Frustration
| Author | John D. McCamus |
| Pages | 655-702 |
655
CH AP TER 14
FRUSTR ATION
A. INTRODUCTION
The doctrine of frustr ation may provide an excuse for non-performance
to a party whose ability to p erform has been compromised by super-
vening events that occur after formation of the agreement.1 In an agree-
ment to rent a concert hall, for example, the owner’s ability to perform
would be severely compromised if the building were to be dest royed by
fire.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 pointles s when the pro-
cession is cancelled.4 A contractor is hired to const ruct a particular
facility and is then ordered by the government to discontinue the work
under wartime regul ations.5 In such cases, provided that the matter
1 See, generally, GH Treitel, Frustrati on and Force Majeure, 2d ed (London:
Thomson Sweet & Maxwe ll, 2004) [Treitel]; E McKendrick, ed, Force Majeure
and Frustration of Co ntract, 2d ed (London: Lloyd’s of London Press, 1995)
[McKendrick]. And see D Percy, “The Application of the Doct rine of Frustration
in Canada” in GH L Fridman, ed, Studies in Cana dian Business Law (Toronto:
Butterworth s, 1971) ch 3.
2 Taylor v Caldwell (1863), 3 B & S 826, 122 ER 309 (QB).
5 Metropolitan Water Board v Dick, Kerr & Co Ltd , [1918] AC 119 (HL)
[Metropolitan Water Board].
THE LAW OF CONTR ACTS656
has not been specifically provided for in the agreement, the doctrine of
frustration may h ave the effect of discharging the agreement, thereby
releasing the parties from any further obligation to perform.
In cases of thi s kind, the parties h ave entered into an agreement
on the assumption that such problems would not material ize. Cases
of frustration are thus quite similar to cases of mistaken assumptions
concerning the facts ex isting at the time an agreement is entered into,
a matter that we consider elsewhere.6 While mi staken assumptions
cases deal w ith assumptions concerning fact s in existence at the time
of formation of the contract, frustr ation cases deal with a ssumptions
concerning future events. The close relationsh ip between mistaken
assumptions and fr ustration cases can b e 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 Ma ll
had been entered into at a time when the orig inally planned corona-
tion procession had already been c ancelled, the case would be one of
mistaken assumptions as to existing fact s.7 If, however, the cancella-
tion of the procession was announced only after t he contract had been
entered into, the case would be one of frustration. As with mistaken
assumptions doctr ine, then, frustration doctrine must find an appro-
priate balance between t he inclination to hold people to their bargains,
notwithstand ing the fact that the bargain h as become unexpectedly
less attractive to them, and, on the other hand, an inclination to relieve
parties from their bargains where a refusal to do so appea rs unjust and
may result in the unjust enr ichment of the other party.
In this chapter, the development of the doctrine of fru stration and
the traditional categories of its application will be considered. It will
be suggested that the analytical model that ha s developed in the law of
mistaken assumptions — risk-allocation ana lysis — may also be f ruit-
fully employed in the context of cases of frustration. We shall then
turn to consider the application of frustration doctrine in the par tic-
ular contexts of increa sed expense or commercial impract icability,
agreements to tran sfer interests in land, and fru stration resulting from
choices made by the party subject to the obligation to perform. Obvi-
ously, parties who anticipate the possibility of interference with con-
tractual performance by supervening events may w ish to stipulate for
the consequences of such events. Such provisions typically relieve par-
ties from the burden of performa nce when certain stipulated events of
this kind occur. The interpretation of these force majeure clauses will
6 See Chapter 13, Section C.
Frustration 657
be briefly considered before turni ng to an account of the consequences
of frustration at common law.
B. DEVELOPMENT OF THE DOCTRINE
The evolution of the doctrine of frustration in Engli sh law may be char-
acterized as hav ing three phases or stages of development. In the ear-
liest 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,8 decided in 1647, was
accepted by the courts9 as est ablishing the rule of absolute contracts.
Under this approach, unexpected changes in circumstances t hat sub-
stantially under mine 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, Pa radi ne involved a twenty-one-year
lease of a farm. Af ter six years of occupancy, the tenant had been dispos-
sessed, 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 “notw ithstanding any accident by inevitable
necessity, because he might have provided against it by his contract.”10
In the absence of so providing, however, the obligation is absolute. Thus,
“if the lessee covenant to repa ir 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 thi s general rule of absolute
contracts. The death of the promisor in a contract of personal service12
and the enactment of subsequent legislat ion rendering performance
illegal13 were recognized defences to the promisee’s claim. A substant ial
inroad on the doctrine wa s not made, however, until the second phase
in the development of the doctrine initiated by Bl ackburn J’s decision
(KB); Hadley v Clark (1799), 8 TR 259, 101 ER 1377 (KB); Atkinson v Ritchie
(1809), 10 East 530, 103 ER 877 (KB).
10 Above note 8 at 27 (Aleyn).
11 Ibid.
12 Hyde v Dean of Windsor (1597), Cro Eliz 552, 78 ER 798.
13 Abbot of Westminster v Clerke (1536–37), 1 Dyer 27a, 73 ER 59 (KB).
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