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Performance Breach and Frustration Tutorial

Performance Breach and Frustration Tutorial

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Published by Adam 'Fez' Ferris

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Published by: Adam 'Fez' Ferris on Mar 30, 2010
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11/28/2012

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TUTORIAL 8
 
PERFORMANCE, BREACH AND FRUSTRATION
Next week: SR3, 2p.m. hour and a half lecture. E-mail my first term contract grade totutor. Also make sure I read Achileus  get citation off Manav
Reading:
McKendrick: Cases and Materials Chs. 21 & 22
 Important Cases:
Taylor v Caldwell 
(1863) 3 B& S 826
T
he claimants entered into a contract to hire the µSurrey Gardens and Music Hall¶ from thedefendants for four grand concerts and fetes. Before the date of the first performance, theHall was destroyed by fire without the fault of either party.
T
he claimants argued that thedefendants were in breach of contract by failing to supply the Hall as promised.Court held that Caldwell didn¶t have to pay damages for breach. Court created the doctrine of frustration. Ground of frustration = impossibility.
rell v Henry 
[1903] 2 KB 184
I
nvolved the hire of a flat to see the coronation procession as it went by. Court said the illnessof the king meant the purpose of the contract was frustrated because there was no other reason for hiring the flat.
Herne Bay Steamboat Co v Hutton
[1903] 2 KB 683
T
he defendant hires a boat from the claimant in order to take passengers to see the navalreview which the king will be presiding over.
T
he review is cancelled but the fleet of ships isstill there.Held that the contract is not frustrated. Court said that it was still possible to see the fleet.King¶s presence is incidental to this contract ± its not radically different from that that wascontracted for.
T
here seems to be contradiction between these two cases.
T
he flat could still be used to livein just as the boat could still be used to see the fleet so should frustration apply?
T
his case ismore likely to be followed than Krell v Henry.
Fi 
brosa Spola Akcyjna v 
a
rburn Lawson Combe Barbour 
[1943] AC 32
E
nglish and polish companies. Contract entered into in 1939 ± war is declared and Germanyinvades Poland. Britain then declared war on Germany and as a consequence all contractsbetween
E
ngland and Poland became illegal. Held that the contract is frustrated because itwas legally impossible to carry on with the contract.Doesn¶t matter if the parties make a provision for what was going to happen eg.
I
t will delaydelivery until after the conflict because the government intervention means frustration isessential.
I
n this case, £1000 had been paid in advance of delivery. Question is what happened to thatmoney ± do
E
nglish company keep it? Court said that the money would not normally berecoverable. But at common law, it is possible to recover the money but its an action inrestitution ± the money just has to be given back, there is no compensation element at all, just
 
the return of the money.
T
he legal ground for this is because the consideration under thecontract has totally failed.
I
MPOR
TANT
 
T
O R
E
M
E
MB
E
R. µ
T
otal failure of consideration¶. ± if you think aboutconsideration, what we¶re talking about the bargain ± part of this, the part that makes itenforceable, has actually failed.
ar 
me Nat 
onal 
Fi 
sh Ltd v Ocean Trawlers Ltd 
[1935] A.C. 524 CANADA PRIVYCOUNCIL
T
he respondents were owners and the appellants were charterers of a steam trawler which was fittedwith, and could operate as a trawler only with, an otter trawl. By the charterparty the vessel could beused only in the fishing industry.
T
he charter party was renewed for a year from October 25, 1932. Atthat date both parties knew that a Canadian statute, which was applicable, made it an offence toleave a Canadian port with intent to fish with a vessel using an otter trawl, except under licence fromthe Minister. In March, 1933, the appellants applied to the Minister for licences for five trawlerswhich they were operating.
T
he Minister intimated that only three licences would be granted, andrequested the appellants to name the three trawlers in respect of which the three licences should begranted.
T
he appellants named three trawlers, excluding the trawler now in question, and accordinglylicences were granted for those three only.
T
he appellants thereupon claimed that they were nolonger bound by the charterparty, and to an action claiming the charter hire pleaded that thecharterparty had become impossible of performance and their obligations under it ended:-
T
here had been no frustration of the charterparty, as the absence of a licence was due to the electionof the appellants, who remained liable for the hire.
 
T
he courts suggested that a force majeure clause be include in contracts like this.
 A
forcemajeure clause is there for the event that things such as acts of god can be dealt with.
J.
Laur 
tzen A
.
.
v W 
 jsmuller B
.V.
(The Super Servant No
.
2)
[1990] 1 Lloyd¶s Rep 1
T
he defendants agreed to transport the claimants¶ drilling rig using a special vessel.
T
hedefendants agreed that the rig would either be transported by
Super Servant One
or 
Super Servant Two
.
T
he defendants decided to use
Super Servant Two
, and committed
Super Servant One
for use in another contract.
The Super Servant Two
sank, and the defendantsargued that the contract was frustrated ± Super Servant
T
wo sank was ground of frustration.Court of 
 A
ppeal reviews self-induced frustration law. Wijsmuller is not responsible for thesinking of Superservant
T
wo. However the fact that Wijsmuller chose Superservant
T
wo over Superservant One meant that he was involved in the frustrating event. He can¶t rely onfrustration ± he puts himself into a frustrated situation. Part of the definition of frustration isthat the event occurs outside the fault/control of either of the parties.
Gamerco SA v IC 
[1995] 1 WLR 1226
T
he claimants agreed to promote a concert to be held at a stadium in Madrid by the rockpersona of the defendants,
G
uns N¶ Roses
.
E
ngineers reported that the stadium could notsafely be used, and the authorities revoked the claimants¶ permit to use the stadium.
T
heconcert was cancelled.
T
he claimants had incurred expenses of $450,000, had paid thedefendants $412,000 and were under an obligation to pay a further $362,500 at the time of cancellation.
T
he defendants had incurred expenses of $50,000.Held: the contract was frustrated.
T
he claimants could recover their $412,000, and were nolonger liable to pay the $362,000.
I
n the circumstances, and having particular regard to theexpenses incurred by the claimants, no deduction for the defendants¶ $50,000 expenseswould be made under the proviso to s 1(2). (since the claimants had incurred higher expenses)
 
 Cutter v Powell 
(1795) 6 TR 320
(
E
ntire obligations rule) Cutter contracted with Powell to be the second mate on a voyagefrom Jamaica to the UK. 7 weeks into the voyage, Cutter dies and the widow sued Powell for 7 weeks worth of wages.Question for court: is it possible for widow to claim these wages that Cutter was due beforehe died?
N
o. Widow can¶t recover anything because Cutter has not fulfilled the entireobligations under the contract.
T
he contract was for the voyage ± he doesn¶t get to the UK sohe hasn¶t fully performed.
Sumpter v Hedges
[1898] 1 QB 673
Sumpter agreed to build two houses and stables on Hedges¶ land and the cost of the contractis £565. Sumpter failed to complete the work so Hedges finished it using all the materials thatSumpter had left on the premises. Sumpter tried to recover the amount of money thatrepresented the work that he actually had done.Court said that Sumpter could not claim anything because Hedges had no option but tocontinue and finish the building. What he could get however was a sum representing thebuilding materials that Hedges used. Court said it was always open to Hedges to getmaterials from somewhere else and he didn¶t have to use the ones on the land ± by usingmaterials on the land, Hedges had saved an expense he would otherwise have incurred.
 Hoen
g v Isaacs
[1952] 2 All ER 176
 A
contract for the decoration of a flat.
T
he price for the contract is £750 but it was found oncompletion of the decorating that £55 of adjustments needed to be made.
I
s the £750 due or not then?
 A
rgued that because there are defects in the decoration, the contract has not been fullyperformed so under 
utter v Powell 
no money is due. Court said that was really unfair because the proportion of work that had actually been carried out was substantial. What thecourt did was invent the doctrine of substantial performance ± the claimant in this case couldrecover £750 - £55 for damage caused.
I
mportant thing to check here is whether the contractis substantially performed or not ± in order to do that you must look at what the contracts for and what has been provided.Doctrine of substantial performance
Bolton v 
ahadeva
[1972] 1 WLR 1009
Contract for the installation of central heating.
T
he system is actually installed but it doesn¶theat to a decent temperature and there are fumes.
T
he argument put before the court is thatits like
oenig v Issacs
, the contract is substantially performed so should get a proportionrepresenting that performance. Court said no and said this is a contract for central heating.Central heating is supposed to heat ± its not heating therefore nothing has been gained fromthis contract.Court says in order to determine substantial performance: Look at:
N
ature of defect, cost of rectifying them and contract price.
Schuler AG v W 
ckman
ach
ne Tool Sales Ltd 
[1974] AC 235

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