from Krell for 26 and 27 June 1902, on
one of which days Edward VII was to be crowned. To Krells knowledge, Henry hired the flat

in order to view the coronation processions, but this was not mentioned in their written
contract.
The procession were postponed because of the kings illness. The court of appeal held that a
view of the procession was not simply Henrys purpose in hiring the flat but the basis of the
contract for both parties, and that since the postponement of the processions prevented this
being achieved the contract was frustrated. In case at hand, the basis of the contract was to
watch the Open championship Golf competition and the thunderstorm was a natural
occurrence the contract can be said to have been discharged due to frustration if furthermore
there was no clause for such unforeseen conditions. However it should be noted that a party
whose obligations have been discharged by frustration has a lawful excuse for not performing
them and is therefore not in breach of contract.
Frustration does not merely make the contract terminable at the election of a party, the
frustrating event automatically discharge the contract at the time that it is frustrated.
Discharge by frustration comes with detrimental effects depending on the obligation of each
party. At common law the original position was that an obligation to pay money due before
the frustrating event remained enforceable and money paid under the contract before the
event was irrecoverable. However the law Reform (frustrated contracts) Act 1943 provided
that all sums payable under the contract before the frustrating event cease to be payable
whether or not there has been a total failure of consideration it further state that all sums
paid under the contract before the frustrating event are recoverable whether or not there has
been a total failure of consideration.
The law Reform Act 1943, furthermore highlights that money which would have become
payable after the frustrating event ceases to be payable, and a party who benefits the other
party to the contract by partly performing the contract before the frustrating event may be
awarded a sum of money, if this partial performance confers any valuable benefit on the other
party. In the case of krell v Henry it was held that the owner of the flat could not recover sum
payable for the hire of the flat because it was not due until a time after the processions had
been postponed. And Henry should pay expenses which were incurred by the owner in
preparation for the service.
Having analysed the facts surrounding the case at hand, the contract was discharged by
frustration, it is proper for St Andrews Coach Company Ltd to refund the deposit of 100 to
Inver-almond Ladies Golf Club as the law state that all sums paid under the contract before

the frustrating event are recoverable whether or not there has been a total failure of
consideration. From the discussion above Inver-almond Ladies Golf Club are not obliged to
pay the remaining 350 because it was not due until a time of the thunderstorm which is the
frustration in this case. Since St Andrews Coach Company Ltd had incurred administrative
expenses in preparation to offer service to Inver-almond Ladies Golf Club, they can appeal to
court for an award of expenses incurred in preparation and Inver-almond Ladies Golf Club is
obliged to pay.
SOLUTION b
When Inver-almond Ladies Golf Club hires the coach it follows that a contract is established
and the contract is binding as advertising forms an offer which is an essential element of a
contract formulation. The contract became frustrated automatically when thunderstorm
occurred meaning to say that in both case the contract is discharged by frustration.
Differences would arise on the effects of the frustration. Since Inver-almond Ladies Golf
Club hired the coach on the basis of special daily rates it implies that the Inver-almond Ladies
Golf Club were ntitled to obtain a refund since St Andrews Coach Company can be held
liable as it has no right of set-off of any expenses incurred in seeking to perform the service.
The law of Reforms does not apply to certain types of contract for instance: a contract of
insurance, were a premium is not returnable once the risk has been attached; a contract to
which the Sale of goods Act 1979 section 7 provides that where there is an agreement to sell
specific goods, and subsequently, without any fault on the part of the seller or buyer, the
goods perish before the risk passes to the buyer, the agreement is thereby avoided. Where a
contract is avoided under section 7 the principle laid down by the House of Lords in the case
Fibrosa Spolka Akcyjna v. Faibairn Lawson Combe Barbour Ltd (1942). Under these a buyer
who has paid for the goods before they perished can recover that payment only if there has
been a total failure of consideration, in which a seller has no right of set-off for any expenses
incurred in seeking to perform the contract before the goods perished.
The above case is related to the case in question since the perishable goods is related to the
coaching service being offered by St Andrews coaching Company. It should be advised That
St Andrew Coaching Company should agree That The contract was discharged by frustration
and does not have right for set-off as compared to the first instance.

REFERENCE

Card R, Murdoch J and Murdoch S ( 2011) Real Estate Management Law (7 th edn),

Oxford: OUP.
www.Ukteacher.co.uk

STATUTES

Law Reforms (Frustrated Contracts) Act 1943 (United Kingdom)

Sales of Goods 1979