B. Development of the Doctrine

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 568-573

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The evolution of the doctrine of frustration in English law may be characterized as having three phases or stages of development. In the earliest phase, the common law appeared to be most reluctant to permit changing circumstances to provide an excuse for non-performance of an agreement. The leading case of Paradine v. Jane,⁸decided in 1647, was accepted by the courts⁹as establishing the rule of absolute contracts. Under this approach, unexpected changes in circumstances that substantially undermine the value of a contract for a promisor constitute no defence to a claim brought by the promisee to enforce the agreement against the promisor. On its facts, Paradine v. Jane involved a twenty-one-year lease of a farm. After six years of occupancy, the tenant had been dispossessed, as a result of the actions of enemies of the King, for a period of approximately two years. The tenant refused to pay rent for the period during which he could not work the land. The landlord’s claim for the rent enjoyed success, however, as the tenant was obliged to perform his contractual obligations "notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract."¹⁰In the absence of so providing, however, the obligation is absolute. Thus, "if the lessee covenant to repair a house, though it be burnt by lightning or thrown down by enemies, yet he ought to repair it."¹¹

Even at this early stage of development, however, there was some authority for the existence of exceptions to this general rule of absolute contracts. The death of the promisor in a contract of personal service¹² and the enactment of subsequent legislation rendering performance illegal¹³were recognized defences to the promisee’s claim. A substantial inroad on the doctrine was not made, however, until the second phase in the development of the doctrine initiated by Blackburn J.’s decision

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in Taylor v. Caldwell,¹⁴some two hundred years later. In this case, a music hall burned down after a contract to rent the hall for four days had been entered into, but before the time for performance had arrived. The owner of the hall defended against the hirer’s claim for damages for breach of contract on the basis that the fire rendered his performance impossible. In permitting the defence, Blackburn J. merely extended the operation of a principle then well recognized¹⁵that a bailee’s duties were discharged if the goods in his care perished without fault on his part. In Taylor the court held that the perishing without fault of the premises to be let discharged the owner’s obligations under the contract of hire. In articulating reasons for this holding, however, Blackburn J. put forward an explanation that dominated English judicial thinking on the subject until the latter part of the twentieth century. Having conceded that the contract did not expressly provide for discharge in the event of a fire, Blackburn J. went on to observe:

a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance ... that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall ... that being essential to their performance.¹⁶Hence, the contract was construed by Blackburn J. as subject to an implied condition that the owner be excused. In Taylor v. Caldwell, then, performance will be excused in the changed circumstances because this solution is dictated by what the agreement reveals about what must have been the actual intent of the parties.

The search, mandated by Taylor v. Caldwell, for subjective intent as a basis for implying a term could, however, only provide a satisfactory explanation for a limited range of cases. It might seem obvious to some that where the subject matter of the contract has been destroyed, it is reasonable to assume that the parties must not have intended the contract to continue in force. Yet even in these cases, it is clear that the inquiry does not concern the actual intent of the parties, but the presumed intent of the parties acting as reasonable persons. As one judge was later to observe, "there is something of a logical difficulty in see-

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ing how the parties could even impliedly have provided for something which ex hypothesi they neither expected nor foresaw."¹⁷The obvious inadequacy of the...