Assignment

Doctrine of Frustration
Submitted To Sir G. M. Chaudhry Submitted by Hamid Mukhtar MBA- IV 01151011004

Quaid-i-Azam School of Management Sciences, Quaid-i-Azam University, Islamabad.

What is doctrine of frustration?

A contract which becomes void after the subsequent events comes under the doctrine of frustration. The concept of frustration has been raised to mitigate the onerous doctrine of absolute contracts where performance of a contract is prevented by supervening events for which neither party to the contract is responsible and loss allocation is required. Frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. According to Section 56 of Indian Contract Act, 1872 An agreement to do an act impossible in itself is void. Supervening impossibility or illegality refers to the intrusion or occurrence of an unexpected event or change of circumstances beyond the contemplation of the parties; such event or change of circumstances must be so fundamental as to be regarded by law as striking at the root of contract as a whole or the basis of the contract no longer exists According to English Law A contract may be discharged on the ground of frustration when something occurs after the formation of the contract which renders it physically or commercially impossible to fulfill the contract or transforms the obligation to perform into a radically different obligation from that undertaken at the moment of the entry into the contract

Key features of the doctrine of frustration

Bingham LJ gave following five suggestions which he regarded as the essence of the doctrine: Frustration mitigates the rigor of the common laws insistence on literal performance of absolute promises. The doctrine operates to kill the contract and discharge parties from further liability under it.

 Frustration brings a contract to an end forthwith, without more and automatically. It should not be due to the act or election of the party seeking to rely on it, so that there must be some outside event or extraneous change in the situation. Supervening Events
According to Section 56 of Indian Contract Act, 1872 following are the possible subsequent events that causes to make a contract void

Destruction of the subject matter of the contract By death or permanent incapacity of the parties (like insanity) where the contract is personal in nature Supervening impossibility or illegality, involving actions contrary to law or public policy; Outbreak of war, war restrictions (avoidance of trading with alien enemy, and so on); Imposition of government restriction or orders or acquisition by government; and

Non-existence or non-occurrence of a particular state of things.

Apart from the above circumstances, impossibility does not discharge a person from the contract. He who agrees to do an act should do it unless impossibility arises in any of the ways mentioned above. On the other hand, the following events have been regarded as insufficient to give rise to the frustration of any underlying contract by English law: Inconvenience, hardship or financial loss. Delay within the commercial risk undertaken by the parties. Difference in expense between the expected and the actual performance. Abandonment of an exchange rate mechanism. De-valorization. Inflation.

Examples

Taylor v Caldwell (1863) Lord Blackburn Concert was impossible to be held because building was burnt down.

Condor v Barron Knights; Robinson v Davison

Contract for personal performance frustrated because accident of concern person made it impossible to perform

Nickoll & Knight v Ashton Edridge

Sales of cottonseed, specified to be shipped by steamship Orlando from Alexandria in January. Orlando was grounded and could not make the journey. Held that the contract requiring performance in a stipulated manner had been frustrated.

The Super Servant Two (1990)

Contract to carry drilling rig in one of the two vessels owned. SS II sanked and D claimed contract frustrated. Held: D had chosen to use SS I on another contract as SS I contract was made after SS II. D negotiated extra payment to use SS I. This indicates that D attempted to use frustration to avoid an agreement which had become inconvenient.

Krell v Henry (1903)

Rented suite room to watch coronation procession. Price of room reflected the significant event. Coronation was called off due to kings illness. Held: that the procession was the foundation of the contract and event renders the contract incapable of performance due to non-existence of express condition which goes to the root of the contract which is essential to its performance. Contract was frustrated.

Tsarkiroglou v Noblee Thorl

Suez canal closed. Journey can continue with a much longer route. Performance had only become onerous or more expensive; performance still possible; manner of performance not specified. Contract not frustrated.

Davis Contractor v Fareham UDC

Labor shortage caused delay and cost more. Held: that the risk events can reasonably be expected to occur. Circumstances did not make performance radically different from what was expected. Performance only become more burdensome and did not change the nature of what was expected to do. Contract not frustrated.

Herne Bay Steam Boat v Hutton (1903) Hired steamboat to watch naval review during the Kings coronation day. Held: that inability to watch naval review during coronation was not fundamental to the contract as pleasure trip still possible. Contract is not frustrated.

Amalgamated Investment and Property v John Walker (1977)

Redevelopment became difficult and impossible. Held: that it did not mean that there was no purpose at all to the contract. It only had become not so lucrative as expected. Contract not frustrated.