A Theory of Frustration and Its Effect

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  • Published: 22 June 2022
  • Volume 43 , pages 263–285, ( 2022 )

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essay on frustration contract

  • Sagi Peari 1 &
  • Zamir R. Golestani 1  

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One of the key legal questions that COVID-19 has raised relates to the status of the traditional contractual doctrine of frustration. The pandemic and the ongoing lockdowns across the globe have made it difficult for many contracts to perform. At the same time, there is a deep doctrinal and conceptual confusion with respect to the very essentials of this doctrine and its remedy - i.e., what happens after an adjudicative tribunal declares that a given contract has been frustrated. The paper offers a unified conceptual account of the frustration doctrine and claims that both the doctrine and its remedy crystallize a single unifying idea.

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The doctrine of frustration addresses situations where contractual performance is affected by certain sudden, unexpected events. The doctrine is gaining significance due to the disruptions caused by Covid-19. The World Health Organisation declared Covid-19 a global pandemic on March 12, 2020 (World Health Organisation, 2020 ). Many contracts signed before that date became impossible or difficult to execute. Governmental restrictions and lockdowns heavily interfered with the availability of labour alongside causing significant disruption to the timelines for delivery of goods and services. The business efficacy in many dealings was lost. Even today, the pandemic clearly affects contracts and the expectations of commercial actors. After months of relative predictability, countries such as Australia suddenly went into tough lockdowns due to Covid-19. The successful vaccination campaigns in other countries have only proved to be a mirage of ‘back to normal’, with the advances of the ‘Delta’, ‘Delta Plus’ and ‘Omicron’ variants and the troubling scientific studies pointing to the declining effectiveness of the existing vaccines. This has led to a new wave of restrictions and lockdowns, with further disruptions to commercial activity.

However, there are other reasons that support the critical relevance of the frustration doctrine. One reason relates to the growing consumer protection legislation that interferes with the contractual terms and conditions. While the traditional common law approach honoured the ability for parties to freely structure their force majeure clauses (e.g., Patterson and Robertson 2020 : 398–399; Treitel 1994 : 415–456) - the contractual provisions that explicitly specify the nature of the unforeseen events and the applicable remedy - today, the situation seems to be changing. Consumer protection legislation maintains the ability to challenge the validity of some force majeure clauses. Footnote 1 For instance, if a force majeure clause is a part of a standard form contract and is drafted in a one-sided way that protects the interests of only one party to the contract, the clause could be declared as void (e.g., Jane and Paterson 2020 ). The traditional doctrine of frustration would then step in and fill the lacuna left by the invalidated force majeure clause.

Finally, the relationship between the doctrine of frustration and the desired structure of the force majeure clauses which interact with each other remains unresolved. The contractual provisions on force majeure could be informed by a conceptual account of the frustration doctrine. In this way, a coherent theory of frustration could provide a blueprint for successful force majeure clauses and support practitioners tasked with drafting contracts.

This article offers a theory of contractual frustration and its remedy. It embeds the doctrine of frustration within the conceptual underpinnings of contract law and the obligations of the parties under a contract. Perhaps the two most important common law cases concerning the frustration doctrine within the 20th century, namely, the UK Davis Contractors Footnote 2 and the Australian Codelfa Footnote 3 cases, will be used as a litmus test in order to develop a conceptual framework for grasping the nature of the frustration doctrine. The article then turns to address the remedial aspect of frustration. It argues that situated within the stances of contract law theory, the doctrine of contractual frustration gives rise to a robust vision of the frustration remedy; in other words, it provides an answer to the question of what happens after the contract has been frustrated? Unfortunately, the subsisting answers to this question across common law jurisdictions are confusing and notoriously unclear. In engaging with the remedial considerations of frustration, the article focuses on the well-known UK Fibrosa case. Footnote 4

The article proceeds as follows. Part II begins with some observations about the nature of contract law and contractual obligations. It then introduces the UK Davis Contractors and the Australian Codelfa cases before providing an outline of the conceptual framework for grasping the nature of contractual frustration, delineating it from alternative accounts. Part III engages with the consequences of frustration and situates this aspect of the doctrine within the suggested conceptual framework before illustrating its operation through the UK Fibrosa case. Finally, Part IV summarises the proposed conceptual framework of the doctrine of frustration and its remedial effect.

Frustration: The Impairment of Contractual Performance Due to an Unforeseen Event

Some basic observations of the nature of contractual obligations.

Contracts primarily serve as a tool for interpersonal collaboration and enforcement of legally binding promises (e.g., Fried 2014 : 17, 20; Dagan and Heller 2016 : 41–47). Footnote 5 They typically involve a reciprocal (Serafin 2019 ) Footnote 6 transfer of objective value (Hegel 1820 : para 63). This may be in the form of an action that one party undertakes to perform for another party (such as a delivery of a service), or a transfer of property (such as a case when ownership of an object changes hands). However, contract law is disinterested in the desired outcomes, benefits, and commercial soundness behind the decision of the contracting parties to enter into the contract. Parties may have different visions, risk allocations, commercial expectations, desirable benefits and expected enjoyments with respect to the contracts that they sign and the ‘worthwhileness’ of the contract for them.

Contract law doctrine generally prioritises the express language of the contract over the surrounding circumstances that led to its formation. Indeed, as contract law doctrine demonstrates in relation to matters such as contractual interpretation Footnote 7 and implied terms, Footnote 8 there seems to be an inherent tension between the two. At least on the point of departure, Footnote 9 contract law abstracts from particular motives, desires and economic calculations that stand as the basis of the contracting parties’ actions. Instead, focus remains on the parties’ external manifestations that provide the ultimate basis for objective assessment of their interaction (Benson, 2019 : 101–121). The express written terms and conditions of the contract alongside the ‘four corners of the contract’ represent the ultimate crystallization of this manifestation. By agreeing to the terms and conditions of the contract, the parties communicate to the external world the nature of their agreement as an exchange of obligations, which in turn involves a reciprocal exchange of something of value.

Many contracts do not work out in the manner expected by the parties at the time of formation. Many times, contracts will lead to financial losses. However, contracts cannot secure the expectations of the parties. Rather, contract law focuses on the time of the contract formation (e.g., Baker 1979 ). Footnote 10 When parties sign a contract, they are concerned only with the explicit terms of the contract as understood within the context of the surrounding circumstances at the time.

A final point must be made regarding the nature of the rights that each party acquires under the contract. Despite some suggestions to the contrary (e.g., Benson, 2019 : 4, 41, 247, 321, 358–359), the nature of these rights relates to the contractual performance of each party. This is indeed what stands at the basis of the contractual agreement (Kant 1798 : para 6: 274). Consider a scenario under which I purchase a horse from my neighbour for $1,000. I acquire a right to the contractual performance of my neighbour, namely, the delivery of the horse. In the same manner, my neighbour’s right against me relates to my contractual performance of paying her $1,000. This vision of contractual rights explains the primary remedy of the contract law doctrine in the case of a breach: the remedy of expectation damages. Footnote 11 By placing a defendant in the position he or she would have been in had the contract been performed, this remedy crystallizes the plaintiff’s loss resulting from the breach. Where a contract is breached, the plaintiff is ‘deprived’ of the performance of the defendant (Kant 1798 : para 6: 274; Ripstein 2009 : 107–144). Footnote 12

Clearly, in the case of a transfer of property, the contractual rights closely interact with property rights. Returning to the example of the horse, the parties can agree that I pay the full amount of $1,000 today for delivery of the horse tomorrow. We may also agree that my neighbour will maintain the possession and ownership of the horse until its delivery. Generally, common law would honour such an arrangement; the property sits where the parties allocate it. Footnote 13 If my neighbour breaches the agreement and does not deliver the horse tomorrow, my remedy is limited to my expectations under the contract; I cannot make an alternative property-based claim of detinue (e.g., Chambers 2019 : ch 7) according to which the horse must be repossessed to me.

Armed with these basic observations about the nature of contractual obligations, attention will now shift to the doctrine of frustration and the two key decisions that illustrate its operation: the UK Davis Contractors (1956) and the Australian Codelfa (1982) cases.

Davis Contractors (UK)

Davis Contractors involved a contract between a municipality and a building company under which the company was supposed to erect a number of houses within an eight-month period. However, due to a shortage of skilled labour in post-war England, the work took significantly longer than the eight-month period scheduled. The company continued working on the project without interruption for a period of 22 months. Footnote 14 Unsurprisingly, the building company suffered a loss under this contract; while the total contract price was £94,424, the total amount of expenses related to the contract amounted to £115,233. Not only was the total contract price insufficient to cover the expenses, it made the project commercially disastrous for the builder. Footnote 15

The company argued that the contract was frustrated due to the shortage of skilled labour. Footnote 16 If accepted, this argument would have meant that the contract had come to a conclusion at some point. Footnote 17 Accordingly, as the work continued on the site without interruptions, the company argued that a new contract was formed which entitled it to a reasonable and fair remuneration for the works performed after the end of the original contract; in other words, a quantum meruit remedy. Footnote 18 In reply, the municipality argued that the shortage of labour did not amount to frustration. Footnote 19 Not only was a catastrophic event missing in the factual scenario of the case, it was also hard to point to a precise clear-cut point in time within the parties’ interaction that would signify frustration. Footnote 20 The building company simply undertook the risk of the shortage of labour. The municipality argued that a determination of frustration in these circumstances would operate to ‘justify interference with almost any commercial contract’. Footnote 21

Their Lordships favoured the municipality’s position and made important observations on the nature of the frustration doctrine. Lord Radcliffe commented 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. Non haec in foedera veni. It was not this that I promised to do. Footnote 22

Lord Radcliffe added that the doctrine of frustration is fundamentally grounded within the concept of ‘foreseeability’ of the contracting parties at the time the contract was formed. This explains why hardship or inconvenience to perform a contractual obligation falls short of the threshold required to engage the frustration doctrine. Footnote 23 Rather, the simple point is that parties should not perform something that they could not foresee. Footnote 24

In similar vein, Lord Somervell of Harrow commented that contractual performance is based on the contracting parties’ expectations, Footnote 25 while Lord Reid observed that the frustration doctrine relates to the question whether the original contract can accommodate the frustrating event. Footnote 26

Codelfa (Australia)

Codelfa also involved a contract between a municipality and a building company, this time concerning the construction of several railway tunnels. The agreed timeline for performance played an important role in the contract and required the contractor to complete the works within several months. This involved continuous work on the site around the clock with 3-shifts per day, 6-days per week. Footnote 27 Although the construction work was expected to generate a considerable amount of noise, the contracting parties did not expect that the residents of the nearby neighbourhood would be successful in seeking an injunction order from a court that would restrain the permitted working hours as one of the municipality’s acts at that time granted it immunity and barred such injunctions against works conducted on its behalf. Footnote 28

Ultimately, the contracting parties had overestimated the scope of the defence under the immunity provision. To the surprise of both parties, Footnote 29 the local residents managed to receive the injunction order in relation to the noise and hours of work. It is not that the parties failed to consider the possibility of an injunction order. Indeed, they had. Rather, both parties operated under the assumption that it would not happen. Footnote 30 The building company made a similar argument to the one made by the building company in Davis Contractors : the contract had been frustrated which should result in a reasonable and fair quantum meruit compensation for the works performed after the injunction order. Footnote 31

In contrast to Davis Contractors , the judges accepted the frustration claim in Codelfa . While much of the judicial reasoning referred to Davis Contractors , the decision included some important observations about the nature and operation of the frustration doctrine. Thus, the judges followed Davis Contractors on the point that the doctrine applies to situations when the contractual performance becomes fundamentally different from the performance in a situation contemplated by the contract. Footnote 32 At the same time, the court observed that situations when a performance of contractual obligation becomes illegal Footnote 33 or impossible Footnote 34 are good indicators of the frustration doctrine, but do not automatically engage it. In other words, impossibility or illegality of performance does not necessarily leads to frustration.

The Nature of Frustration

The two-limb structure.

The Davis Contractors and Codelfa cases provide a fertile ground for grasping the normative nature of the frustration doctrine. One of the central lessons of the two decisions is that the doctrine of frustration appears to include two major limbs: (1) an unforeseeable event; and (2) that the unforeseeable event must interfere with the performance of the contract. These two limbs seem to be interrelated and yet normatively separated. First, the doctrine applies only in the case of an event that could not be reasonably foreseen by the parties at the time of contract formation. While the injunction order was not foreseeable in Codelfa , the shortage of skilled labour was foreseeable in Davis Contractors . Second, even if the event is unforeseeable, the event also must affect the performance of the parties. As we have seen in both cases, the event affected the scheduled timeline of the works and therefore interfered with the contractors’ performance.

It is submitted that the time of contract formation represents the focal point of the doctrine. The contracting parties reasonably anticipate a broad range of events and developments that may take place throughout the life of the contract. This may include a variety of expenses, inconveniences, price fluctuations and other risk allocations and benefit expectations. In Davis Contractors the parties could simply anticipate the interfering event. As Lord Reid put it: ‘[The delay] was not caused by any new or unforeseeable factor or event: the job proved to be more onerous but it never became a job of a different kind from that contemplated in the contract’. Footnote 35 That was not the case in Codelfa , where the injunction order did not lie within reasonable contemplation of the parties at the time of the contract formation. While the broad range of possible risks and benefits usually are not found within the explicit contractual terms and conditions, it represents a key aspect of the background circumstances that surround the contract. These background circumstances provide the basis for the contractual agreement under which each party to the contract accepts to undertake his or her obligation.

If the background circumstances of the contract changed so dramatically that they extend beyond the reasonable expectations, risk allocations, and benefits calculated by the parties at the time of the contract formation, this defeats the very nature of the contractual obligations made by the parties. Footnote 36 In other words, frustration does not attempt to accommodate parties’ motives and wishes at the time of contract formation. Instead, the doctrine operates to acknowledge the possibility of the existence of dramatically rare situations when one (or both) of the contracting parties must perform an obligation that could not have been anticipated when the obligation was undertaken. Unforeseeable events that interfere with the ability of the parties to perform their obligations leads to a situation where the original foundation of the contractual choice disappears.

From this perspective, the doctrine of frustration resembles the doctrine of a common mistake (e.g., Treitel, 2020 : 1106–1107). Footnote 37 Under the latter doctrine, the law provides that a contract cannot be formed if both parties to the deal make a mistake with respect to one of the key elements of the contract (e.g., Treitel, 2020 : 353–389). The doctrine of frustration follows this same rationale. While in the case of a common mistake, no contract is ever formed due to the lack of a reasonable factual basis upon which the agreement has been reached, instances of frustration represent a situation when the contract is formed. However, similar to common mistake, at some point (more specifically, the point of the dramatic intervening event) reality pulls apart the original anticipatory basis of the contract.

The dramatic, unforeseeable change in the circumstances of the contract disempowers the parties’ choice that stands as the basis of their obligations. This is why frustration defeats the very nature of the contract and discontinues the contractual rights that each party maintains under the contract. Since the objective manifestations of the parties rely on the anticipatory basis at the time of formation, frustration breaks apart the established contractual rights and duties. The question here is whether the reasonable anticipatory basis of the contract is present. If it is not, a performance of the contract in those circumstances would mean imposing on a person to do something that he or she never agreed to.

These observations shed light on the various doctrinal aspects of the frustration doctrine. First, there exists the two-limb structure of the doctrine. The suggested vision of frustration provides a normative explanation: the unforeseen event must be so dramatic that it does not lie within the broad spectrum of possible risks and benefits calculated by the parties at the time of contract formation. The interference with the obligation of performance of one (or both) of the parties is indeed what creates the problem that the doctrine of frustration aims to address. Without a causal link between parties’ obligations and an intervening event, the performance of the contract remains untouched.

Second, and closely related, is that this vision of frustration focuses on the dramatic non-foreseeable nature of the intervening event and accepts any interference with contractual performance. The interference could be very serious, such as destruction of the subject matter, Footnote 38 the illegality of performance Footnote 39 or other impracticalities. Footnote 40 While the degree of interference with contractual performance may indeed provide an indicative sign of frustration, any interference with contractual performance would be sufficient to establish frustration as long as the intervening event meets the high threshold of non-foreseeability. While in Davis Contractors the shortage of labour led to significant expenses of the building company, the amount of expenses itself does not affect the question whether frustration takes place or not. What matters is that the shortage of labour became, at some point, unforeseeable; if so, any interference with contractual performance would constitute frustration. The same point applies to Codelfa : what matters is the anticipatory basis of the injunction order, rather than the significant additional cost that the project incurred due to the frustrating event. As long as there is some interference with contractual performance, the second limb of the doctrine is satisfied. This vision of frustration shifts the focus from severity of the impact towards the nature of the intervening event. It limits the scope of the first limb of the doctrine and pushes forward the limits of the second.

Third, there is a question relating to a clear-cut point of the interfering event. As we have seen in Part II (B)(1) above, this was a central point in Davis Contractors and is a factual inquiry. Footnote 41 The question here is whether something beyond the reasonable expectations of the parties had taken place that affected the ability of either of the parties to perform a contractual obligation. The fact that the frustrating event might be ongoing complicates matters, and yet does not affect the normative dimension of the doctrine. Clearly, the frustrating event must start at some point. In Davis Contractors , that could be the time when the shortage in labour commenced or at some latter point. This is up to the court to determine whether throughout contractual performance the original anticipatory basis maintained by the parties remains firm. In Codelfa this determination is relatively uncomplicated, with the relevant point in time of frustration was at the date of the injunction order.

The current evolving reality of the COVID-19 pandemic well-illustrates this point. The timeline between the first reports from China (December 2019) until the day when the World Health Organisation declared the coronavirus a global pandemic on March 12, 2020 (World Health Organisation, 2020 ) could be considered a reasonable timeline for invoking the frustration doctrine. One should suspect that contracts signed within this timeline may be frustrated by the COVID-19 pandemic. A party claiming frustration would still need to show that the unforeseeable event (i.e., the pandemic’s outbreak) impaired the performance of obligation/s under the contract (e.g., Morgan 2021 ). However, contracts signed after March 12, 2020 generally do not seem to be subject to frustration, as the evolving reality of recurring lockdowns, restrictions and commercial inconvenience falls within a reasonable anticipatory spectrum of risk allocation at the time of the contract formation.

Finally, there is the issue of fault. Both Davis Contractors and Codelfa stressed the point that the intervening event must not be the fault of either of the parties. Footnote 42 The suggested understanding of frustration offers an easy explanation to this requirement. The intervening event must not to be attributed to either of the parties, not because of the nature of the fault itself, but rather due to the foreseeability of the fault . At the time of the contract formation the parties can reasonably foresee the possibility of a contract breach by one of the parties. In other words, the event lies within the reasonable foreseeability of the parties at the time of the contract formation, thus pre-empting the application of the frustration doctrine.

Clarifying the Suggested Vision of Frustration Through the Alternatives

How does the suggested vision of frustration relate to the existing conceptions of the doctrine? Footnote 43 While it is at odds with some, it indeed clarifies others. Consider first, the accounts that we reject: (1) absolute contracts; (2) justice/fairness; (3) implied terms; (4) radically different theory; and (5) multi-factorial approach.

First, there is a historical ‘absolute contract’ approach which rejects the frustration doctrine altogether. While we embrace the current, high threshold for doctrine recognition in the courts (e.g., Treitel, 2020 : 1036–1037), our conceptual account allows room for the frustration doctrine in exceptional circumstances. Second, we object to the justice/fairness justification. Footnote 44 It says that the doctrine should be recognised to meet the requirements of justice and fairness in particular cases (e.g., Treitel, 2020 : 1102) in order to ‘do justice between the parties’. Footnote 45 We doubt this position due to its uncertainty with respect to the very question of what ‘justice/fairness’ actually means and due to its departure from a principled understanding of private law rules, principles and concepts as a reflection of the parties’ rights and duties. Third, our approach is at odds with the ‘implied terms’ understanding, under which the contracting parties implicitly agree to end their contract in the case of unusual circumstances (e.g., Treitel, 2020 : 1101). If anything, frustration cases are not reconcilable with parties’ agreements. The very crux of our argument follows this logic: the doctrine of frustration is conceptually coherent precisely because the agreement to undertake the obligations under the contract is not present.

Fourth, the suggested account is at odds with the ‘radically different theory’ of the doctrine which focuses on the parties’ performance (e.g., Treitel, 2020 : 1103–1104). We would argue that this theory mischaracterises the very nature of the doctrine by overlooking the first limb and focusing too heavily on the second. Instead of focusing on the nature of the event that leads to any interference with performance, the ‘radically different theory’ is incorrectly preoccupied with the examination of the question to what degree (i.e., examination of the magnitude) the actual performance departs from the original performance. The suggested normative structure of frustration turns away from such an inquiry.

Consider the Tsakiroglou case Footnote 46 which concerned the prolonged and expensive shipping of goods through the Cape of Good Hope as a result of the closure of the Suez Canal. Footnote 47 Our analysis of this case would depart from the judicial reasoning which considered the difference between the original performance (i.e., shipping through the Suez Canal) and the new one (i.e., shipping through the Cape of Good Hope). The court focused on the degree of impact that the new performance requirements had on the parties in terms of their expenditures and the shipping timeframe. Footnote 48 We would argue that the court did not consider the following critical point in this case: the foreseeability of the war between Israel and Egypt that led to the Suez Canal closure (Encyclopedia Britannica, 2021 ). Had the court decided that this war could not have been reasonably anticipated, any change to the parties’ performance under the contract would have constituted frustration. Footnote 49 The reason for this absolute position lies in the very nature of contractual relations; once the frustrating event takes place, any change in performance means that a party (or parties) is asked to perform something that they did not agree to.

The recent Australian Happy Lounge case Footnote 50 well-illustrates this point. It involved a sale of a bar which sold food, alcoholic beverages and provided live music entertainment. The contract was signed on February 16, 2020. On March 23, 2020, the local authorities issued a health emergency decree which prohibited the operation of such businesses. While the buyer invoked the ‘frustration’ argument, the court held that the decree did not deprive the buyer of a ‘substantial’ benefit of the contract. Footnote 51 We would argue that the court should have accepted the frustration argument in this instance. In similar vein to the observations on the Tsakiroglou case, the court’s analysis of the foreseeability of the governmental decree and the magnitude of the impact of that decree could have been challenged. The focus should have been on the foreseeability of the pandemic and the subsequent question of whether the pandemic in any way affected the performance. Given the timeline of contract formation and performance, the frustration argument in this case should have been successful.

Finally, our argument is inconsistent with the multi-factorial approach which suggests incorporating a broad range of factors to be considered and weighed against each other. Footnote 52 The suggested unifying normative basis would challenge the multiplicity of often self-contradictory vectors. While it places some of the factors favoured by the multi-factorial approach (such as parties’ reasonable expectations as to risks and the nature of the intervening event) under a single basis, we join the literature that doubts the adequacy of this multilayered justification to frustration (e.g., Roberts 2021 ).

Alongside the rejection of the above alternatives, we would argue that the suggested account clarifies other conceptual visions of frustration: (1) the foundation; and (2) the construction theories of frustration. First, consider the remarks made by Lord Haldane in the Tamplin case Footnote 53 where his Lordship stated that ‘the occurrence itself may be of a character and extent so sweeping that the foundation of what the parties deemed to have had in contemplation has disappeared, and the contract itself has vanished with that foundation.’ Footnote 54 While this statement links the conceptual bases of the doctrine to the very foundations of the contract, the subsequent literature (e.g., Treitel, 2020 : 1102–1103) and case law have perceived it as notoriously vague and amorphous. In Canary , Smith J commented on this point, stating that ‘[a]lthough attractively phrased, this theory [the foundation theory] is no more than a form of words, with no clear meaning behind it.’ Footnote 55

We would argue that the suggested account sheds normative light on the foundation of contractual frustration. The objective notion of agreement is the one that stands as the basis of every contract. If the supervening circumstances repeal the very basis upon which the parties reach the agreement with respect to their obligations, this notion challenges the very foundation of the contract. Once the high threshold of unforeseeability is met, any deviation from the original obligation leads to frustration of the contract.

Second, a related point applies to the ‘true construction’ theory of frustration. This justification focuses on the construction of the force majeure clauses and contemplates whether a given clause covers the occurrence of the frustrating event. Some of the literature has correctly pointed out that the construction justification cannot provide a normative justification to frustration. Footnote 56 By focusing on the force majeure clauses, Footnote 57 it tackles the question of their proper interpretation. However, the ‘construction’ theory of frustration does not really explain the very nature of frustration in any detail.

The conceptual account of frustration matters. It is important for grasping the nature of the doctrine and for contemplating its future development. One must carefully delineate cases that constitute frustration and those cases that do not. Furthermore, as we will see in the next part, this conceptual account also aims to shed light on the other side of the doctrine, namely, its remedial consequences.

The Frustration Remedy

The uncertainty.

What happens after a contract is frustrated? This question remains highly debatable within the common law literature and subject to notorious confusion (e.g., Stewart and Carter 1992 ; Carter 2018 : 773–792). It is not that the common law jurisdictions have not tried to address the confusion; in fact, explicit attempts have been made to address it. In 1943, the UK Parliament enacted the Frustrated Contracts Act Footnote 58 to address the problem. Several Australian jurisdictions followed this path by enacting distinct legislative schemes, namely, the Frustrated Contracts Act 1978 (‘New South Wales Act’), Footnote 59 the Frustrated Contracts Act 1988 (‘South Australian Act’), Footnote 60 and part 3.2 of the Australian Consumer Law and Fair Trading Act 2012 (‘Victorian Act’). Footnote 61 In all other Australian States and Territories, the common law as laid out in Fibrosa continues to govern the consequences of frustration (Barker and Grantham 2008 : 253). Unfortunately, despite the various legislative attempts, common law jurisdictions failed to reach a consensus with respect to appropriate remedial response to frustration and allocate this response within the conceptual stances of the contract law doctrine (e.g., Stewart and Carter 1992 : 69–79).

The UK case of Fibrosa v Fairbairn Footnote 62 is a good starting point to illustrate the failure of contemporary jurisprudence to coherently address the question of the remedial effect of frustration. This case involved a Polish company that agreed to purchase machinery from a UK company, with delivery to be made in Poland. After the Polish company had made a sizeable deposit, Nazi Germany invaded Poland, making performance impossible and frustrating the contract. Not a single unit of machinery had been delivered and the contract itself was silent on the point of frustration and the remedial effects of frustration. The UK company relied on precedent established in the previously decided Chandler case which asserted that the ‘loss lies where it falls’. Footnote 63 Furthermore, they argued that it incurred significant expenses related to the production of the machines.

Their Lordships overruled the Chandler precedent and decided that the Polish company should receive its deposit back. Somewhat vague and diverse reasoning lay at the basis of this decision. Lord Atkin talked about ‘most people, whether laymen or lawyers’ who would think ‘the buyer ought to get his money back…’, Footnote 64 favouring a rule that would ‘enable a man who has paid money and received nothing for it to recover the money…’ Footnote 65 . Lord Macmillan commented about ‘equitable adjustment between the parties’ Footnote 66 and that anything else would ‘fall short of complete justice’. Footnote 67 Lord Wright mentioned the doctrine (unrecognised at that time) of unjust enrichment as a possible conceptual framework for grasping the nature of frustration remedy. Footnote 68 Other justifications referred to the conditional nature of the deposit. As Lord Wright put it: ‘The payment was originally conditional. The condition of retaining it is eventual performance. Accordingly, when that condition fails, the right to retain the money must simultaneously fail’. Footnote 69 Along the same lines, Lord Roche made mention of the ‘provisional nature’ of the deposit made by the Polish company. Footnote 70

The Fibrosa case set a harsh precedent of a ‘total failure of consideration’ according to which the restitution of the payments made under a frustrated contract would only be possible when the party who made the payment can demonstrate that he or she has not received any consideration in return for the payment. Footnote 71 In Fibrosa , the Polish company did not receive any consideration for its advanced payment, which indeed justified the restitution of the deposit. Since not a single machine was received, the judgment went for the plaintiff. Had the Polish company received even one machine, this would have precluded the restitution of the deposit.

The doctrine of a ‘total failure of consideration’ has been heavily criticised on the grounds of its rigidity (e.g., Birks 1996 ; Edelman 1997 ). Some favour a possible re-interpretation of the doctrine to include a ‘partial failure’ of consideration as well (e.g., Wilmot-Smith 2013 ). The above-mentioned legislative acts in the UK and some of the Australian jurisdictions were aimed precisely at overriding the harshness of the ‘total failure of consideration’ doctrine. The legislation in Australia and the UK favours restitution of monetary payments made under frustrated contracts regardless of whether the failure is ‘full’ or ‘partial’. Footnote 72 These legislative pieces have incorporated a wide range of open-ended provisions that provide courts with the discretion to also take the expenses incurred by the parties into account Footnote 73 or to adjust the entire award with seemingly unbridled discretion in order to promote ill-defined notions of ‘justice’. Footnote 74 Further, the scope of application of these provisions extends beyond monetary transfers and is potentially applicable to situations involving contracts for provisions of services.

Despite the efforts to address the deficiencies of Fibrosa , the current legislative provisions in Australia and the UK concerning the remedial aspects of frustration evidently require a significant overhaul. These provisions grant almost absolute discretion to the judges to consider the cases as they wish, on a case-by-case basis. Furthermore, it would appear that each legislative piece relies on a different normative vision of frustration remedies, which explains the significant language discrepancy used in each of the provisions. To no one’s surprise, this unprincipled, no-rule approach attracted much criticism, creating doubt regarding the desirability of the legislative intervention in the first place (Stewart and Carter 1992 : 108). Accordingly, it is little wonder that these statutes are seldom utilized in the UK Footnote 75 and Australia. Footnote 76

In recent decades, the advancing law of ‘unjust enrichment’ has tried to accommodate the remedial aspect of frustration under its auspices. As we have seen above, some of the comments made by the judges in Fibrosa indeed supported this direction. At the basis of the law of unjust enrichment lies the fundamental claim that an ‘unjustified’ transfer of something of objective value from the plaintiff to the defendant triggers a restitution of that value (Birks 1989 : 16–18). The defendant should not unjustly benefit at the expense of the claimant.

This principle has received official recognition in the UK Lipkin Gorman case. Footnote 77 Australian jurisprudence struggles and hesitates on whether to adopt this law as a separate ground of liability in private law. Footnote 78 In relation to the remedial aspect of frustration, unjust enrichment scholars have argued that it would be ‘unjust’ for the English company in Fibrosa to retain the deposit (e.g., Edelman and Bant 2016 : 255–256). Furthermore, the expenses incurred by the English company could also be taken into consideration in the calculus of the parties’ entitlements as those expenses could be viewed as part of the unjust enrichment doctrine titled ‘change of position’ (e.g., Bant 2008 : 243–249). According to this doctrine, the court should consider the fact that the defendant relies on the benefit received and spends it. In some circumstances, according to unjust enrichment scholars, such reliance is legitimate and should be taken into the consideration for restitution purposes (e.g., Bant 2008 : 162–163; Goff and Jones, 2016 : 776–777). In this way unjust enrichment claims to explain the remedial nature of frustration and its various aspects.

The difficulty with the ‘unjust enrichment’ foundation of the frustration remedy lies in the shaky foundations of the unjust enrichment project itself. Consider each one of the four key elements of the analytical framework of the principle: (1) the defendant’s enrichment; (2) the enrichment is at the expense of the claimant; (3) the enrichment is unjust; (4) availability of applicable defences to the defendant. Footnote 79

First, consider the enrichment element that has been characterised by many unjust enrichment supporters as referring to the notion of a ‘transfer of value’ (e.g., Weinrib, 2020 : 171–174; Birks 1989 : 23). Footnote 80 The notion of ‘value’ seems to be important and clearly plays a central role in the contract law category: any contract for the transfer of property or delivery of services involves the transfer of something of value. However, one can challenge the question of the significance of the transfer of value outside of contract law. Further, the notion of ‘transfer of value’ is hard to accommodate with a central pillar of private law that relates to the parties’ rights and duties (e.g., Stevens 2018 : 583–584, 590; Nadler 2008 : 248–261). If it could be argued that contract law protects claimants’ right of contractual performance and that tort law protects claimant’s right to bodily integrity and property (e.g., Ripstein 2016 ), which right does the transfer of value protect?

Second, the notion according to which enrichment is at the expense of the claimant seems to simply follow the general insight of private law that situates the litigating parties’ rights and duties in a relational manner. This notion reflects the bipolar relationship between the litigating parties. However, this relational aspect of the unjust enrichment doctrine appears to simply reflect the obvious nature of private law; it does not provide a normative uniqueness to the structure of unjust enrichment. One of the immediate conceptual questions relates to the exact nature and magnitude of the required interaction between a particular claimant and a particular defendant (e.g., Smith 2018 : 98–100).

Third, the justice element of unjust enrichment requires pause. Clearly, all normative elements of the private law liability should reflect the needs of justice. Unsurprisingly, unjust enrichment supporters have not tried to make an example of interpersonal relationships that are ‘just’. Rather, the unjust enrichment movement has referred to a broad range of so-called ‘unjust factors’ (e.g., Goff and Jones, 2016 : ch 5; Edelman and Bant 2016 : 199 − 130; Burrows 2011 :86–87) that satisfy the ‘justice’ element in the unjust enrichment formula. The shift towards ‘unjust factors’ raises serious conceptual doubts regarding the question of whether there exists a single unifying thread that may be said to link the unjust factors together (e.g., Hedley 2019 ; Watts 2016 ). A failure to provide a unifying theory applicable to the unjust factors suggests that the unjust enrichment framework could not claim a normative independence.

Finally, there is a conceptual difficulty related to the various defences developed by unjust enrichment scholars. Take for example, the above-mentioned ‘change of position’ defence which states that in certain circumstances the defendant may limit their total restitutionary liability. A situation when the defendant acts in good faith, relies on the enrichment and ‘spends’ the benefit, represents a paradigmatic example of this defence. However, the conceptual difficulty with this defence is that it seems to be completely unrelated to the interpersonal relationship between a particular defendant and a particular claimant (e.g., Grantham 2018 : 5). The fact, for example, that the defendant relied on the claimant’s benefit and spent it, is not a factor which relates to the claimant. This not only seems to be unfair to the claimant, but also challenges the conceptual coherency of this doctrine.

Unsurprisingly, the law of unjust enrichment has attracted a high volume of criticism, pointing to the lack of historical, conceptual and doctrinal coherency (e.g., Jansen 2016 , Gallagher et al. 2020 ). Footnote 81 The problem with the law of unjust enrichment is a serious one. One of the leading private law commentators went as far as to characterise the present status of unjust enrichment doctrine as a ‘Disaster’ (Stevens 2018 ). Footnote 82 Given the growing volume of criticism mounted against the unjust enrichment project, the true basis of the remedial angle of the frustration doctrine must lie elsewhere.

Property, Not Contract or Unjust Enrichment

Given the law of unjust enrichment does not seem to provide an evident solution to the remedial aspect of frustration, the contract law and property law doctrines are the next possible candidates. First, consider the contract law doctrine. In Davis Contractors , the municipality made the promise to pay; the building company made the promise to erect the buildings. The reciprocal obligations of each party hinges on the actual terms and conditions of the contract, as pointed out by the Lord Reid. Footnote 83 However, as we have seen in Part II (C), frustration involves a dramatic change in the circumstances that goes beyond the reasonable range of risks and benefits at the time of the contract formation. If, and only if, the event falls outside of the parties’ reasonable expectations at the time of contract formation are their contractual rights ineffective from the point of the intervening event. The duty to perform a contractual obligation ends with this event, as frustration undermines the very foundation of the agreement to perform an obligation. From this perspective, the comments made in the case law about the end of the contract and unenforceability of the parties’ future obligations Footnote 84 all comply with the underpinnings of contract law. From the standpoint of contract law theory , the loss lies where it falls. The Chandler case was correctly decided, at least from the standpoint of contract law.

However, in this article we do not follow the path of unjust enrichment scholars who complain about the shortfall of the traditional private law doctrine to accommodate possible restitution remedies in the case of contract frustration (e.g., Burrows 2011 : 35–43; Virgo, 2015 : 51–58). While contract law doctrine indeed does not accommodate such remedies, a reference to property law could do so without embracing the ‘unjust enrichment’ project and the accompanying criticism raised against its conceptual and practical foundations. In other words, it is submitted that while contract law does not help with remedial aspects of frustration, property law does.

The difficulty in accommodating a possible proprietary restitution remedy in the context of frustration cases lies in the traditional reluctance of the common law doctrine to perceive the concept of ‘money’ within the stances of property law. However, things seem to be clearly moving in another direction (Fox 2008 : 18–24, 31–33, 34–38, 42–50, 73). Footnote 85 Consider the factual scenario in the Fibrosa case. Without delving into the question whether this scenario meets the suggested two-limb structure of the frustration doctrine in the first place (most likely it does not, as the Nazi invasion of Poland could reasonably be anticipated – e.g., Clavin 2015 : 7, 34), from the standpoint of the remedial level of frustration the contractual obligations of the parties ended with Nazi’s invasion of Poland that interfered with the performance of the obligations. However, the proprietary allocation of the parties’ rights and duties deserves attention. This requires an attentive review of the terms and conditions of a given contract. In some cases, the parties may explicitly decide that the property in goods (or money) passes hands with the contract formation. In other cases, they may say it does not. Footnote 86 As we have seen in Part II(A), the common law courts accept the notion that the property sits according to parties’ allocation.

In Fibrosa , the Polish company could have invoked its restitutionary right in the deposit by simply claiming its proprietary interest in it. In Fibrosa Lord Wright commented along these lines:

The claim for money had and received is not, in my opinion, a claim for further performance of the contract. It is a claim outside the contract. If the parties are left where they are, one feature of the position is that the one who has received the prepayment is left in possession of a sum of money which belongs to the other . Footnote 87

These comments echo the point that the Polish company’s entitlement to restitution does not hinge on the contractual obligation of the UK company. Nor does it relate to the law of unjust enrichment. Rather, the claim of the Polish company is a proprietary one.

Nevertheless, there is the question of the proprietary allocation in cases when the contract is silent on this matter. Things become difficult in situations when the parties do not explicitly specify the timing of the property transfer in the contract. The following presumptive default rule could be established. According to this rule, the property does not pass until the buyer of a property pays the full amount of the payments. The normative grounds of this presumptive rule relate to the very nature of the contract as a transfer of values and exchange of contractual obligations. Footnote 88 Consider the horse example under which I purchase a horse from my neighbour for $1,000 that is scheduled to be delivered tomorrow. This default rule says that my payment today of the $1,000 means that the property title in the horse moves to me immediately with contract formation and before taking possession. The situation would be different if I pay any amount less than $1,000.

There are several supportive statements of this ‘proprietary’ vision of the remedial aspects of frustration in the case law and the literature. Beyond the above-mentioned observations by Lord Wright, Footnote 89 the comments about the ‘conditional’ nature of the Polish company’s deposit Footnote 90 are also helpful. In similar vein, some of the unjust enrichment scholars have adopted the ‘condition’ language (e.g., Edelman and Bant 2016 : 252, 267; Wilmot-Smith 2013 : 415; Virgo, 2016: 308; Maher 2004 : 97 − 8) as a possible justification of the ‘just’ nature of restitution. The suggested approach here goes one step further in this direction: the UK company should not hold the deposit because it was ‘conditioned’ on the delivery of the machines. Rather, the UK company should return it because it belongs to the Polish company.

There are several implications of the suggested approach. First, it draws a sharp line between those contracts that involved a transfer of property (whether goods or money) and those contracts that involve a performance of an action for another party. Proprietary restitution could only be relevant in the former case. Contracts concerning the performance of an action for another person may involve an improvement of a property or delivery of a service. Nevertheless, those contracts do not involve a transfer of proprietary rights that could potentially (and subject to property allocation) trigger restitution. In building works and provision of services, the frustration ends the contract without further restitutionary actions.

This means, for example, that the extra work in Davis Contractors and Codelfa should not entitle the contractors to the quantum meruit remedy, Footnote 91 unless the contractors can show that a new contract is formed based on the parties’ conduct. True, there is a transfer of value between the parties in the case of the building works. However, one could argue that (and in contrast to unjust enrichment scholars) the transfer of value alone does not trigger a liability in private law. Unless the contractual terms and conditions breaks the contract into independent parts (i.e., a severable contract) or a new contract is formed, Footnote 92 contract law does not justify the contractor’s remuneration for unsolicited services performed. As no property passed hands, property law provides a similar negative answer.

Secondly, the suggested vision the frustration remedies denies the relevancy of the various expenses that the parties incurred prior to contract frustration. Recall that in Fibrosa , the UK company referred to its expenses related to the production of the machines that were incurred prior to contract frustration. However, similar to the notion of ‘transfer value’, the occurrence of expenses alone does not establish the liability of either of the parties. The incurred expenses belong to the contract law doctrine, concerned as it is with the parties’ reasonable allocation of risks and benefits, which, as we have seen, lies at the basis of the contract and are irrelevant after frustration of the contract. Footnote 93 Thirdly, the suggested approach rejects the ‘total failure of consideration’ doctrine. Rather than looking at the amount of value exchanged between the parties, it looks at the very nature of this value and allocates it within the contractual and proprietary entitlements of the parties. Footnote 94 These are considerations that should guide the courts in instances of contract frustration, rather than considerations of obscure justice and no-rule, flexible approaches adopted throughout the various legislative provisions, which have aimed to provide coherency to the law and disarm the stringency of the Fibrosa rule, but perhaps have achieved the opposite. Finally, it could be argued that the suggested vision of frustration remedies prioritises legal certainty and predictability over considerations of flexibility and fairness in particular cases. By sharply dissecting between proprietary and service-based claims and rejecting restitution of expenses incurred prior to frustration, we do not deny that. However, what does justice mean in a given case? Some would argue that the values of certainty and predictability epitomise ‘justice’ (e.g., Radbruch, 1946 : 7). The analysis of the Fibrosa case by the unjust enrichment scholars themselves perhaps reveals the disagreement over the concept of ‘unjust’: some argue that the English company should not have returned the deposit due to the expenses incurred related to machine production (e.g., Birks, 1989 : 231); others say that Fibrosa ’s justice requires restitution. Footnote 95 The alternative and principled approach to frustration’s remedies, which is based on the nature of the parties’ rights involved, seems to be preferred.


The suggested vision of frustration clarifies the normative boundaries of the doctrine and offers a framework for its understanding. We envision a two-limb structure of the frustration doctrine that pushes each one of the limbs in a different direction. On the one hand, it favours a fairly high threshold for grasping the nature of the frustrating event. This bar is high, very high. It requires demonstrating that the frustrating event could not be reasonably foreseen by the parties at the time of the contract formation. On the other hand, our accounts adopt a fairly liberal vision of the second limb of the doctrine. Any interference with contractual performance of the parties would meet the requirements of this limb.

The article also situates the remedial aspect of frustration within the stances of the suggested argument. Frustration pulls apart the very foundation upon which contractual obligations are made. While the underpinnings of contract law indeed do not provide a remedy for restitution of benefits conferred under the contract, properly understood property law doctrine can invoke restitution in appropriate cases. Accordingly, we reject the relevance of expenses made by the parties prior to the frustration event and draw a sharp line between contracts involving transfer of property and other contracts.

The times of COVID-19 underlie the significance of the frustration doctrine and its effects. This article has offered a coherent conceptual foundation that grounds it in the underpinnings of private law categories and situates it within the parties’ entitlements. It has rejected the present path of no rules, case-by-case approach, or a reference to the amorphous concept of ‘justice’. This position indeed aligns with the general vision of contract that underlies its institutional significance to support interpersonal relationships through providing contracting parties legal certainty and predictability in planning their future affairs.

* Senior Lecturer in Private and Commercial Law, University of Western Australia.

** JD student, University of Western Australia.

Unfair Contract Terms Act 1977 (UK); Sects. 23–28, Schedule 2, Competition and Consumer Act 2010 (Cth) (Australia).

Davis Contractors Ltd v Fareham Urban District Company [1956] AC 696.

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.

Fibrosa v Fairbairn [1942] AC 32.

Fried characterises a contract as ‘a kind of moral invention’ and as providing ‘free individuals a facility for extending their reach by enlisting the reliable collaboration of other free persons’.

As Serafin demonstrates, the traditional contract law doctrine vehemently separated itself from the law of gifts.

See e.g. Investors Compensation Scheme Ltd V West Bromwich Building Society [1997] UKHL 28.

See e.g. BP Refinery Pty Ltd v Hastings Shire Council (1977) 16 ALR 363.

See e.g. Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another [2015] UKSC 72.

See also Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 355 (Ch) at [31].

Robinson v Harman (1848) 1 Ex Rep 850.

One could argue that the remedy of specific performance would better and more directly crystallize the notion according to which the rights acquired under the contract relate to contractual performance. However, this remedy frequently requires supervision and monitoring by the courts, what complicates the contract enforcement mechanism and therefore produces uncertainty. This indeed explains the priority of expectation damages over specific performance. See e.g. Benson ( 2019 : 265–274).

Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676; Article 17, Sale of Goods Act, 1979 [UK]; Article 22, Goods Act 1958 Vic (Australia). Even fierce opponents of this arrangement strictly limit their objection to the specific context of secured transactions, without challenging the parties’ autonomy within the context of property law. See e.g. Wappett and Duggan ( 2019 ).

Davis Contractors [1956] AC 696, 700, 717.

Ibid at 715, 722.

Ibid at 704, 713.

Ibid at 706 (As the company put it, ‘There must be some stage at which prolongation of the time produces frustration.’).

Ibid (‘Once there was a frustration the whole contract had gone and the respondents [the municipality] could have ordered the appellants [the building company] off the site.’)

Ibid at 711.

Ibid at 717.

Ibid at 709.

Ibid at 729 (emphasis added).

Ibid (‘… even so, it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for.’).

Ibid at 731: (‘…the cause of the delay was not any new state of things which the parties could not reasonably be thought to have foreseen.’)

Ibid at 733.

Ibid at 721 (‘The question is whether the contract which they [the parties] did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end.’)

Codelfa 149 CLR 337, 381, 412.

Ibid at 411–412.

Ibid at 413.

Ibid at 376, 419.

Ibid at 414.

Ibid at 383 (‘Performance by means of a two-shift operation, necessitated by the grant of the injunctions, was fundamentally different from that contemplated by the contract.’).

Ibid at 422, 398.

Ibid at 380.

Davis Contractors [1956] AC 696, 724.

Cf British Movietonews Ltd v London and District Cinemas Ltd [1951] 2 All ER 617, 625 (‘they [the parties] never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point…’)

See also Codelfa , 149 CLR 337, 381.

See e.g. Taylor v Caldwell [1863] 3 B & S 826.

See e.g. Zinc Corp Ltd v Hirsh [1916] 1 KB 541. For a recent defence of this reading of a unifying basis of the frustration events, see Roberts ( 2021 ).

See e.g. Jackson v Union Marine Insurance (1874) 10 Common Please 125.

Lord Reid expressed this point in the following way: ‘As and from such and such a date, at latest, the contract ceased to bind the parties.’ Davis Contractors [1956] AC 696, 723.

Davis Contractors [1956] AC 696, 729; Codelfa 149 CLR 337, 383. See also Fibrosa [1942] AC 32, 58.

Canary , [2019] EWHC 355 at [21]- [46]; Davis Contractors [1956] AC 696, 714–716, 719–722, McNair 1940 ; Treitel, 2020 : 1100–1107.

Canary [2019] EWHC 355 at [22], [25].

Ibid at [25].

Tsakiroglou & Co., Ltd v Noblee & Thorl G.M.B.h. AC 93 [1961] 2 All ER 179.

Ibid at 181, 185.

Ibid at 184, 186–187, 192.

It is likely that in many cases of minor departures from the original performance, the contractual parties will choose to continue their contract and therefore will create a new contract through conduct. However, our point here is a conceptual one: once the event meets the (very) high threshold of frustration, any deviation from the original performance leads to frustration.

Happy Lounge Pty Ltd v Choi & Lee Pty Ltd and Anor [2020] QDC 184.

Ibid at [34].

See e.g. Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (Sea Angel) [2007] EWCA Civ 547, [2007] 2 Lloyd’s Rep 517; Canary , [2019] EWHC 355 at [39]; Treitel, 2020 : 1038.

Tamplin SS Co Ltd v Anglo-Mexican Petroleum Co [1916] 2 AC 397.

Ibid at 406.

Canary , [2019] EWHC 355 at [26].

Ibid (‘…whilst the true construction of the contract may be relevant to the question of frustration, it is not of itself the test for frustration.’) (emphasis in original). Also commenting that ‘even construction has its limits when faced with extreme and unforeseeable supervening events.’ Ibid.

The question of the proper interpretation of the force majeure clauses in light of the suggested vision of frustration would require independent treatment. However, we would argue that our account is fully consistent with the current ultra-conservative construction of the force majeure clauses (See e.g. Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep 323). Such a restrictive construction underlies the point that the contractual doctrine aims to ensure the validity of the foreseeability basis upon which the parties undertook to perform their obligations.

Law Reform (Frustrated Contracts) Act 1943 (UK).

Frustrated Contracts Act 1978 (NSW) (‘NSW Act’).

Frustrated Contracts Act 1988 (SA) (‘SA Act’).

Australian Consumer Law and Fair Trading Act 2012 (Vic), pt 3.2 (‘Victorian Act’). The Victorian Act replaced Part 2 C of the Fair Trading Act 1999 (Vic) which itself replaced the Frustrated Contracts Act 1959 (Vic).

[1942] AC 32.

Chandler v Webster [1904] 1 KB 493.

Fibrosa [1942] AC 32, 50.

Ibid at 55.

Ibid at 58.

Ibid at 59.

Ibid at 61 (‘It is clear that any civilized system of law is bound to provide remedies for cases what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep.’).

Ibid at 65.

Ibid at 75.

Ibid at 55–57, 61.

UK Act s 1(2); NSW Act s 12; SA Act s 4(1); Victorian Act s 36(1).

UK Act s 1(2); Victorian Act s 37.

NSW Act s 15(1); SA Act s 7(4).

See e.g. BP Exploration Co (Libya) v Hunt (No 2) [1979] 1 WLR 783, 798 (‘ BP Exploration ’) which was subsequently affirmed on other grounds in BP Exploration Co (Libya) v Hunt (No 2) [1981] 1 WLR 232 and BP Exploration Co (Libya) v Hunt (No 2) [1983] 2 AC 352; Gamerco SA v ICM/Fair Warning (Agency) Ltd [1995] 1 WLR 1226.

See e.g. Ardee Pty Ltd v Collex Pty Ltd [2001] NSWSC 836; McRoss Developments Pty Ltd v Caltex Petroleum Pty Ltd [2004] NSWSC 183.

Lipkin Gorman v Karpnale Ltd [1988] UKHL 12.

See Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498, 516; Barker ( 2020 : 922–928).

See e.g. Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 A.C. 221, 227, 234.

See also Investment Trust Companies (in liquidation) v HMRC [2017] UKSC 29 at [43] (Lord Reed).

The US courts also traditionally disfavour the unjust enrichment principle. See e.g. Langbein ( 1998 :61) (describing the American landscape of unjust enrichment as representing a situation like ‘…a neutron bomb has hit the field—the monuments have been left standing, but the people have been killed off.’). See also Burrows ( 2020 : 294–301).

Along similar lines, Lionel Smith targets the present status of the unjust enrichment project due to the failure of this project to explain a simple case of a resident living on the top floor of an apartment who benefits from the fact that the lower-level resident is heating her apartment. See Smith ( 2018 : 98–100). Indeed, this simple example against unjust enrichment underlies the fatal point against unjust enrichment according to which private law liability cannot be solely based on the notion of transfer of value.

Davis Contractors [1956] AC 696, 721.

As Lord Radcliffe put it in the Davis Contactors: ‘The theory of frustration belongs to the law of contract and it is represented by a rule which the courts will apply in certain circumstances for the purposes of deciding that contractual obligations, ex facie binding, are no longer enforceable against the parties.’(Ibid at 727).

In his works, Professor Fox demonstrates doctrinal and conceptual fallacy embedded in the artificial distinction between corporeal and incorporeal mediums of money.

Cf Lord Wright’s replicas in Fibrosa: ‘The principles [restitution of the payment in the case of a total failure of consideration], however, only apply where the payment is not of such a character that by the express or implied terms of the contract it is irrecoverable even though the consideration fails.’ Fibrosa , [1942] AC 32, 67.

Ibid at 69–70 (emphasis added). For somewhat a related argument (albeit made in the context of restitution of mistaken payments), see Jaffe ( 2013 ).

While we note that Article 18 (1) of the Sale of Goods Act, 1979 [UK] seemingly runs against this presumption, traditionally it does not apply to the context of transactions involved a transfer of money. For discussion of this point, see Fox ( 2008 : 87).

Fibrosa [1942] AC 32, 61.

Cf Mann v Paterson Constructions Pty Ltd [2019] HCA 32.

The unjust enrichment doctrine of ‘free acceptance’ according to which the services should be ‘accepted’ by the defendant follows precisely this point about the contractual foundation of this doctrine. What triggers restitution here is not the fact that the defendant ‘unjustly’ enriched at the expense of the claimant, but the notion that a new contract has been formed between the parties. For the discussion of this point, see Priel ( 2012 ), Burrows ( 2019 : 536–541). Accordingly, this point clarifies our position with respect to cases where the contracting parties continued to perform their duties after the occurrence of the frustrating event (such as the case in Codelfa and Davis Contractors ) and those cases when the parties discontinue such performance (as in Fibrosa ). Our approach does not delineate between the two scenarios. When the parties choose to continue perform their obligation may constitute a formation of a new contract, as indeed was argued in Codelfa and Davis Contractors . This, however, does not change the conceptual nature of frustration.

This position follows the general hostility of the common law doctrine towards the protection of the ‘reliance’ interest of the parties, as opposed to the expectation interest. For the discussion of this point, see eg McLauchlan ( 2007 ).

Respectively, we reject the ‘total failure of consideration’ justifications of the frustration doctrine. See National Carries v Panalpina , [1981] 1 AC 675, 687, 702; Treitel, 2020 : 1104.

Fibrosa [1942] AC 32, 59.

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Stewart, Andrew, and J. W. Carter. 1992. Frustrated Contracts and Statutory Adjustment: The Case for a Reappraisal. Cambridge Law Journal 51: 66.

Treitel, G. H. 1994. Frustration and Force Majeure . Sweet and Maxwell.

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The authors indebted to in the participants of the Contract Law in Common Law Countries Conference, two anonymous reviewers and our commentator Professor David Cabrelli, for their excellent comments and suggestions.

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Contract: Frustration

Frustration, scope of the doctrine, establishing frustration.

To establish frustration, the party seeking to rely on the doctrine must show that:

  • Performance has become impossible;
  • The impossibility is not the fault of that party; and
  • The impossibility was not foreseeable.


Performance must be completely impossible, not merely more difficult, disadvantageous or expensive: Davis   Contractors v Fareham   UDC [1956] AC 696. The kinds of cases where performance is considered impossible include:

illegal, crime

Where the contract was initially legal to perform but subsequently becomes illegal to perform, it will be frustrated: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1942] UKHL 4.

Destruction of Subject

destruction, fireball

If a specific piece of property is needed to perform the contract, and that property is destroyed (or too damaged to be used), then the contract will be frustrated: Taylor v Caldwell (1863) 3 B & S 826.

Sale of Goods

sale, fruit, vendor

If a sale of goods contract involves specific goods, it will be frustrated if they perish ( Sale of Goods Act 1979 , s 7). If they are unascertained, or risk has passed to the buyer, the contract remains valid: the seller will need to find substitute goods.

Death or Illness

death, gravestone

If the contract demands performance by a specific person, and that person dies or becomes too ill to perform, the contract is frustrated: Whincup v Hughes (1871) LR 6 CP 78. If performance can be done by anyone, then the contract will not be frustrated.


unavailable, locked out

If a specific piece of property is needed to perform the contract and that property is rendered unavailable, the contract is frustrated: The Wenjiang (no 1) [1982] 1 Lloyd’s Rep 128. An example is if the property is requisitioned by the government during the time in which performance is necessary. Another example is theft of some or all of the subject matter in contracts for the sale of specific goods: Barrow Lane and Ballard Ltd v Phillip Phillips and Company Ltd [1929] 1 KB 574.

Commercial Purpose

tiara, royal, crown

In rare cases, it may be objectively apparent that the contract is for a particular commercial or other purpose. In these cases, if the purpose becomes impossible the contract may be frustrated even if, strictly speaking, the contractual obligations can be performed: Krell v Henry  [1903] 2 KB 740.

If the party seeking to establish frustration caused the frustrating event, they cannot rely on the doctrine: The Eugenia [1964] 2 QB 226; The Super Servant Two [1990] 1 Lloyd’s Rep 1.


If the defendant ought to have foreseen the subsequent event which rendered performance impossible, frustration does not apply. This is a matter of degree – the more foreseeable the event, the less likely the contract is frustrated: The Sea Angel [2007] ‎EWCA Civ 547.

If there is a contract term specifically dealing with that event, the parties are normally taken to have foreseen the event. For this reason, the doctrine will not apply.

The foreseeability limitation does not apply where the frustrating event is the outbreak of war causing the contract to involve trading with the enemy: Ertel Bieber v Rio Tinto [1918] AC 260.

Effect of the Doctrine

Nature and timing of the doctrine.

Frustration automatically terminates the contract the moment the frustrating event occurs (without the parties needing to do anything), but it does not render the contract void ab initio : Hirji Mulji v Cheong Yue Steamship Co Ltd [1926] AC 497. It merely discharges the contract going forwards. Breaches that occurred before the frustrating event or obligations which previously became due remain actionable: Chandler v Webster [1904] 1 KB 493.

Sums Paid and Benefits Acquired Prior to Frustration

The Law Reform (Frustrated Contracts) Act 1943 provides that any sums paid prior to the frustrating event are recoverable: s 1(2). However, the court may reduce the amount repaid (or make a separate award) to reflect any expenses incurred during performance. An expenses award may also be made where there was a live, unfulfilled obligation to pay a sum prior to the frustrating event.

If a valuable benefit was given prior to frustration, a sum not exceeding its benefit is recoverable: s 1(3). Again, if the court thinks it just, it may reduce the amount to reflect expenses, sums payable to third-parties and the effect of the frustrating event on that benefit.

Any benefits accruing as a result of an insurance pay-out resulting from the frustrating event are disregarded: s 1(5).

Contract Termination Quiz

Test yourself on the principles which determine when a contract is terminated.

The defence of frustration renders a contract voidable. True or false?

Incorrect . Frustration merely discharges the contract going forwards. Existing breaches remain actionable.

Are sums and benefits paid prior to an event which frustrates the contract recoverable?

Incorrect . See Law Reform (Frustrated Contracts) Act 1943 , s 1.

If the innocent party terminates the contract in response to a breach, this renders the contract void. True or false?

Incorrect . The contract is merely discharged going forwards - it is not retrospectively deemed not to have ever existed.

If a party to a contract makes objectively clear that they intend to breach the contract, when does the innocent party gain the right to a remedy?

Incorrect . See Hochster v De la Tour.

A party to the contract purports to terminate the contract because of the defendant's breach. They give an invalid reason for terminating, but unbeknownst to them, the defendant has committed some other breach which entitles the innocent party to terminate. Is the innocent party in repudiatory breach because of their actions?

Incorrect . If the innocent party gives the wrong reason but there is actually another, valid reason to terminate, they can later rely on the valid reason so long as they did not prevent the breaching party from dealing with the real breach by giving the wrong reason:  Heisler v Anglo-Dal Ltd

What are the three requirements of frustration?

When will the breach of an innominate term entitle the innocent party to terminate the contract?

Incorrect . See Hong Kong Fir Shipping v Kawasaki Kisen Kaisha.

When is an existing contract discharged? (Three answers)

Incorrect .

The parties agree to a contract which stipulates that the defendant will not be paid until he performs his obligations in their entirety. Can this defendant be paid even though there is a breach of contract?

Incorrect . See the substantial performance exception in Hoenig v Isaacs.

The defence of frustration renders a contract void. True or false?

The parties agree to a contract which makes provision for what will happen if a particular event happens. That event happens, and makes the contract impossible to perform. Does the defence of frustration apply?

Incorrect . If the parties have provided for an event in the contract, it is very unlikely the courts will consider the requirement of foreseeability to be established.

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Force Majeure and Frustration of Contract edited by Ewan Mcken-Drick

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Andrew Bell, Force Majeure and Frustration of Contract edited by Ewan Mcken-Drick, Arbitration International , Volume 9, Issue 1, 1 March 1993, Pages 118–119, https://doi.org/10.1093/arbitration/9.1.118

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The law of frustration is seen as a basic element of any legal education; force majeure clauses, on the other hand, are all too often completely ignored. Given that such clauses are commonplace and figure in the bulk of commercial litigation relating to impossibility of performance, such a one-sided approach can scarcely be viewed as adequate, whether for practical or academic purposes. It is refreshing, therefore, to find in this collection of essays, Force Majeure and Frustration of Contract , a work that sets out to examine in depth both aspects of the law and, indeed, the relationship between them. The universal high standard and accessibility of the contributions, many of them from very distinguished academic and practical lawyers, make the book doubly welcome.

As the editor makes clear, the book is not intended as an exhaustive statement of the law: it is a collection of essays analysing specific aspects. Nevertheless, the essays taken as a whole cover a great deal of ground, and, in particular, the treatment of the more general issues is certainly fairly comprehenisve. The essays are divided into three groups. The first is concerned with general principles, and covers construction and drafting of force majeure clauses, the relationship between force majeure and frustration, the Law Reform (Frustrated Contracts) Act 1943 and the relationship between frustration and estoppel. The second group of essays is entitled ‘The General Principles at Work’ and covers a diversity of specific problems: the effects of industrial action, frustration and shipping law, war clauses in time charterparties and finally building contracts. The last part of the book looks at international and comparative aspects. The first essay here considers international sales contracts in general, while the second concentrates on the Vienna Convention on International Sales. There then follows an analysis of the series of complex soya bean cases that followed the flooding of the Mississippi basin in 1973. The final essay gives an account of force majeure in EEC law, bringing out some of the interesting nuggets that lie buried in the mundane agricultural case-law of the European Court of Justice.

From this brief résumé, the wide range of this collection of essays will be apparent. As has been noted, the authors of the various essays include both academic lawyers and practitioners (and indeed, there is a contribution by the Australian commercial judge, Mr Justice Rogers). As a consequence, the style and approach of the essays does vary; but the blend is successful, and each topic seems well-suited to the expertise of its author. Furthermore, the contributions all share the virtue of clarity of exposition.

Without hesitation, this is a work to be recommended to all who have a practical or academic interest in this area.

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Frustration of Contracts in law: Getting out of Contract Obligations (Termination of Contracts)

essay on frustration contract

The law takes legally binding contracts seriously.

It's difficult to get out of contracts and escape liability for performance, even when something happens that makes it harder, more expensive or onerous to perform.

Whether a contract has been frustrated or not can mean the difference between:

  • a claim for a serious breach of contract , or
  • relief from performance of the contract .

What is Frustration of Contract?

Frustration of contract is the general law's method of allowing parties to be relieved of their legal obligations.

It only applies to contracts which have become impossible to perform.

A supervening event changes the circumstances of performance of the contract so significantly, that the parties no longer need to perform the contract.

The supervening event terminates the contract.

Covid-19 and Frustrated Contracts

Whether or not a contract has been frustrated by the Coronavirus depends on:

  • on the type of contract it is
  • the sort of goods or services to be supplied, or the assets being bought, sold or licensed
  • the precise performance requirements of the parties under the contract
  • how the supervening event interferes with the parties' obligations to perform their respective commitments.

First some background. Then we come on to some examples.

Consequences of Frustration

Frustration brings a contract to an end immediately and automatically: Maritime National Fish Ltd. v. Ocean Trawlers Ltd [1935] UKPC 20. It's one of the methods of termination .

It’s the supervening event that causes impossibility of performance that causes that legal effect. It’s a method of discharge of a contract.

If the supervening event does not frustrate the contract, the party required to perform (and hasn't) is in breach of contract.

That breach of contract will probably be a repudiatory breach of contract .

That’s because the contract probably has not been performed in accordance with its terms: the frustrating event prevented it.

Why is termination by frustration limited?

It is a big deal to enter into a contract. It’s a legally binding agreement .

Contract sets up expectations on both sides of the deal. Each party promises to do something, in exchange for the promise of the other. The parties have imposed upon the contract upon themselves.

Legal Policy of Frustration

The law takes the view that these promises are serious. When a defaulting party lets the innocent party down by failing to perform, it will have serious consequences for the innocent party.

Maintaining the certainty and purpose of commercial business agreements is a high priority in the law.

Also, courts don't have the power to rewrite contracts: the parties do.

So contracting parties are not relieved easily of their obligations. To do so would mean that there would be an easy way out for one party to disappoint the party for non-performance.

It could also mean that a wealthy contracting party could easily defeat a weaker business partner with the aid of the law.

Why might that be the case?

A better funded party could go to court and see the dispute through to the trial. The other party might not be able to defend themselves properly, as they would wish.

The claim by the better funded party is not going to be waved through by a court.

It’s a high threshold to succeed, even for well-funded business. Doesn't matter who you are.

That's why the requirements of frustration are so strict.

There are alternatives to frustration in contract law.

They can lead to the same result. I set out some of them further down.

What’s the test to work out whether a contract is frustrated?

Frustrated Defined: What does it mean?

The test for a frustrated contract was defined by Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 .

It’s settled law:

...frustration occurs whenever the law recognises 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. … It was not this that I promised to do.

Central to the test is the reference to " radically different ". The doctrine of frustration is not lightly invoked.

When events entirely overtake the deal, the doctrine of frustration has its place.

It means that there must be a break in the circumstances when the contract was agreed, and its performance in the new circumstances.

The test is deceptively simple on its own, for a few reasons.

  • Each case is assessed on its own merits. Previous legal cases and decision dealing with frustration have little value.
  • Frustration doesn’t protect against "imprudent commercial bargains". That's one of the downsides of freedom of contract .
  • owe a contractual duty to one another to prevent the frustrating event from occurring or
  • had already planned for it.

Also, special importance attaches to the unexpected event which changes the circumstances, which creates the “radically different” contract: Davis Contractors v Fareham Urban District Council [1956] AC 696, Lord Reid.

This "radically different" contract:

  • must change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for
  • requires a significant change in circumstances of performance
  • is assessed using an objective standard. The legal effect of frustration can't depend on the parties' intention or their opinions, or even knowledge of the event: Hirji Mulji v Cheong Yue Steamship Co (1926) AC 497. After all, the parties did not have knowledge of the event at the time of the contract.

Frustration - and automatic termination of the contract - is:

  • the outcome that the parties would have agreed upon if, having such possibility in view, they had made express provision as to their several rights and liabilities in the event of its occurrence
  • what a fair and reasonable person who is disinterested - not uninterested - in the outcome would think. That person ends up being the judge hearing the case.

Events leading up to Frustration 

Death or incapacity of one of the contracting parties frustrates a contract.

That’s not the case where the contracting party is a company or other separate legal entity. The contracting party must be a human being.

The supervening event must give rise to the impossibility of performance.

In all cases, the event needs to so severely impact performance that it becomes impossible. But this is only the first step. There’s more to it. The sorts of events include:

  • war, rioting and civil unrest
  • Acts of God : storm of unusual or unpredictable strength
  • banning of sale of particular products (food, drinks, plastic straws)
  • outlawing services such as particular types of financial services, money or lending services or methods of providing those services
  • trade embargoes imposed on a country or person, for the sort of goods or services to be delivered (such as trade embargoes with Iran)
  • banning attendance at event venues following a virus outbreak, such as pubs, clubs, business conference centres or ski fields
  • prevention of entry to countries in the interests of public health, by the government of a country 
  • Injunctions: an injunction which prevents performance of the contract to continue, and Destruction-of-truck
  • Destruction of the subject matter of the contract.

When those sorts of events make it impossible for the parties to execute the contract, a case of frustration is more likely to succeed.  

These are just categories of events. In the real world, there are any number of sorts of events which can give rise to a frustration event.

Courts consider all of the circumstances of the case at hand, not on some theoretical or conceptual state of affairs.

We cover types of factual scenarios next, followed by 4 examples.

All the Circumstances of the Case

In a frustration case, the background and factors considered include:

  • the terms of the contract itself, and the relevant background to the contract
  • the parties' knowledge, expectations, assumptions as to the risk assumed by each of them as at the date of the contract
  • the nature and effect of the supervening event
  • the contracting parties’ possibilities of future performance in the new circumstances
  • Most importantly, the consequences of the frustration . The frustration of the contract may well mean that the contractual allocation of risk is reversed. For example:
A courier contracts to deliver a package within a specified time frame. The courier accepted the risk of delivering on time doing so by entering the contract. If the courier doesn't deliver on time, the courier is in breach of contract. Frustrating the contract reverses the risk of delivery onto the customer.

Should the customer be forced by a court to bear that risk?

Limitations to Discharge by Frustration

  • be reasonably foreseeable by the parties. It must be some outside event or extraneous change of situation outside the control of the parties

Fault of Parties

  • be brought about or occur by the fault of the party seeking frustration. So it can't be due to the act or election of the party seeking to rely on it. The inability to perform would have come about due to an act of the party seeking to rely upon a frustrating event

More inconvenient, expensive or onerous

  • only cause performance to become more onerous, inconvenient or expensive
  • the obligation undertaken would, if performed,
  • be a different thing from that contracted for

Common Assumptions

  • be based on a common assumption that an event or state of affairs will be maintained.

Example: Destruction of subject matter of the contract

Suppose you own a plantation of pine trees. You enter into a contract for the sale of the pine trees. Assume lightning strikes are not common in the part of the world that the plantation is located. Lightning strikes one of the trees and causes to the trees to burn (an Act of God). The contract would likely be frustrated.

Example: Fixed Price Contract; Materials and Labour shortage

A contract required construction of 80 houses over 9 months. It’s for a fixed price.  Work begins. The expected labour and materials for the work wasn’t available in the market. The building works fall behind schedule. The contractor wanted to be paid more for the work. The customer refused to raise the price. The contract was not frustrated. The builder was in breach of contract. The nature of the contract didn’t change by the lack of availability of labour and materials.

In essence, the contractor took the risk under the contract that labour would not be available. Also, the lack of availability of labour was able to be foreseen. The contractor could have insisted on a special contractual stipulation for the lack of labour, and not have to rely on frustration to terminate the contract.

Example: More Onerous Performance

The sellers agreed to sell to buyers Sudanese ground nuts for shipment. The carrier planned to use the Suez Canal. It was closed during war in the 1950s, after the contract was signed. An alternative route existed around the Cape of Good Hope. The route was more than twice as long and much more expensive. The sellers refused to ship the goods. Although the journey around the Cape of Good Hope involved a change in the method of performance, it was not such a fundamental change as to bring about frustration. Importantly, the buyers did not attach importance to the route to be taken or the time to be taken for delivery. Though more expensive, it would not involve any failure to deliver in accordance with the contract.

Example: Common Assumption

In Krell v Henry (1903) 2 KB 740, a flat was hired for the purposes of viewing the Coronation of the King. The King fell ill and the procession didn’t take place. The contract in that case was frustrated.

The modern approach of Lord Radcliffe means that Krell v Henry would be decided differently today.

Those sorts of contracts are properly characterised as contracts subject to a condition or a conditional contract (which is not satisfied). Both parties take their chances that the event will take place.

What are some alternatives to Frustration?

Whether frustration is available or not depends on the terms of the contract, the background facts and the interrupting supervening event. The contract must be interpreted .

Just because the law of frustration won’t terminate a contract, doesn’t mean your at the end of the road.

With the difficulty presented by the law of frustration, a good deal of judicial brainpower has gone into analysing alternative legal grounds and arguments to reach the same result as frustration provides: termination of the contract.

Here are a few.

Force majeure

Don’t think force majeure is an easy out. Unless a force majeure clause exists in the contract, and the supervening event is provided for in the contract it may not be a solution. It applies to catch the class of event relied on to relieve the parties of their performance obligations.

Implied conditions

A common implied term is one whereby a continuing state of affairs would continue.

Conditional Contracts; Contracts subject to a Condition

The contract was conditional upon an event would (or would not) take place. The term could be an implied term or an express term of the contract.

Mutual Mistake

Obtaining legal relief for mutual mistake is limited to mistakes of fact, not law.  Where the mistake relates to the present, it is a case for mutual mistake. Where it is of a future fact, it is a case of frustration.

In the first case the contract is void from the very beginning. In the second,  it is binding until the assumption becomes false.

Quantum Meruit

Quantum meruit claims rely on an implied promise to pay a reasonable sum for the work done and a failure to pay such sum.

In amongst all of this, a party may also breach the contract, giving rise to a right to terminate and other opportunities.

What are the remedies in contract law for frustration?

When a contract is frustrated:

  • it happens automatically, by operation of law
  • it is "discharged", and terminates.

The law says that the parties don’t need to do anything: because the contract terminated automatically when the supervening event took place.

But that's a "legal fiction".

Disputes arise. Parties disagree. One says it was a frustrating event. The other says it’s not.

That may lead to a lawsuit. Companies sue one another to resolve the dispute.

In a frustrated contract case, the question asked of the court is: "Was the contract frustrated by the intervening event or not?".

When a Contract is Frustrated

If the court confirms that the contract was frustrated, then:

  • a party could have owed money on the contract and the amount remained to be paid, or
  • a party might have been in breach of contract.
  • all the primary legal obligations of each party are no longer legally binding. There may be secondary obligations which continue after the frustration (such as preservation of confidential information).

When the Contract is not Frustrated

It is almost certain that one of the parties will be in repudiatory breach of contract, because the contract was not performed.

The other party will have (at least) a claim for damages against the non-performing party, and probably a right to terminate the contract .

Coronavirus Developments and Frustration

Contextual examples.

The fact that there is a pandemic (ie a global epidemic) on its own is not likely to frustrate a contract.

  • The performance requirements may be localised to a particular geographic location and not cause supply chain problems to the service provider or supplier.
  • Another type of contract might depend entirely on supply of components of products from China.  China itself suffered a shutdown of industry, with well-reported delays to manufacturing activity and supply delays: as you would expect when 40 million people are required to stay at home.
  • On the other hand, even with a "stay at home" order by local government doesn't necessarily answer the problem. IT Consultancy services which might be delivered remotely without personal attendance on site by a contractor - even if painfully difficult and more expensive to deliver - can still be performed and delivered. It's less likely that the contract has been frustrated. Contrast this situation in 2020 with a hypothetical pandemic in the early 1990s. If a pandemic similar to the Coronavirus crisis was to have happened in  the early 1990s, before remote working became possible (and not even prevalent), then the answer would probably be different.

Any particular case depends on what was contracted to be delivered, and how it is effected by (1) the virus, or (2) the fallout from the virus: government regulations and orders being one of them.

It's not the sort of area of law that applies in the abstract.

Questions of law and legal entitlements can't be resolved on a high level of abstraction, that is, without looking at the precise contractual obligations and the effect(s) on the performance of the contract.

Guideline Test for Frustration:

Complete the following sentence, replacing the prompts with the circumstances of the supervening event and the subject matter of the contract.

Example of Frustrated Contract

It’s a rough and ready (ie over-simplified) guide to whether a contract has been frustrated:

The parties had not foreseen or be taken to foresee that [insert supervening event] might be taken to interfere with the [primary purpose of the contract], would make it impossible to perform the contract on terms which bore any real commercial resemblance to those agreed between the parties. To hold us bound to our contract in these altogether different commercial circumstances would be positively unjust.

For example:

The parties had not foreseen, nor should be expected to have foreseen that [the car having been destroyed by a freak accident] might be taken to interfere with the [sale of the car], and would make it impossible to perform the contract on terms which bore any real commercial resemblance to those agreed between the parties. To hold us bound to our contract in these altogether different commercial circumstances would be positively unjust.

All of that has to be read against the backdrop of the terms of the contract. 

Consequences of Frustration: Remedies

Termination by frustration.

Not only does the law of frustration end the contract where a supervening event takes place.

Pre-paid products and services 

When customers have prepaid for products or services, English law in some circumstances requires the contractor (or consultant service provider, or supplier of a product) to refund prepayments of money for the performance the contract.

There are variety of defences available to the contractor, all which are subject to a broad discretion which remains with the court.

The aim of the exercise is to arrive at a solution which is fair to both parties, rather than one or other of the parties bearing the entire brunt of the financial loss caused by the supervening event.

The usual law of damages which apply in contract law do not apply to frustration of contract law.

Different rules of law apply in different situations: entitlements of the parties depend on the facts of the case at hand.

In frustration cases, tensions arise because one of them will be better off for being relieved of their obligation to perform the contract (which it can no longer perform).

The other will be worse off for the loss of the deal made legally binding by the contract, such as in the courier example, above.

It is not just any unforeseen event that qualifies to frustrate a contract. The change of circumstances must be so dramatic that the new circumstances were completely outside the contemplation of the parties at the time of the contract.

The objective of frustration is to achieve a just and reasonable result between the parties. It does so by recognising that events do interfere with contractual performance. It is an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances.

The justice of the case requires that the contract no longer applies.

Frustration of Contract: Business Solicitors

It's tough to try and pick up frustration law from a standing start.

Asking whether a contract has been frustrated or not is a simple question to ask. The answer is usually complex, because there are so many moving parts involved.  

We have advised on frustration of:

  • retail contracts
  • event contracts
  • agency agreements
  • employment agreements
  • holiday and leisure related contracts
  • advertising and marketing contracts in football, 

to name a few.

Need legal advice from an expert frustration solicitor as it applies to a business contract? Facing down an alleged discharge of a contract by frustration? 

We advise businesses operating internationally and English companies on the effects of frustration and force majeure clauses, to improve situations for their business that first appear to be complete disasters with no way out. 

  • those wanting to be paid money to sustain turnover under existing contracts in a harsh economic climate; and
  • those wanting to retain cash reserves.

Smart businesses take legal advice when there is huge uncertainty in a given situation to narrow the unknowns and position themselves for what's coming.

Don't be left by the side of the road.

Call us on +44 20 7036 9282 or email us at [email protected] for assistance.

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The Doctrine of Frustration of Contract: An Analysis and Comparison of Indian Law and English Law, with reference to Landmark Cases

Profile image of Tweisha Mishra

The Law of Contract is as relevant in the present day as it used to be centuries ago. The Doctrine of Frustration is an integral component of the Law of Contract. This doctrine was developed to counter the problems imposed by the rule of absolute performance of promises made between parties. This doctrine plays a major role in protecting the interests of the parties to a contract whose performance has become impossible due to initial or subsequent impossibility. This article attempts to explain the origin and concept of the Doctrine of Frustration and also compares the position of the doctrine in Indian and English laws. Finally, the content of the article is supported by the decisions of both English and Indian courts in various landmark cases concerning the said doctrine.

Related Papers

Journal of Peace, Development and Communication

Shahid Rizwan

Absolute liability in contracts or absolutism is traced back to seventeenth century. The famous case of Paradine v Jane (1647) laid down the basic rule of absolute liability in contracts. The rule stated that contracting parties are bound to fulfill their promises irrespective of circumstances. This case is considered as an authority in absolute liability in contracts. In order to excuse the party not performing his contractual obligations due to no fault on his part, doctrine of frustration of contract was developed. Taylor v Caldwell (1863) is generally considered a turning point in the application of absolute liability in contracts. It provided a new avenue for discharge of contracts on the ground of supervening impossibility. This article deals with the factors responsible for the development of doctrine of frustration of contract. Especially case laws will be discussed which had changed the doctrine of absolute liability in the performance of contracts and this new doctrine has been emerged.

essay on frustration contract

SSRN Electronic Journal

Francesco Parisi

Journal of Law and Jurisprudence

saloni khanderia

Dr. Sandie Benevides

This hybrid Black-letter law methodological study answers how the doctrines of frustration and force majeure are implemented for contract termination within the United Kingdom, Germany and France. Depending on the country laws and history, the doctrines are likely to yield inconsistent results with contract termination, which creates debate on how legal rules should be applied. Key terminology was discovered that provided a clear research route for finding information towards answering the central question. The research indicates that frustration is kept within narrow limits and is not lightly invoked. Force majeure is frequently equated with frustration, but has a broader interpretation and is used more flexibly. The doctrines are analogous because these address unforeseen supervening events that are beyond the control of the contracting parties. The research reveals landmark cases including: Paradine v Jane, which demonstrates the absolute rule of contract; Taylor v Caldwell that forms the foundation of frustration via implied condition and supervening impossibility; Krell v Henry where contractual performance depends on a state of things essential to performance whether expressly mentioned or not; and Herne Bay Steam Boat Co v Hutton, which exposes the challenges in deciding the point at which the contract has become impossible or radically different from what the parties had originally intended. There exists critical differences and significant conflicts between the UK, Germany, and France, which includes the extreme consideration of pacta sunt servanda and rebus sic stantibus, of which directly contradict each other, and imprévision. To address the research question, key themes were revealed that led to various queries. The main theme reiterates that each individual case should be judged by its own circumstances, which entails primary theories: implied condition; structure of the contract; reasonable time; and termination by law. Key Terms: frustration, force majeure, imprévision, pacta sunt servanda, rebus sic stantibus, contract termination

Kgm Attorneys Law Review

Mr. Karim G . Mussa

In Contract Law

isara solutions

International Res Jour Managt Socio Human

This dissertation will look into whether there is need to reform the doctrine of privity to allow third parties to sue on contracts for their own advantage in the situation of contracts that safeguard third-party interests. In order to answer this issue, I will examine the doctrine from both an Indian and an English legal perspective, as well as the exceptions to this principle, such as when a third party is permitted to suit for the contract, which can include court judgements for an equivalent. This is frequently used to replace the common belief that a contract cannot be sued by a third party. To comprehend the rights of a third party to sue for a contract in which he or she features a benefit, we must first discuss who is considered a third-party beneficiary and intended beneficiary, as well as when the third party can overcome the doctrine of privity of contract, which will be discussed through the decisions of the High Courts and the Supreme Court of India. Which compares English and Indian law, as well as the extent to which third-party intrusion is tolerated within the contract and the privity position in these two countries. The statutory exceptions to the doctrine of privity of contract will be examined in this section. Tweddle v. Atkinson and Dunlop pneumatic tyre Co. Ltd. v. Selfridge & Co. Ltd., where the doctrine of privity of the contract was reaffirmed by the House of Lords in 1915, will be discussed in this chapter. In these cases, the doctrine of privity of contract was first mentioned. The reasons for comprehending the principle of privity of contract will be discussed further in this dissertation, as it is critical for anyone involved in contracting, whether at the negotiation stage or after the agreement is signed, to understand the principle of privity of contract. Research Question: Should the privity of contract rule be reformed, in order to allow the third party to sue on contracts in their benefit? In the event that an outsider can sue without privity or consideration, what impact would this have on law of contracts?

NUJS Law Review

Anmol Jain , Ram Mohan M P

The Indian contract law continues to follow the classical contract law model under which parties may, in exercise of their autonomy, limit or exclude their liability for breach of contract. As long as parties have freely contracted, an exclusion clause remains effective. Because of this, parties have started drafting wide exclusion clauses, highlighting creeping unreasonableness in contracting practices. In the absence of any statutory law governing the same the only way by which a party could be relieved from the performance of an onerous contract in India is by arguing procedural unconscionability. This paper comprehensively traces the development and understanding of exclusion clauses as they have evolved under the Indian Contract law and through the adoption of common law by the courts. This being a time series study, we examine all the Indian Supreme Court and High Court decisions reported until early 2020 and find that courts have attempted to instil just- contracting by adopting ad-hoc mechanism against the unfair use of the exclusion clauses. However, uncertainty continues to prevail regarding the enforceability of unconscionable exclusion clauses. Therefore, taking a comparative approach, we argue in favour of adopting certain legislative reforms in the Indian contract law towards empowering the court to adjudicate on claims based on substantive unconscionability. A first step in this direction, specifically for consumer contracts, is the statutory recognition of ‘unfair contract terms’ under the new Consumer Protection Act, 2019.

Arizona Journal of International & Comparative Law

Scott Pryor

Christ University Law Journal

Girish Deepak

Grant of damages in case of restrictive covenants is an important issue plaguing commercial contracts in India. This paper attempts to explore the best possible practices to resolve this issue, through a detailed analysis of various Indian and Foreign case laws. Various sections of the Specific Relief Act 1963, deal with the necessary remedies to protect parties against contractual breaches such as section 38, which allows for Specific Performance and section 42 for Injunctions in the case of Negative Covenants, it curiously excludes the latter from eligibility for damages under section 40 of the Act. This has led to a scenario wherein, while breach of positive covenants (“agreement to do something or perform an obligation”) are remedied through grant of damages; negative (restrictive) covenants (“agreement not to do something”) have no similar remedy, leaving parties only entitled to nominal damages. The argument supporting this discrimination is that damages cannot be quantified i...

fraser moraes

Doctrine Of Frustration

Sr. adv.mohan v. katarki.

13 Oct 2023 12:56 PM GMT

Doctrine Of Frustration

Frustration is a helplessness arising from impossibility. The doctrine of frustration therefore discharges parties from their obligation to perform a contract when a contract is hit by an event that makes its performance impossible. Even though, the semantic meaning appears simple, it has become a complex subject because of a thin line of distinction between several concepts such as...

Frustration is a helplessness arising from impossibility. The doctrine of frustration therefore discharges parties from their obligation to perform a contract when a contract is hit by an event that makes its performance impossible. Even though, the semantic meaning appears simple, it has become a complex subject because of a thin line of distinction between several concepts such as the impossibility of performance governed by the conditional contract; the impossibility of performance under the contract which is non-conditional; and the impossibility of performance arising from man-made frustrating and non-manmade events or force majeure .

Juristic Basis of the Doctrine

The origin of the doctrine of frustration is traced to the principle of absolute liability which formed the basis of contracts. A general rule is that the parties to a contract founded in vinculum juris – a legal tie, are obliged to fulfill their obligations and therefore, in the case of a breach of contract, the party breaching the contract is liable to compensate for the loss suffered by the affected party. However, as the mercantile world progressed, Shylock’s approach of “one’s pound of flesh” in Merchant of Venice, lost its flavour. An exception to the rule sprung up as the doctrine of frustration for relieving the breacher of any liability that might arise under the contract.

The juristic basis of the doctrine of frustration has its foundation in several theories [1] . The right to avoid contract is read as an implied term of the contract on a presumption that parties couldn’t have intended to perform the contract if cannot be performed physically or legally. The disappearance of the foundation of the contract due to the changed circumstances; disappearance of the subject matter of the contract; or radical change in the obligations to be performed, is the second theory applied [2] . But, this is closely related to the theory of implied terms. Since the parties cannot be intended to have undertaken to do something if the foundation of the contract has disappeared. The next theory is the power or obligation of the court to deliver justice by finding a just and reasonable solution if the contract is ambushed by the impossibility of performance [3] .

Frustrating Events

The frustrating events and or the grounds for the impossibility in performance of the contract that render the contract void are not exhaustive. Some of the grounds are death or incapacity of a party; legislative intervention; destruction of the subject matter of the contract; or the changed circumstances. The death of a party in a personal contract undoubtedly ends the contract. The legal intervention exposing the performance of the contract to unlawfulness is not a difficult proposition. The ground of destruction of the subject matter including deterioration and unavailability has been the subject of interpretation. The fourth ground, namely, the changed circumstances have more issues. Even though it's not specifically acknowledged [4] , it's applied as part of the third one - the destruction of the subject matter of the contract.

The frustration and force majeure appear same, but they differ. If the frustration occurs due to a frustrating event that is beyond the control of man, it is a force majeure such as a flood or epidemic. However, the doctrine of frustration which is larger in its sweep includes the frustrating events that are beyond the control of man like floods and epidemics and man-made events like war. But, the editors of the classic on Indian Contract law say, “war, inundation (flood) and epidemics are cases of force majeure” [5] .

Judicial Response to Frustration

Digging into the legal history, we go back to the 17 th century. The theory of absolute liability was accepted by the court in the Paradine case [6] . In this case, a person was sued for arrears of rent. However, he argued that he was evicted and kept out of possession of the land which was beyond his control. Because of this, he pleaded that he couldn’t receive the profits from the land and he couldn’t therefore pay the rent. However, he was still held liable for not paying rent due to the theory of absolute liability. How sad?

To rectify the theory of absolute liability, the doctrine of frustration sneaked into the court in Atkinson's case [7] . In this case, the defendant British ship was relieved from the breach of contract for failing to upload cargo at St. Petersburg in Russia, since it was found impossible to upload cargo due to the frustrating event of an outbreak of war. After decades, in Taylor’s case [8] , the defendants were discharged from their liabilities mentioned in the contract because the court found that it was impossible and incapable of being performed due to the fire which destroyed the subject matter of the contract, namely, concert hall and garden. Blackburn J reasoned that the rule of absolute liability only applied to positive, definite contracts, not to those in which there was an express or implied condition underlying the contract. He reasoned that the continued existence of the music hall in Surrey Gardens was an implied condition essential for the fulfilment of the contract. The destruction of the music hall was the fault of neither party and rendered the performance of the contract by either party impossible. Blackburn J cited the civil code of France and the Roman law for the proposition that when the existence of a particular thing is essential to a contract, and the thing is destroyed by no fault of the party, the parties are freed from the obligation to deliver the thing.

The extension of the frustration doctrine to commercial contracts poses more challenges. In Krell’s case [9] , there was a contract to hire a flat for the coronation of King Edward VII but the coronation was cancelled. The court extended the frustration doctrine from the foundation to the purpose of the contract and held that the plaintiff could not claim the rent because the coronation was cancelled which was the purpose of the contract.

The unlawfulness in the performance of the contract is a frustrating event. Nobody should be compelled to perform a contract if the performance exposes the performer to illegality. The contract which is against the public policy is illegal and void.

Indian Contract Act, 1872

Now let's look into the common law of contract as codified under the Indian Contract Act of 1872. Even though the Act does not use the expression frustration, Section 56 has incorporated the doctrine in three parts. Firstly, the section declares that an “agreement” to do an impossible act is “itself void”. Secondly, though the second part of the section is not happily worded, declares that the contractual act, which after the “contract” is made becomes impossible to perform due to some event that the promisor couldn’t prevent from happening or because the performance of the act would be unlawful, the contract is void. Thirdly, the section declares that the compensation is payable for the breach of contract by the promisor if the promisor had known or might have known by the exercise of his due diligence, but if the promisor did not know, then the promisor must pay compensation for non-performance of his promise. The first part uses the word “agreement” which is wider than the term “contract” used in the second part of the section [10] . The agreement includes all bilateral acts that create rights, transfer rights or extinguish rights. However, the contract is an agreement that creates rights in personam . If this test is applied, the second part of Section 56 applies only to contracts that create only the rights in personam and the first of the section part applies to all other agreements. If so, it follows that the contracts attract the doctrine of frustration only if the contractual act, which after the “contract” is made becomes impossible to perform due to some event that the promisor couldn’t prevent from happening or because the performance of the act would be unlawful. However, the agreements attract the doctrine of frustration irrespective of the fact whether the event disables or hinders the performance of an agreed act or whether doing an agreed act exposes to unlawfulness arising from law made before or after the agreement. The third part of the section talks about the remedy of compensation payable to the injured promisor. The section consciously doesn’t use the words agreement or contract and therefore, it applies to both. However, the payment of compensation shouldn’t arise normally if the agreement or contract is void. The intention of the legislature is to pay compensation only to such a class of injured.

If the question of impossibility is a part of the contract as a condition, what follows has been dealt with by the Act of 1972. Instead of being chased by the doctrine of frustration on the happening of impossibility, the contracting parties may choose to have this as a part of the contract itself by anticipating the likely impossible event. There shouldn’t be any impediment to the freedom of contracting parties. However, the event shouldn’t be an uncertain future event. If the future event is uncertain, it may partake in the character of a wagering contract.

Section 29 and Section 30 of the Act of 1872 bar uncertain contracts and wagering contracts respectively. However, Section 32 of the Act of 1872, while prohibiting the enforcement of the conditional contract (defined in Section 31) until the contingent or future event has happened, declares in the second part that “ If the event becomes impossible, such contracts become void” . This is a repetition of the rule stated in the first part of the second part of Section 56. However, the courts have said that, if the Contract itself stipulates that the performance of the contract is subject to frustration or force majeure , then the issue should be dealt with by Sec 32 [11] . But, if the frustrating event occurs de hors the contract, then the case falls under Sec 56. But, it's not clear what difference it makes in the final outcome.

The Act of 1872 doesn’t prohibit contracting out of either Section 56 or Section 32. The parties to the contract may anticipate the frustrating event and stipulate the manner in which that should be dealt with. In such cases, the parties will be dealt with as provided in the contract. Similarly, the parties may contract out of the frustration doctrine by expressly stating that strict or absolute liability applies and under no circumstances, the promiser shall plead impossibility of performance. The contract may even stipulate that the promisee shall be entitled to X amount as compensation from the promiser for the non-performance of the contract due to a frustrating event.

The third part of Sec 56 that obliges payment of compensation is not clear on its application. If the contract is void, why compensation be paid? However, the wording of the Act implies that the promisor is liable to pay if he knew the impossibility of the act which he expected to perform but he still entered into the agreement, then the liability to pay arises.

As we have already discussed, if frustration occurs due to a frustrating event that is beyond the control of man, it is a force majeure such as a flood or epidemic. However, there is no general law that the contract becomes void on account of force majeure . The doctrine of force majeure therefore applies if it is a part of the contract. Where the contract does not have a clause on force majeure , the parties that want discharge from the contract may have to invoke either Sec 32 or Sec 56 and take discharge by proving frustration [12] .

21st-century society has become more interactive. Economic activities have been expanding. Consumerism has been on the rise. The market economy has been promoting free bargains. Globalization policy adopted by most nation-states has phenomenally increased trade and commerce. The Internet has replaced the once mighty pen. The pandemic due to the virality of the virus is a reality. Next, Artificial Intelligence is likely to substitute humans as performers. The possibility of the impossibility of the performance of the contract is expected to increase. Robustness in the application of the doctrine of frustration is all the more necessary.

The author is a Senior Advocate, Supreme Court of India. This article is the edited version of Online lecture delivered by the author on 08.09.2023: BEYOND LAW CLC

[1] See, FA Tamplin Steamship Co vs Anglo Mexican Petroleum Products: (1916) 2 AC 396 @ 403

[2] See, Russkoe Obschestvo vs John Stirk & Sons: (1922) 10 L1 LR 214 @217. See also Davis Contractors Ltd vs Foreham UDC: (1956) AC 696 @ 721 and 729

[3] See, British Movietones Ltd vs London and District Cinemas: (1951) 1 KB 190 @ 202

[4] The fundamental change of circumstances is specifically recognised in International law under the doctrine of Rebus Sic Stantibus as escape clause. Now, it is also a part of Art 62 of Vienna Convention on the law of Treaties.

[5] Pollock & Mulla on the Indian Contract and Specific Relief Acts, 16 th Edition, page 933

[6] Paradine v. Jane (1647): 82 E.R. 897

[7] Atkinson v. Ritchie: 103 E.R. 877

[8] Taylor v. Caldwell: (1863) B & S, 826 @ 836

[9] Krell v. Henry [1903] 2 K.B. 740 and 797

[10] See, p 339-339 and 439-442, Twelfth Edition, Salmon on Jurisprudence by P J Fitzgerald.

[11] See, National Agricultural Cooperative MKTG. Federation of India v. Alimenta S.A: (2020) 19 SCC 260 @ 283

[12] Energy Watchdog v. Central Electricity Regulatory Commission: 2017(4) Scale 580. See also, Doctrine of Frustration by Rishabh Soni: IPleaders, 12.08.2023. https://blog.ipleaders.in/doctrine-of-frustration/

essay on frustration contract

Force Majeure and Frustration

Jeremy Heywood

Jeremy Heywood

The coronavirus pandemic, and the restrictions on economic and social activities which it has brought in Jersey and the wider world, has already had a serious impact on most businesses.  The further the virus spreads and the longer the ‘lockdown’ continues the more serious the impact on business will be.  Businesses’ rights and obligations under contracts are coming under close scrutiny.

Non-performing parties may seek to rely on force majeure provisions and/or the doctrine of frustration so as to avoid liability for what would otherwise be a breach of contract.  These doctrines and/or contractual provisions which seek to engage them, may allow a party to avoid liability for a failure to perform its obligations under a contract, or at least not to be held liable for any delay in performance.  These will be of particular relevance to contracts for the sale of goods or the supply of services.

Force Majeure

The literal meaning of force majeure is ‘superior force’.  In the context of contract law, the phrase is used to denote intervening acts, outside of the control of the parties and beyond their reasonable contemplation, which prevents the performance of obligations under a contract.  Where the doctrine applies it may excuse a party to a contract from performing its obligations under it, either at all, or at least for a period of time.

In English law there is no general common law doctrine of force majeure .  The applicability of force majeure  is purely a question of whether or not the terms of the contract provide it.  This differs from other jurisdictions, such as France, where force majeure  is a general legal concept implied into contracts by virtue of the provisions of the Code Civil .  This is an important distinction.   In English law it is entirely a matter for the parties to define the events which constitute a force majeure (these usually include war, strike, riot, crime, epidemic or an ‘Act of God’, although what the latter term actually means is the subject of some debate).  It is also for the parties to determine their rights and obligations should such an event occur.  In French law, Article 1218 of the Code Civil provides that a force majeure event justifies suspension or termination of a contract, even if the contract does not contain any provision in that respect.  As such, the doctrine of force majeure  is always available to a party as a defence to liability (providing the test for establishing an event as a force majeure is met).

In Jersey the principles of force majeure were, to a limited extent, discussed in the case of Hotel de France (Jersey) Limited v. The Chartered Institute of Bankers [2002 JLR Note 5] .   The case concerned a booking made for a particular function room at the Hotel de France.  The day before the event there was a fire at the hotel which (it was said) rendered the specified room unusable.  The CIB declined the use of an alternative room and was sued by the hotel for damages.  The Court held that the particular room was a fundamental term of the contract and thus the CIB was entitled to set aside the contract and that, in any event, the fire was a force majeure (or cas fortuit , the Court stating that the two doctrines amount to the same thing).  There was no specific clause in the contract which dealt with force majeure , which suggests that the Jersey courts may take a less restrictive approach to the issue than the English courts would.

Where there is a contractual force majeure provision, in order to make a valid claim under the clause, a party would have to show that:

  • The factual event came within the scope of those defined as force majeure in the contract;
  • The occurrence of the event impacted upon the company’s performance of its obligations;
  • The company had done all it reasonably could to mitigate the effect of the event; and
  • The company had complied with all relevant notification requirements.

Where a force majeure is properly raised, the parties’ obligations under the contract will usually be deferred until after the force majeure has passed, or the parties’ breaches of obligation will be excused.


The doctrine of frustration applies where a supervening event occurs after the formation of the contract which renders the performance of the obligations under the contract impossible or illegal, or fundamentally changes the parties rights and obligations under the contract to such an extent that it would be unjust to hold the parties to the original bargain.  It is important to note that the parties to a contract can specifically exclude the doctrine of frustration from applicability to the contract in question.

The doctrine appears to form part of Jersey law as its application was considered in the case of Mobil Sales & Supply Corporation v. Transoil (Jersey) Limited [1981 J.J. 143] .  The Court in Mobil v. Transoil referred exclusively to English authority so it is likely that the Jersey courts will place reliance on English jurisprudence in this area, although will not be bound by it.  There is no later Jersey authority.  In that case, it was held that a shutdown of a particular oil refinery did not amount to a frustration of the contract because it was one for supply of a specified amount of oil to a particular place, not from a particular refinery.  Other refineries were operating as normal and the defendant could and should have sourced oil from an alternative source.

Frustration is a difficult argument to run.  There are few reported cases where a contract has been found to have been frustrated as a matter of English law.  The test to be met is a high one.  Whether a contract has been frustrated will depend upon the precise contractual terms, the surrounding factual matrix, and how the facts impacted upon the performance of the contract.  The focus will be on whether the parties’ specific contractual obligations have fundamentally changed to the extent that it would be unjust to require a party to comply with its strict contractual obligations because that would mean requiring it to do something fundamentally different from that which the party had originally agreed to do.

It is important to note that the ‘supervening event’ relied upon to invoke the doctrine must not be the fault of the non-performing party.  Obviously, the spread of coronavirus is not the fault of any business.  However, decisions taken by a business in response to the pandemic which render the performance of the obligations impossible or more expensive may still amount to an actionable breach of contract.  For example, a decision to close a business to protect staff may be the correct response to the pandemic but may not result in that business escaping liability for breach of contract.  If , however, the Government passed legislation requiring that business to close, the performance of the business’s contractual obligations would become unlawful as a result of changes in the law implemented after the contract was entered into.  In such a case, the contract would be highly likely to be held to have been frustrated.

The effect of a contract being frustrated is that the contract is set aside.  Any sums paid by one party will be returned (subject to a discretion to allow retention of sums for costs and expenses).  Strictly, there is no requirement to notify the other party or parties to the contract although as a matter of practical reality it would be sensible to do so.

Practical Tips

The starting point for those facing difficulties in fulfilling their obligations, or dealing with those who assert such difficulties, is to look at the terms of the contract.  If the contractual provisions contain a force majeure clause, and its scope is wide enough to include the current pandemic, then it may be that force majeure comes into play.  If it does, it is imperative that any notification requirements are strictly complied with.  Force majeure clauses will usually stipulate strict time limits within which claims for force majeure relief must be made.  Such clauses are also likely to stipulate precisely what any notice given must contain by way of detail.  Businesses should also check what the clause stipulates as to the parties’ rights and obligations in the event of a force majeure event.  Is the defaulting party permitted to avoid performance of its obligations entirely, or only to delay them?  What provisions are there in relation to any monies already paid?

If the contract does not contain a force majeure clause, it may be that in Jersey the Court would ultimately conclude that the intervening event was a force majeure , as it seems to accept that it has such a jurisdiction following the Hotel de France case.  Equally, it may be that the doctrine of frustration might come into play, although as noted above, the cases in which the English courts have held that a contract has been frustrated are very few in number and there are no such cases in Jersey.

On a common sense level, these are difficult times for all of us.  The first step should be to contact the other parties and seek to open a constructive dialogue to explore what alternative routes might be open which would be acceptable to all concerned, rather than invoking strict legal rights and remedies immediately (although be mindful of any contractual time limits).

For any additional information on this matter, please contact Jeremy Heywood.

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essay on frustration contract

Agent describes 'frustration and disappointment' with Sundowns-Mokoena contract negotiations

  • Mokoena has two years left on current contract with Downs
  • Masandawana negotiating improved contract with midfielder
  • Agent shares player's frustrations with lack of progress


Teboho Mokoena has been Mamelodi Sundowns' purring engine in their midfield, consistently delivering in crucial matches for both club and country.

The 27-year-old has been subject to recent transfer speculation, with Premier League side Bournemouth among the listed suitors .

With this in mind, the club opened improved contract negotiations with the player in November 2023, but so far no agreement has been reached.


The 2022/23 Premier Soccer League's Player of the Season played a crucial role in helping Bafana Bafana claim a bronze in the 2023 Africa Cup of Nations held in Ivory Coast in the beginning of the year.

He was also key for Downs in their successful bid to win the African Football League [AFL] as well as claiming the PSL title for the seventh consecutive season .

It explains why Masandawana want to extend his current deal which expires in 2026 just like goalkeeper Ronwen Williams who will be at the club until 2028 .

Mokoena's agent Glyn Binkin is, however, not happy with the way the club is dragging its heels on a new deal.


"We have been in discussions and negotiations since November, and sadly are no closer to finalizing a new deal, which has led to a lot of frustration and disappointment for both myself and my client in this regard," Binkin opened up to SABC Sport .

"However, we are hopeful the club will present a revised offer, which will bring this to finality and in the best interests of all concerned so that the player can continue producing Man of the Match performances for Sundowns for years to come."

Mokoena is working on his fitness after sustaining a hamstring injury that has kept him out of action since April 15.

The South Africa international is expected to be fit for the Nedbank Cup final against Orlando Pirates.

He is also expected to play a role in Bafana Bafana's 2026 World Cup qualifier against Nigeria scheduled for June 7.

Teboho Mokoena, Sundowns

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TikTok challenges U.S. ban in court, calling it unconstitutional

Bobby Allyn

Bobby Allyn

essay on frustration contract

TikTok's suit is in response to a law passed by Congress giving ByteDance up to a year to divest from TikTok and find a new buyer, or face a nationwide ban. Kiichiro Sato/AP hide caption

TikTok's suit is in response to a law passed by Congress giving ByteDance up to a year to divest from TikTok and find a new buyer, or face a nationwide ban.

TikTok and its parent company on Tuesday filed a legal challenge against the United States over a law that President Biden signed last month outlawing the app nationwide unless it finds a buyer within a year.

In the petition filed in the Court of Appeals for the District of Columbia Circuit, the company said the legislation exceeds the bounds of the constitution and suppresses the speech of millions of Americans.

"Banning TikTok is so obviously unconstitutional, in fact, that even the Act's sponsors recognized that reality, and therefore have tried mightily to depict the law not as a ban at all, but merely a regulation of TikTok's ownership," according to the filing.

The law, passed through Congress at lightning speed, which caught many inside TikTok off guard, is intended to force TikTok to be sold to a non-Chinese company in nine months, with the possibility of a three month extension if a possible sale is in play.

Yet lawyers for TikTok say the law offers the company a false choice, since fully divesting from its parent company, ByteDance, is "simply not possible: not commercially, not technologically, not legally," the challenge states. "And certainly not on the 270-day timeline required by the Act."

Anupam Chander, a law professor at Georgetown University who specializes in technology regulations, said if TikTok loses this legal fight, it will likely shut down in the U.S.

"The problem for TikTok is that they have a parent company that has these obligation in China, but they're trying to live by free speech rules by the United States," Chander said in an interview. "The question is whether American courts will believe that that's even possible."

TikTok says law based on "speculative and analytically flawed concerns"

Lawmakers in Washington have long been suspicious of TikTok, fearing its Chinese owner could use the popular app to spy on Americans or spread dangerous disinformation.

But in the company's legal petition, lawyers for TikTok say invoking "national security" does not give the government a free pass to violate the First Amendment, especially, TikTok, argues, when no public evidence has been presented of the Chinese government using the app as a weapon against Americans.

Possible TikTok ban could be 'an extinction-level event' for the creator economy

Possible TikTok ban could be 'an extinction-level event' for the creator economy

According to the filing, the law is based on "speculative and analytically flawed concerns about data security and content manipulation — concerns that, even if grounded in fact, could be addressed through far less restrictive and more narrowly tailored means."

New DOJ Filing: TikTok's Owner Is 'A Mouthpiece' Of Chinese Communist Party

New DOJ Filing: TikTok's Owner Is 'A Mouthpiece' Of Chinese Communist Party

Constitutional scholars say there are few ways for the government to restrict speech in a way that would survive a legal challenge. One of those ways is if the government can demonstrate a national security risk. Also key, legal experts say, is the government showing the speech suppression was the least restrictive option on the table.

TikTok said Congress ignored less restrictive ways of addressing the government's national security concerns.

"If Congress can do this, it can circumvent the First Amendment by invoking national security and ordering the publisher of any individual newspaper or website to sell to avoid being shut down," the filing states. "And for TikTok, any such divestiture would disconnect Americans from the rest of the global community."

Since more than 90% of TikTok's users are outside of America, Georgetown's Chander said selling the U.S.-based app to a different owner would cannibalize its own business.

"You can't really create a TikTok U.S., while having a different company manage TikTok Canada," Chander said in an interview. "What you're doing essentially is creating a rival between two TikToks," he said. " It may be better to take your marbles out of the United States and hope to make money outside of the U.S., rather than sell it at a fire-sale price."

TikTok critics call app a 'spy balloon on your phone'

The filing sets off what could be the most important battle for TikTok. It has been fending off legal challenges to its existence since former President Trump first sought to ban the app through an executive order in the summer of 2020. That effort was blocked by federal courts.

Since then, Democrats and Republicans have shown a rare moment of unity around calls to pressure TikTok to sever its ties with ByteDance, the Beijing-based tech giant that owns the video-streaming app.

Trump's Ban On TikTok Suffers Another Legal Setback

Congress has never before passed legislation that could outright ban a wildly popular social media app, a gesture the U.S. government has criticized authoritarian nations for doing.

In the case of TikTok, however, lawmakers have called the app a "spy balloon on your phone," emphasizing how the Chinese government could gain access to the personal data of U.S. citizens.

Worries also persist in Washington that Beijing could influence the views of Americans by dictating what videos are boosted on the platform. That concern has only become heightened seven months before a presidential election.

Yet the fears so far indeed remain hypothetical.

There is no publicly available example of the Chinese government attempting to use TikTok as an espionage or data collection tool. And no proof that the Chinese government has ever had a hand over what TikTok's 170 million American users see every day on the app.

TikTok says it offers U.S. a plan that would shut app down if it violated agreement

TikTok, for its part, says it has invested $2 billion on a plan, dubbed Project Texas, to separate its U.S. operation from its Chinese parent company. It deleted all of Americans' data from foreign servers and relocated all of the data to servers on U.S. soil overseen by the Austin-based tech company Oracle.

While the plan was intended to build trust with U.S. lawmakers and users, reports surfaced showing that data was still moving between staff in California and Beijing.

In the filing on Tuesday, TikTok said it submitted an agreement to the Committee on Foreign Investment in the United States, which has been probing the app for five years, that would allow the U.S. to suspend TikTok if it violated terms set forth in a national security plan.

But, lawyers for TikTok say, the deal was swept aside, "in favor of the politically expedient and punitive approach," the petition states.

Mnuchin claims he will place a bid to buy TikTok, even though app is not for sale

Despite the new law giving TikTok the ultimatum of selling or being shut down, there are many questions around how the app could even be bought by another company or group of investors.

Former Treasury Secretary Steven Mnuchin told NPR on Monday, he is planning to assemble a group of investors to try to purchase TikTok without the app's algorithm.

Mnuchin, who declined to answer additional questions, said in between sessions at the Milken Institute Global Conference in Los Angeles that the proposal to buy the app is still in the works, but he would not say when it would be formally submitted.

One major obstacle in any possible sale of TikTok is a glaring problem: The app is not for sale.

TikTok Ban Averted: Trump Gives Oracle-Walmart Deal His 'Blessing'

TikTok Ban Averted: Trump Gives Oracle-Walmart Deal His 'Blessing'

Despite the new law in the U.S., ByteDance says it does not intend to let go of the service. Furthermore, winning the support of China would be necessary, and officials in Beijing are adamantly against any forced sale.

In 2020, amid the Trump administration's clamp down on the app, China added "content-recommendation algorithms" to its export-control list, effectively adding new regulations over how TikTok's all-powerful algorithm could ever be sold.

ByteDance, not TikTok, developed and controls the algorithm that determines what millions see on the app every day. The technology has become the envy of Silicon Valley, and no U.S. tech company has been able dislodge TikTok's firm hold on the short-form video market. Experts say key to its success is its highly engaging and hyper-personalized video-ranking algorithm.

The algorithm, which involves millions of lines of software code developed by thousands of engineers over many years, cannot be easily transferred to the U.S., even if China did allow it, TikTok's challenge states.

Lawyers for TikTok argue that "any severance [of the algorithm] would leave TikTok without access to the recommendation engine that has created a unique style and community that cannot be replicated on any other platform today."


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