NAME- SHAURYA RAI

PRN- 19010126246
DIV.- C
YEAR- 4TH (BBA. LLB)
SUBJECT- MARITIME and SHIPPING LAW
ASSIGNMENT- 1ST INTERNAL ASSESSMENT
THEME- FRUSTRATION
TOPIC- An Analysis of Frustration of Contracts in the Suez Canal
BACKGROUND
The Suez Canal Company, which was run by the French, was nationalised by the Egyptian
government on July 26, 19561.
However, the "six-day" war against Israel began ten years later2, and on June 6, 1967, President
Nasser once more closed the Canal. The fact that only two cases were litigated as opposed to
seven instances in 1956 suggests that there were fewer issues and disagreements this time
around. On June 5, 1975, the Canal was finally reopened, and since then, the Egyptian
government has owned and operated it.
One can deduce that the Suez Canal has been a subject of continuous controversy which has
often led to the frustration of contracts via shipping companies passing through them.
INTRODUCTION and ISSUES
To establish frustration, whether performance has been made either impossible or so drastically
changed that it would be unfair to hold the parties accountable to the terms of the contract is one
of the key factors the court will consider.
In the Name of the People of Egypt, the President of the Republic, The People’s Assembly
passes the following law and we in our capacity shall promulgate it:
Article 1:
The Suez Canal Authority shall manage, use, maintain and improve the Suez Canal utility itself
as found when Law No. 285 of 1956, nationalizing The Universal Company of the Suez
Maritime Canal, was issued. The SCA may, when needed, establish, encourage or take part in
establishing projects that are related to the Canal.
The aforementioned law prohibited any shipment of goods.
The suppliers of Sudanese groundnut3 agreed to send them c.i.f. Hamburg in
November/December 1956, pursuant to a documented contract. The only path there, though, was
from around the cape of the God Hope because the Suez Crisis forced the closure of the Suez
Canal. This path was longer than twice as far and would have cost more in freight. When the
matter went to arbitration, it was determined that the performance of the contract by shipping the

1
See Note, Natiouzlization of the Suez Canal Company. 70 HARV. L. Rsv. 480, 486 (1957).

2
Although it has been reported recently that Egypt might submit to a decision of the International Court of Justice on the
question of Israeli rights to passage through the canal.

3
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] A.C. 9 (the “Tsakiroglou Case”)
goods on a vessel that travelled by the Cape of Good Hope was not fundamentally different from
the performance of the contract via Suez from a commercial standpoint. However, the seller did
not ship the goods.
"In the current case, an unforeseen occurrence occurred, namely, the closure of the Suez Canal,
and no doubt it may be considered to have included both discomfort and material loss," the court
said. But I am not convinced that there was also such a change in the significance of the
obligation as to call the principle of frustration into play." As a result, the fact that the alternative
route for shipment of goods via Cape of Good Hope would incur enormous additional costs to
the obligor will not absolve them of liability. A contract of carriage between a charterer and a
carrier would yield similar outcomes, except that if the contract requires that cargo be delivered
via the Suez Canal, the blockade would have occurred.
In Ocean Tramp Tankers Corp v. V/O Sovfracht, the problem reappeared (the Eugenia)4. The
Eugenia was leased to the charterers "for a trip out in India via the Black Sea," with the
understanding that they would bear the risk of any delays, such as the closure of the Suez Canal.
According to clause 21 of the charterparty, the vessel was not to be ordered or allowed to
continue to any point that would place her in a zone that was dangerous due to any real or
imminent act of war, war hostilities, or warlike actions, unless with the approval of the owners.
The ship left Genoa after being delivered, travelling from Odessa via Suez to India.
Suez was "hazardous" in the sense of clause 21 when the Eugenia arrived at Port Said, yet she
continued on her journey and was ultimately prohibited from continuing south. The canal being
blocked, according to the charterers' claims, caused the charter party to become frustrated. The
proprietor downplayed his frustration. The court of appeal determined that by sending the ship to
the Suez Canal, the charterer had violated clause 21. The court rejected this claim, holding that
shipping via the Cape route would not result in a performance that was significantly different
from what was anticipated by the contracts.

ANALYSIS
4
The Eugenia, [1964] 2 Q.B. 238 (C.A.).
All of these mishaps would result in a flood of claims owing to delays or cancellations of
shipments via the canal. These claims typically occur between purchasers and sellers of
commodities being transported, between charterers and ship owners/carriers, and between parties
in service and construction contracts involving products being transported. Would these claims
be readily dismissed since the incidents were caused by nature's force majeure (FM) and the
parties in breach should be excused from liability?
We can examine the legal issue in the context of I English law, which is the most frequently
applied law to international trade contracts, and (ii) the UN Convention on Contracts for the

International Sale of Goods (CISG), which contains substantive provisions that apply to buyers
and sellers of goods who have their places of business in member states5.
The contractual performance will be excused owing to unforeseen circumstances only if they
come within the doctrine of frustration, or if the parties stipulate otherwise in their contract (most
likely an 'FM clause'). The frustration test has a very high bar: it only applies when events render
the fulfilment of the contract impossible, unlawful, or significantly different from what the
parties originally intended. The buyer and seller disagreed over the alleged violation of failure to
ship products via the Suez Canal under a sales contract that used Form No.38 of the Incorporated
Oil Seed Association Forms of Contract in the first Suez event waiver of instances
Article 79.1 of the CISG provides a more specific description of the conditions for an
“impediment” which stops a party from performing a contract: “A party is not liable for a failure
to perform any of his obligations if he proves that the failure was due to an impediment beyond
his control and that he could not reasonably be expected to have taken the impediment into
account at the time of the conclusion of the contract or to have avoided or overcome it or its
consequences.” The term “impediment” must be interpreted to read that the event actually
prevents performance. This also implies that an event that makes performance commercially
impracticable does not satisfy the test.
The conditions for an "impediment" under the CISG include that it is outside a party's control,
(ii) the affected party could not reasonably anticipate the impediment at the time of contract
signing, and (iii) the affected party could not reasonably avoid or overcome it or its
consequences. "Reasonably" means what a reasonable person in such circumstances knew or
should have known at the time of contract signing. Furthermore, the afflicted party must notify
the other party of the hindrance and its impact on his ability to perform within a reasonable time,
or he will be held liable for damages resulting from such failure to receive (Article 79.4).

5
Berman, Excuse for Nonperformance in the Light of Contract Practices in InternationalTrade,63 COLUm. L. REV.
1413, 1419 (1963).