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Published by: Matthew Bryant on Nov 11, 2010
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Nick Dowse

Frustration – Pg 36 SG

Frustration – Structure of Answer
1. The test for frustration is whether, without the fault of either party, performance of the contract has been radically different from that originally contemplated (Codelfa). But there is no frustration just because performance becomes more onerous, inconvenient or expensive (The Eugenia) Examples of frustrating events: a. Destruction of unavailability of the subject matter: i. Destruction of the subject matter is a well recognised frustrating event (Taylor v Caldwell) b. Death or incapacitation of a person essential for performance: i. Whether sickness renders a contract something radically different depends on the nature and probable duration of the sickness and the nature and terms of the contract (Carmichael v Colonial Sugar) c. Failure of basis of contract: i. The event must be the true basis of contract and not merely coincident (Krell v Henry) d. Method of performance impossible: i. Particular method of performance must be stipulated or contemplated by both parties in circumstances necessitating that method (Codelfa) ii. eg when injunction prevents working hours etc e. Excessive delay: i. Will depend on the probability of the length of the delay compared to the time left to run on the contract (Pioneer Shipping v BTP Tioxide) ii. Courts tend to a 'wait and see' approach to strikes because they are usually over before the start (Embiricos v Sydney Reid) iii. Events are not judged with hindsight (Court Line v Dant) f. Illegality: i. If the law changes or there is a supervening action by the executive after contract formation (Scanlan's New Neon v Tooheys) ii. Dealing with the enemy in times of war (Hirsch v Zinc Corporation) g. Land Contracts: i. Sale contracts: 1. The land must completely disappear or be resumed by the government (Austin v Sheldon) ii. Leases: 1. Can hardly ever be frustrated (Panalpina) 2. eg where a premises is leased and road access is cut off indefinitely. State when the frustration, if any, occurred. Limits of frustration a. The event must not be provided for in the contract (Claude Page 1 of 2


3. 4.

The event must not have been foreseen by the parties (except from the case of illegality) (Codelfa) i. Neon) b. State that any work carried on after the frustration will need to be recovered on a quantum meruit basis. The event must not be due to the fault of one of the parties (Maritime National Fish) i. Work out what they are entitled to up until the frustration. 6. Page 2 of 2 . and the loss lies where it falls (Hirji Mulji). The effect of frustration is that the contract is automatically discharged as to the future – it terminates further performance of the contract.Nick Dowse Frustration – Pg 36 SG 5. It must have been a serious possibility (Codelfa) c. b. The onus lies on the party asserting the fault (Joseph Constantine) Effect of the frustration a. Unconditionally acquired rights and liabilities are not discharged but conditionally acquired rights are liabilities and all future rights and liabilities are discharged.

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