Sometimes the commercial aims of the parties to a

contract are defeated, through no fault of their own, by

the impact of supervening circumstances. Where such a
situation occurs. English law provides that the contract
will be considered frustrated if certain requirements are
met. The principles on which the doctrine of frustration is
based are well settled.
However, the application of the doctrine is not
without difficulty, for whether the circumstances in a
particular situation amount to frustration is often difficult
to decide.
The doctrine of frustration is of great importance in
international trade transaction because there is a greater
element of uncertainty than in purely domestic
transaction, as such transactions are subject to diverse
political and economic influences.
Legal Meaning of Frustration
Frustration occurs only where, subsequent to the
conclusion of the contract, a fundamentally different
situation has unexpectedly emerged. Not every turn of
events satisfies the test imposed by the doctrine. The
emergence of some new set of circumstances might make
the performance of the contract more difficult, onerous or
costly than was envisaged by the parties when entering the
contract.
Examples of such circumstances may include a
sudden, even abnormal, rise or fall in prices or the failure
of a particular source of supply requiring the seller to
obtain supplies from another more expensive source.
Lord Radcliffe in Davis Contractors Ltd v. Fareham UDC ,
of the opinion that
“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.”
Conditions upon which the Contract is Frustrated
It is impossible to give a completer catalogue of
frustrating events. The following are typical sets of
circumstances in which it has been contended – often
successfully – that the contract is frustrated.
Frustration may be a matter of Degree
Frustration in the legal sense may occur in some
cases ata a stage often not easily predictable – in a sequence
of events which are in gradual transition, & it then becomes
a matter of degree whether an uncontemplated event does,
or does not, amount in law to frustration.
Frustration by delay
Whether delay for which neither party is responsible
operates as a frustrating event is a matter of degree.
 Arbitration was sometimes promoted with such
inordinate delay that a party contends later in court
proceedings that the arbitration agreement is “frustrated”
because a fair trial before the arbitrator is no longer
possible.

Self –induced frustration

An act or omission of one of the parties rendering
the performance of the contract impossible or otherwise
creating a fundamentally different situation does not
qualify as a frustrating event. The first requirement of the
doctrine of frustration is that the frustrating event must be
an event beyond the control of the parties i.e. an event for
which neither of them is responsible.
The event must in the words of Lord Brandon of
Oakbrook in Hannah Blumenthal Case “some outside
event or extraneous change of situation.”
Conditions Upon which the Contract is Frustrated
It is impossible to give a complete catalogue of
frustrating events. The following are typical sets of
circumstances in which it has been contended – often
successfully – that the contract was frustrated.

Destruction of Subject – Matter

The simplest case of frustration occurs when the
performance depends on the continued existence of a given
person or thing and, after the conclusion of the contract,
that person or thing has been physically destroyed. In these
cases, “a condition is implied that the impossibility of
performance arising from the perishing of the person or
thing shall excuse the performance.”
Where a ship was chartered but failed to load because it had been
disabled by an explosion, which was not due to the negligence of the
shipowners or their servants, the commercial object of the contract of
carriage by sea was held to be frustrated.
Illegality - Outbreak of War
When, after the parties have entered into the contract,
war breaks out, the question arises whether the performance
of the contract is rendered illegal by that event or is only
indirectly affected by the outbreak of war.
A United Kingdom exporter has sold goods to an
importer in another country & war breaks out between the
UK & that country, the performance of the contract by the
UK exporter would become illegal because it would
constitute an act of trading with the enemy, and the contract
is frustrated.
Export & Import Prohibition
A contract may be frustrated because subsequent to its
conclusion the government has prohibited its performance,
for instance by placing an embargo on the exportation or
importation of the goods sold in situation other than
wartime.
Government Prohibition affecting State Trading
Corporations
The question has arisen whether a State
trading corporation can plead a government prohibition
of exports as a frustrating event. Normally the State
trading corporation which has separate legal personality
will not be so closely connected with its own
government as to be precluded from relying on the
prohibition.
Fundamental Change in Circumstances
A contract is further frustrated, if, after it
was made, such a radical change of circumstances has
occurred that the foundation of the contract has gone &
the contract, if kept alive, would amount to new &
different contract from that originally concluded by the
parties.
 To held the parties to their original bargain after the
original common design is gone would mean that a different
contract was substituted for their original contract.

Export and Import Licences & Quotas

Considerably difficulty is often caused by the
imposition or strengthening of restrictive government
regulations affecting the exportation & importation of goods,
such as licences & quotas. Where a contract cannot be
performed because the licence is not granted or revoked or
the quota is too small, it is often contended that the contract
is frustrated. The following propositions should be borne in
mind:
Where the contract of sale does not contain the terms
“subject to licence”, “subject to quota” or a similar term
making it conditional.
Partial Frustration
Where a contract gives a party the right of electing one
of several modes of performance & one mode has become
frustrated, the contract is not completely destroyed but has to
be performed in one of the remaining modes.
[

Apportionment of Performance
It has been seen that self-induced frustration does not
qualify as frustration in the legal sense, i.e. it is not allowed
as an excuse for non-performance.
This rule creates a difficulty if a person has entered
into several contracts but, owing to a supervening event
which qualifies in law as frustration, is unable to perform
them all.
For example, if a exporter sells 1,000 tonnes of sugar to A &
another 1,000 tonnes to B & if subsequent to the sale but before delivery a
quota scheme is introduced which allocates only 1,000 tonnes to the
exporter, what can be done?
 The traditional view is that whatever he elects to do, whether to
supply each with 500 tonnes or deliver the lot to A, he could not escape
liability to both in former case or to B in the later.

Any action undertaken would be of his own volition

& any “frustration” would therefore be self-induced.

Effects of Frustration
The consequences of frustration have been stated by
Lord Simon L.C. in Joseph Constantine Steamship Line Ltd
v. Imperail Smeltine Corporation Ltd, with admirable
brevity: “When frustration in the legal sense occurs, it does
not merely provide one party with a defence in an action
brought by the other. It kills the contract itself & discharge
both parties automatically “.
 The contract is consequently avoided as from the date
when the frustrating event occurs, the liability of the parties
in respect of the future performance of the contract in
discharged and all that remains to be done is to provide for
an adjustment of the mutual rights and liabilities which
arose under the contract prior to the time of discharge. This
adjustment may involve difficult problems.

Force Majeure Clauses

An exporter will reflect that it may be wiser to
introduce a clause in agreement defining in advance mutual
rights & duties if certain events beyond control occur,
whether or not such events result, in the eyes of the law, in
the frustration of the contract. Such clauses are, in fact,
frequently employed in practice. They are known as force
majeur clauses & vary considerably in ambit and effect.
Different kinds of Force Majeur Clauses
As regards the ambit of the clause, i.e. the events
covered by the clause, it is sufficient to state simply that it
shall apply in case of force majeur. This term has a clear
meaning in law, it includes every event beyond the control of
the parties. Sometimes, however, the parties modify the
normal meaning of the clause & it is therefore necessary to
construe the clause in each case, with a close attention to the
words which precede or follow it, & with a due regard to the
nature & general terms of the contract. Sometimes the parties
define the ambit of the clause in considerable detail, as may
be illustrated by the following clause.
“Strike, lockout, labour disturbances, anomalous working
condition, accidents to machinery, delays en route, policies or restriction
of governments, including restriction on export or import or other
licences, war, riot, civil disturbances, fire, act of god, or any other
contingency whatsoever beyond the control of party, to be sufficient
excuse for any delay or non-performance traceable to any of the causes”.