Chapter 34- Frustration

Question 1

what is ‘frustration’ in a contract

Answer 1

When the parties of a contract cannot perform their obligations anymore due to unforeseen events that make it impossible to complete it. The contract is said to be frustrated and will come to an end

Question 2

What are the 5 ways in which frustration can occur

Answer 2

1- Destruction of subject matter
2- Contracts that become illegal
3- Government or local authority intervene
4- Commercial purpose is destroyed
5- Death or non-availability

Question 3

A contract can become illegal when:

Answer 3

• When there has been a change in the law that makes the performance illegal
• The intervention of the government or local authorities

Question 4

A contract can become pointless when:

Answer 4

When a supervening event makes the performance of a contract completely pointless, though still technically possible to perform

Question 5

What will not amount to frustration

Answer 5

• Usually when the contract can make provisions for such an event
• When the event was foreseen or foreseeable
• When it was due to the fault of one of the parties
• When performance has become more onerous or more expensive than expected.

Question 6

What is the effect of frustration at common law

Answer 6

This meant that money:
- paid before the frustrating event was unrecoverable
- Due before the frustrating event had to be paid
- due after the frustrating event was not payable

Question 7

What does the Law Reform(Frustrated Contracts) Act 1943

Answer 7

This act changed the effect of frustration at common law.

Question 8

Obligation to pay money:

Answer 8

S1(2)
- The Act entitles a person to recover money paid OR obligation to pay money before the frustrating event.

Question 9

Obligations other than to pay:

Answer 9

S1(3)
- Before the frustrating event, if one party obtains a valuable benefit(other than money) that the other party performed, then the party receiving the benefit will have to pay a fair sum in return for it
- A weakness to this is that courts have to determine how valuable the benefit was and award a fair sum for that benefit

Question 10

What does S1(1) of the reform act state

Answer 10

• The act does not apply to contracts concerning the sale of specific goods which are frustrated by the goods perishing nor the carriage of goods by sea.

Question 11

List the evaluation points for frustration

Answer 11

• Because of the doctrine being strict, it can restrict parties ability to invoke it
• The doctrine is for the purpose of protecting the contract “Faurce majeure clause”
• The doctrine avoids unwanted escape
• It ensures justice is served for BOTH parties
• “pacta sun sarvanda” - Agreements must be met
• For the doctrine to apply, it MUST have radical consequences and alter the main purpose

Question 12

The Law Reform (Frustrated Contracts) Act 1943 ensures fairness by:

Answer 12

• Avoiding unjust enrichment (one party unfairly benefiting).
• Preventing complete financial loss for one party.
• Providing clarity on financial obligations after frustration.

Question 13

Limitations to the act:

Answer 13

• The Act does not define what constitutes frustration; that is left to case law.
• Application depends on judicial discretion, especially under Section 1(2) and Section 1(3), which can lead to inconsistent outcomes.