Frustration

• Author: John D. Mccamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 566-611

CHAPTER 14

FRUSTR ATION

A. INTRODUCTION

The doctrine of fru stration may provide an excuse for non-perform ance

to a party whose ability to perform has been compromised by super-

vening events that occur after form ation of the agreement.1 In a n agre e-

ment to rent a concert hall, for example, the owner’s ability to perform

would be severely compromised if the build ing were to be destroyed by

f‌i re.2 A contract to sell and ship goods from India to an Italian buyer

becomes more expensive to perform when the Suez Canal is unexpect-

edly closed.3 A contract to rent rooms on Pall Mall with a view of the

coronation procession of Edward VII becomes pointless when the pro-

cession is cancelled.4 A contractor is hired to construct a particular

facility and is then ordered by the government to discontinue the work

under wartime regulations.5 In such cases, provided that the matter

1 See generally G.H. Treitel , Frustration and Force Majeure, 2d ed. (London:

Thomson Sweet & Max well, 2004); E. McKendrick, ed., Force Majeure and

Frustration of Cont ract, 2d ed. (London: Lloyd’s of London Press , 1995) [Mc-

Kendrick]. And see D. Percy, “The Application of the D octrine of Frustrat ion

in Canada” in G.H.L . Fridman, ed., Studies in Cana dian Business Law (Toronto:

Butterwort hs, 1971) c. 3.

2Tayl or v. Cald well (1863), 3 B. & S. 826, 122 E.R. 309 (Q.B.).

3Tsakiroglou & Co. v. Noblee Thorl G.m.b.H., [1962] A.C. 93.

4Krell v. Henry, [1903] 2 K.B. 740 (C.A.).

5Metropolitan Water Board v. Dick, Kerr & Co. Ltd ., [1918] A.C. 119 (H.L.).

566

Frustration 567

has not been specif‌i cally provided for in the agreement, the doctrine of

frustration may have the effect of discharging the agreement, thereby

releasing the parties from any further obligation to perform.

In cases of this kind, the parties have entered into an agreement

on the assumption that such problems would not materialize. Cases

of frustration are thus quite similar to cases of mistaken assumptions

concerning the facts existing at the time an agreement is entered into,

a matter that we consider elsewhere.6 While mistaken assumptions

cases deal with assumptions concerning facts in existence at the time

of formation of the contract, frustration cases deal with assumptions

concerning future events. The close relationship between mistaken

assumptions and frustration cases can be neatly illustrated by refer-

ence to the coronation cases arising from the postponed coronation

of Edward VII. If the contract entered into to rent rooms on Pall Mall

had been entered into at a time when the originally planned corona-

tion procession had already been cancelled, the case would be one of

mistaken assumptions as to existing facts.7 If, however, the cancella-

tion of the procession was announced only after the contract had been

entered into, the case would be one of frustration. As with mistaken

assumptions doctrine, then, frustration doctrine must f‌i nd an appro-

priate balance between the inclination to hold people to their barga ins,

notwithstanding the fact that the bargain has become unexpectedly

less attractive to them, and, on the other hand, an inclin ation to relieve

parties from their bargains where a refusal to do so appears unjust and

may result in the unjust enrichment of the other party.

In this chapter, the development of the doctrine of frustration and

the traditional categories of its application will be considered. It will

be suggested that the analytical model that has developed in the law of

mistaken assumptions — ri sk-allocation a nalysis — may also be fruit-

fully employed in the context of case s of frustration. We shall then turn

to consider t he application of fru stration doctri ne in the partic ular con-

texts of increased expense or commercial impracticability, agreements

to transfer interests in land and frustration resulting from choices

made by the party subject to the obligation to perform. Obviously,

parties who anticipate the possibility of interference with contractual

performance by supervening events may wish to stipulate for the con-

sequences of such events. Such provisions t ypically relieve parties from

the burden of performance when certain stipulated events of this kind

occur. The interpretation of these so-called force majeure clauses will

6 See Chapter 13, sect ion C.

7Griff‌i th v. Brymer(1903), 19 T.L.R. 434.

THE LAW OF CONTR ACTS568

be brief‌l y considered before turning to an account of the consequences

of frustration at common law.

B. DEVELOPMENT OF THE DOCTRINE

The evolution of the doctrine of frustration in English law may be char-

acterized as having three phases or stages of development. In the earli-

est 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 Pa radine v. Jane,8 de cided in 1647, wa s

accepted by the courts9 as establishing the rule of absolute contracts.

Under this approach, unexpected changes in circumstances that sub-

stantially 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 i nevita ble nece ssity, be cause h e might h ave prov ided aga inst it by his

contract.”10 In the absen ce of so provid ing, h owever, the obl igati on is ab -

solute. Thus, “if the lessee covenant to repair a house, t hough 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 th is general rule of absolute

contracts. The death of the promisor in a contract of personal service12

and the enactment of subsequent legislation rendering performance il-

legal13 were 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

8 (1647), Aleyn 26 , 82 E.R. 897.

9 See, for example, Wa lton v. Waterh ouse (1673), 2 Wms. Saund. 420, 85 E.R. 1233;

Hadley v. Clark (1799), 8 T.R. 259, 101 E.R. 1377; Atkinson v. Ritchie (1809), 10

East 530, 103 E.R. 877.

10 Above note 8 at 27 (Aleyn).

11 Ibid.

12 Hyde v. Dean of Windsor (1597), Cro. Eliz. 552, 78 E.R. 798.

13 Abbot of Westminster v. Clerke (1536–37), 1 Dyer 27a, 73 E.R. 59.