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Bluebook 21st ed.

P. A. Chandler, Self-Induced Frustration, Forseeability and Risk, 41 N. IR. LEGAL Q.
362 (1990).

ALWD 7th ed.

P. A. Chandler, Self-Induced Frustration, Forseeability and Risk, 41 N. Ir. Legal Q.
362 (1990).

APA 7th ed.

Chandler, P. P. (1990). Self-Induced Frustration, Forseeability and Risk. Northern
Ireland Legal Quarterly, 41(4), 362-369.

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P. A. Chandler, "Self-Induced Frustration, Forseeability and Risk," Northern Ireland
Legal Quarterly 41, no. 4 (Winter 1990): 362-369

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P. A. Chandler, "Self-Induced Frustration, Forseeability and Risk" (1990) 41:4 N Ir
Legal Q 362.

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P. A. Chandler, 'Self-Induced Frustration, Forseeability and Risk' (1990) 41 Northern
Ireland Legal Quarterly 362.

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 NORTHERN IRELAND LEGAL. QUARTERLY I1Vol.41, No. 4
NORTI-IERN IRELAND LEGAL QUARTERLY IVol. 41. No. 4

SELF-INDUCED FRUSTRATION, FORESEEABILITY AND RISK

The doctrine of frustration evolved during the mid-nineteenth century

to moderate the common law's uncompromising insistence on the literal
performance of absolute contractual obligations.' Although the juridical
basis of the doctrine is obscure, it is generally recognised as functioning
independently of the parties' intentions: "The court is exercising powers,
when it decides that a contract is frustrated, in order to achieve a result which
is just and reasonable." 2 The hallmark of frustration is that it refers to a
supervening event not reasonably contemplated by the parties at the time of
contracting which radically alters the foundation of the contract or renders it
physically or legally impossible to perform; 3 disappointed expectations,
hardship or mere inconvenience do not of themselves give rise to frustrated
contracts. 4 Finally, the event must not be "induced" by the party seeking
discharge. 5 This latter condition has prompted, inter alia, two interesting
questions: (i) will the interposition of human choice after the allegedly
frustrating event always be fatal to a plea of frustration'? and (ii) must the
cause of the frustrating event be free of any blame or fault of the party
seeking discharge of the contract? These issues were considered afresh by
the Court of Appeal in J. Lauritzen A/S v Wijsmuller BV (The "Super
Servant Two").6

The defendants agreed to transport the plaintiffs' drilling rig from a

Japanese shipyard to a location off Rotterdam, arriving between June 20th
and August 20th, 1981. Delivery was to be facilitated by the use of either
Super Servant One (SSI) or Super Servant Two (SS2), vessels specially
adapted for this type of duty. The defendants had a right to cancel the

I. See for example Paradine v Jane (1647) Aleyn 26; 82 ER 897.

2. Joseph Constantine SS Line v Imperial Smelting Corporation Limited 119421 AC 154 at
p 186 (per Lord Wright). See also Davis Contractors Ltd v Farehant Urban District
Council 19561 AC 696 at p 721 (per Lord Reid):-... there is no need to consider what the
parties thought or how they or reasonable men in their shoes would have dealt with the
new situation if they had foreseen it". See generally the current view of the House of
Lords in National Carriers Limited v Panalpina (Northern) Ltd 119811 AC 675.
especially at p 700 (per Lord Simon).
3. See for example Davis Contlractors Lid v I' orehtom Urbatn District Council 119561 AC
696 at p 729 (per Lord Radcliffe).
4. Eg. Amtlgamated Investment & Propeqry Co Ltd v John Walker & Sons Lid 119771 I
WLR 164: Pa'lno Shipping Inc v Continental Ore Corp 119701 2 Lloyds Rep 21.
5. See Bank Line .Ltd v Arthur Capel & Co119191 AC435:FhlgI enmin'ilimI196412QIi 226:
Denmark Prodiutions Ltd v Boscohel ProductionsLtd 119691 I QB 6)9.
6. 1199(11 I Lloyds Rep I.
Winter. 19901 COMMENTS AND NOTES

contract in the event of force majeure.7 On January 29th 1981, before the
contract was to commence, SS2 sank. The defendants intended to employ
the vessel for the plaintiffs' contract. Moreover, they had entered into
contracts with other persons which required the use of SSI during the
relevant period. On February 16th the defendants informed the plaintiffs that
they would not carry out the required transportation with the remaining
vessel. For our purposes, the central questions were: (i) did the contract
allocate risk for this occurrence? (ii) if not, did the contract come to an end
automatically on the sinking of the SS2 or did it require some conscious
election by the defendants? and (iii) could the defendants claim frustration if
the sinking of the SS2 was caused by their negligence? 8

Implied Terms and Risk Allocation

In considering the defendants' act of cancellation Bingham L 9 was
mindful of the unreported decision of Goff J in Westfalische Central-
Genossenschaft GmbH v Seabright Chemicals Ltd' ° concerning the
application of force majeure clauses in commodity contracts. In particular,
where a seller could avail himself of a "protected perils" clause, subsequent
delivery of available stock to other customers could not be regarded as an
independent cause of shortage provided the seller had acted reasonably in-all
the circumstances. 1

Bingham LJ recognised the force of these authoritative statements but

distinguished the construction and application offorce majeure clauses from
a determination of whether the facts were such as to hold the contract
discharged between the parties. His Lordship conceded that discharge might
be ordered where in a contract of carriage the vessel no longer existed
through no fault of the owner. But on the present facts the plaintiffs had
contracted for an option: either SS I or SS2. If the sinking of SS2 had been
foreseen then the plaintiffs would have thought "... no matter since the
carriage could be performed with the other". 12 The option clause was
therefore construed as predetermining the allocation of risk. Risk lay with
the defendants unless clear evidence existed at the time of contracting that
only one of the vessels had been specified for use, and that if it became
unavailable the defendants would be absolved from further performance.

7. Eg perils of the sea, Acts of God, seizure under legal process.

8. The Civil Appeals Office treated the appeal as an interlocutory appeal which two judges
(Bingham and Dillon LJJ) would have jurisdiction to hear. This was accepted by Dillon
Li, as the High Court had merely to decide four preliminary issues of law in order to limit
the scope of a full trial. However, as his Lordship indicated: -... if the complexity and
importance of the issues raised in the appeal had been appreciated at an early stage it
would have been much better if the appeal had been listed before a Court of three judges
... (at p 11).
9. Bingham Li delivered the main judgment, whilst Dillon Li added a few additional
observations on selected aspects of the appeal.
10. Approved by the Court of Appeal in Bremer Handelsgeselischaft mbh v Continental
Grain Co 119831 I Lloyds Rep 269 at p 292.
1I. See also IntertradexSAv Lesieur-Tourteau SARL 1197812 Lloyds Rep 509 at p 513 (per
Lord Denning MR).
12. 119901 1 Lloyds Rep I at p 9.
 NORTHERN IRELAND LEGAL QUARTERLY IVol. 4 1, No. 4

Interestingly, no explanation was offered as to why the plaintiffs would

have addressed their minds to the possibility of SS2 being lost, especially at
a date prior to performance. Hindsight analysis can always be employed to
predict any eventuality. This danger is heightened if a court attempts to
speculate upon the anticipated reactions of either party without first
establishing that the alleged frustrating event is foreseeable. If the event is
not foreseeable then no useful purpose can be served by hypothesising on the
parties' reaction to its materialisation. Conversely, if foreseeability is
established then it becomes a question of how the contract should be
construed, requiring a court to define the nature of the existing contractual
obligations and then determine whether it would be just to expect literal
performance of these obligations in radically altered circumstances. 13 The
absence of an express provision encompassing this radical change is, by
itself, inconclusive. " Significantly, the historical use of "implied terms" in
this "construction" process is now discredited, as it produces an
unacceptable degree of artificiality, necessitating an objective assessment of
the hypothetical reactions of a party to an unforeseen event whilst assuming
at all times that the party was a "reasonable and sensible"' 5 individual.
Bingham U appears to reinforce this artificiality in three ways: (i) by failing
to consider whether, or at the very least explain why, the sinking of the SS2
was a foreseeable event; (ii) by ignoring the possibility that the contract's
silence on this matter was a purposeful omission, thereby allowing the
incidence of risk to be resolved by the rules of frustration; and (iii) by
emphasising the plaintiffs' supposed interpretation of the option clause
without examining in any detail the surrounding circumstances in which the
contract was negotiated.

It is submitted that in construing the contract one vital question

remained unanswered: did the option clause encompass such a drastic event
as the sinking of SS2? That is, did the parties deliberately allocate risk in
such circumstances? To answer this one might examine the reasons for the
defendants operating two vessels. Bingham U's judgment suggests that one
vessel was expected to act as a substitute for the other's unavailability, but
does this correspond with "mercantile usage and the understanding of
mercantile men"? 16 It is equally arguable that the option clause secured a
more economic use of the two vessels over any given period of time; each7
vessel would be booked in a way that ensured optimal utilisation of both. '

13. See for example National Carriers Lid v Panalpina (Northern) Ltd 119811 AC 675 at
p 700 (per Lord Simon).
14. See for example Larrinaga & Co v Soci~t Franco Americaine des Phosphates de
Medulla (1923) 39 TLR 316; Chandler Bros Lid v Boswell 119361 3 All ER 179: WJ
Tatem Ltd v Gamboa 119391 1 KB 132.
15. F A Tamplin Steamship Co Ltd v Anglo-American Petroleum Products Co Ltd 119161 2
AC 397 at p 404 (per Lord Lorebum).
16. T.akiroglou & Co Lid v Noblee Thorl Gmbh 119621 AC 93 atp 124 (per Lord Radcliffe).
See also Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) 119821 AC 724 at p 783 (per
Lord Roskill) and p 738 where Lord Diplock said that it is "mercantile men" that should
assess the significance of the commercial differences between the original obligations and
their performance under changed circumstances.
17. Thereby maintaining the most competitive rates for prospective users.
Winter, 19901 COMMENTS AND NOTES

Viewed in this light reliance might then be placed on the statement of Goff J
in Westfalische that "in the absence of any contractual term to the contrary,
the buyer ... must contemplate that the seller has other customers besides
himself, and must contemplate that the seller will take reasonable steps to
fulfil the needs of other customers". This approach might still lead one to
conclude, quite justifiably, that as the contract did not stipulate the use of a
specified vessel, the option clause demonstrated an intentional flexibility to
cover for one vessel's unavailability. But the process of analysis is quite
distinct, utilising commercial usage and good practice as a means to
construction rather than any process of implication dependent upon the
presumed response of one or other party to a hitherto unconsidered event. 18

The Principle of Election

Bingham Li identified other flaws fatal to the defendants' plea of
frustration. Specifically, the doctrine brought a contract to an end
"automatically".' 9 This did not occur on the facts as SSI remained in
existence; a point fortified by the two week delay between the sinking of SS2
and the defendants' letter cancelling the contract: "It was indeed, because
the contract did not come to an end automatically on January 29th, that ...
[the defendants] ... needed a fortnight to review their schedules and their
commercial options". 20 Of course, it is arguable that the word
"automatically" can encompass prospective delay. Consider a computer
service agreement in which an electricity power cut irreparably damages the
computer mainframe, a fact only discovered a few days later after expert
investigation. If a plea of frustration is upheld the court will retrospectively
adjudge the power cut to be the frustrating event. Bingham Li, adopting the
reasoning of the Judicial Committee of the Privy Council in Maritime
National Fish Ltd v Ocean Trawlers Ltd,2 ' neatly circumvented this
argument: "it is actual and prospective delay ...which frustrates the
contract, not a party's election or decision to treat the delay as frustrating".
In short, the doctrine of frustration could not depend on "any decision,
however reasonable and commercial, of the party seeking to rely on it". 22

Dillon LI concurred, accentuating the parallels between the present

case and those in MaritimeNationalFish in which the defendants operated a
fleet of five trawlers, two of which were chartered from other owners
(including one from the plaintiffs). The parties recognised that the
charterparty could only be performed with an appropriate otter trawl licence.

18. Note that even if the event was foreseeable, it would have been toreseeable to both
parties. This further highlights the difficulty of employing the "'implied terms" theory.
However reasonable the parties, "they would almost certainly on the one side or the other
have sought to introduce reservations or qualifications or compensations" Denny., Mott &
Dickinson v James B Fraser & Co Ltd 119441 AC 265 at p 275 (per Lord Wright).
19. 119441 AC 265 at p 274.
20. 119901 1 Lloyds Rep I at pp 9-10.
21. 119351 AC 524.
22. 119901 1 Lloyds Rep I at p 10.
 NORTHERN IRELAND LEGAL QUARTERLY IVol. 4 1. No. 4

The defendants were permitted only three licences, none of which they
allocated to the plaintiffs' trawler, making it illegal to use the latter vessel for
its intended purpose. The Privy Council concluded that the defendants had
elected not to supply the necessary licence and therefore could not rely upon
frustration. Dillon LJ was unimpressed by the reasoning in Westfalische as it
depended on the proposition that the chain of causation between "the
uncontemplated supervening event and the non-performance of those of his
contracts which will not have been performed" remained unbroken by an
election to allocate the defendants' remaining vessel in a "reasonable"
manner to other outstanding contracts. 23 This approach was inconsistent
with Maritime National Fish, where speculation as to why the defendants
preferred to put forward the particular three trawlers for licences was
considered irrelevant. Moreover, the present contract could not come to an
end automatically as ihe remaining vessel "could have been used ...to
perform the contract". 24

Both judgments emphasise the "election" of the defendants as

corroborative evidence of self-induced frustration. Investigation as to what
constraints operated on the minds of the defendants in cancelling the contract
appeared superfluous. Reliance upon Maritime National Fish at first glance
appears perfectly reasonable, but note should be taken of three important
facts: (i) two of the three trawlers to which the licences were applied were
owned and operated by the defendants; 25 (ii) the parties knew that a public
campaign by on-shore fishermen had prompted the Canadian authorities to
limit the number of licences; and (iii) the specific contract was still capable
of performance without any third parties being affected by the allocation of
licence grants. Undoubtedly the defendants would have lost operating
profits if their own trawlers had been laid up, 26 but that was always a risk
where licences were being knowingly restricted, hence a conscious decision
was made to cancel the contract with the respondents. The same cannot be
argued in the present case. If the defendants had employed the remaining
vessel for the specified contract then other users would have claimed breach
of contract. In the light of aggregate third party demand exceeding available
supply, can one assert that a conscious election was made when the only
choice was which contract to frustrate'? Surely a strong causal link is retained
between the sinking of the ship and the termination of the contract? It is
submitted that the significance of the two week delay between accident and
cancellation (evidence of election) is weakened unless the defendants
retained a realistic commercial option of performing all outstanding third
party contractual commitments.

23. Ibid. at p 13.

24. Ibid. at p 14.
25. These two trawlers were characterised as "free agents" by [he Canadian Courts as they
were owned by subsidiaries of the defendants' company and were therefore not bound by
any charterparty.
26. See comments of Hall J (1934) 4 DLR 288 at p 299 (Supreme Court ol Nova Scotia).
Winter, 19901 COMMENTS AND NOTES

Control and the Standard of Care

The third issue concerns the defendants' role in the sinking of the ship.
At the time of appeal the plaintiffs were still investigating the defendants'
responsibility for the accident and the carelessness of their servants. It was
not alleged that the defendants had deliberately caused the accident. Nor was
there any pre-existing legal duty at the time of the accident, as the contract
was yet to be performed. However, Bingham LI considered any fine test of
legal duty to be inappropriate in the circumstances. Invoking the judgment
of Griffiths Li in The Hannah Blumenthal, 27 where "control" over the
supervening event was considered the litmus test for self-induced
frustration, Bingham Li declared: "What is needed is a pragmatic judgment
whether a party seeking to rely on an event as discharging him from a
contractual promise was himself responsible for the occurrence of that
event". 28 His Lordship did not accept defence counsel's submission that
self-induced frustration required deliberate conduct or breach of an
actionable duty. This would confine the law in a "legalistic strait-jacket" and
distract attention from whether the alleged frustrating event was "an outside
event or extraneous change of situation".

This issue has generated considerable academic debate. In Bank Line

Ltd v Arthur Capel & Co 2 9 Lord Sumner asserted that frustration "arises
without blame or fault on either side". This definition was confined by Lord
Wright, in Joseph Constantine Steamship Ltd v Imperial Smelting
Corporation Ltd,3 ° to positive acts against the faith of the contract which
amounted to a repudiation and would justify rescission. Furthermore, doubt
was expressed over whether "mere negligence" would render an event
"self-induced". 3' Indeed, with regard to the present case it does appear a
novel proposition that a contract is construed so as to allocate risk (the option
clause) but is then disregarded when assessing the standard of care and
contractual responsibility for that risk. As Lord Diplock has so eloquently
pointed out: "A man cannot be permitted to take advantage of his own wrong
...But this may be misleading if it is adopted without defining the breach of
duty to which the pejorative word 'wrong' is intended to refer and the person
to whom the duty is owed" .32 In the present case plaintiffs' counsel argued
that a term ought to be implied into the contract that the defendants should
"take reasonable care to preserve both vessels, or the intended vessel, from
loss or damage before the time of loading." Bingham Li dismissed this

27. 1198311 AC 854 at p 882.

28. 119901 I Lloyds Rep I at p 10 (emphasis added).
29. 119191 AC 435 at p452.
30. 119421 AC 154.
31 . Cheall v Association of ProfessionalExecutive Clerical & Computer Sta'[ 19831 2 AC
180 at p 188-9 (per Lord Diplock). See also Poussard v Spiers & Pond (1876) I QBD 410
at 414-5 (per Blackburn J). In Sutton & Shannon on Contracts (7th ed) the test is
considered to be: "What degree of care or other co-operation is demanded of the party
concerned by the contract, expressly or impliedly?"
32. Ibid 1198312 AC 180 at p 189. Lord Diplock added: "To attract the principle ... that a
party to a contract is not permitted to take advantage of his own breach of duty. the duty
must be one that is owed to the other party under that contract".
 NORTHERN IRELAND LEGAL QUARTERLY [Vol. 41, No. 4

claim: "The term contended for, however reasonable, is not in my view

necessary to make the contract operable nor is it a term which one could
confidently say the parties would have adopted had the point been raised
during their negotiations". 33 The foregoing analysis highlights an apparent
inconsistency. A party who induces a frustrating event is considered to be in
breach of contract, yet in the present case the court refuses to imply the only
term that the party could be considered to have breached. Should the
"control" criterion advocated by Griffith LI in The Hannah Blumenthal
override the terms of the contract? Consider the following example: A agrees
to deliver, with his only lorry, one ton of steel to B's factory on 1st June. The
court refuses to imply a term that A will take reasonable care of his lorry
prior to delivery, and B was able to obtain appropriate insurance cover
against factory closure for materials' shortages. A negligently drives his
lorry into a brick wall on 31st May. If the court designates such activity as
"inducing" the frustrating event then B has successfully implied a term by
the back door when the front door was firmly shut.

Conclusion
According to Bingham LJ:
"Since the effect of frustration is to kill the contract and discharge the parties from further
liability under it, the doctrine is not to be lightly invoked and ought not to be extended". 34

This approach is eminently sensible as excess judicial intervention can often

undermine certainty in commercial dealings. But its justification requires
the application of mercantile criteria; foreseeability and risk are
impenetrable terms unless defined in a mercantile context. This is why the
artificial "implied terms" theory was necessarily jettisoned in favour of the
"construction" theory. The former induces unpredictability by interposing a
stratum of objective hypothesis unrelated to the contractual provisions. The
latter refuses to extend enquiry beyond those terms and the circumstances in
which they were negotiated. If the contract offers no guidance, then a
decision which best serves the interests of justice and commercial good
sense must be secured. One may question whether the court in the present
case adopted this latter test, irrespective of the conclusion reached.

Finally, how can the rules of self-induced frustration and breach of

contract be reconciled? It is submitted that Lord Wright's restricted
approach in Joseph Constantine is to be preferred. If the doctrine of
frustration operates at the interface between original contractual obligations
and their performance under changed circumstances, one cannot ascribe
standards of care based on effective control unless the parameters of those
original obligations are firmly entrenched in existing contractual notions.
The principle that one party must not be allowed to take advantage of his own

33. [19901 1 Lloyds Rep I at p 6.

34. 119901 1 Lloyds Rep I at p 8. See also Bank Line v Capel 119191 AC 435 at p 459. and
Pioneer Shipping Ltd v BTP Tioxide [19821 AC 724 at p 752.
Winter, 19901 COMMENTS AND NOTES

wrong does not detract from this approach. It is a foundation of all contracts
that neither party will wilfully or intentionally obstruct its performance 35.
But lesser forms of intent require analysis of the governing contract, as either
party may be deemed to accept the risk of such conduct.

P. A. CHANDLER*

35. See Stirling v Maitland (1864)5 B & S 840 at p852 (per Cockburn CJ); Mertens v Home
Freeholds Co 11912] 2 KB 526; New Zealand Shipping Co v Socijtj des Ateliers et
Chantiers de France [1919] AC I as interpreted by Lord Diplock in the Cheall case (supra
n 31) [1983] 2 AC 180, at p 189.
* LLB, LLM, PhD; Principal Lecturer, Bristol Polytechnic.