Frustration

• Author: John D. McCamus
• Pages: 655-702

655

CHAPTER 14

FRUSTR ATION

A. INTRODUCTION

The doctrine of frustr ation may provide an excuse for non-performance

to a party whose ability to perform 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 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, 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).

3 Tsakiroglou & Co v Noblee Thorl GmbH,[1962] AC 93 (HL).

4 Krell v Henry, [1903] 2 KB 740 (CA) [Krell].

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 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 f‌ind an appro-

priate balance between the inclination to hold people to their bargains,

notwithstanding the fact that the bargain has 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 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 — risk-allocation analysis — may also be fruit-

fully employed in the context of cases of frustration. We shall then

turn to consider the application of frustration doctrine in the partic-

ular contexts 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. Obvi-

ously, parties who anticipate the possibility of interference with con-

tractual performance by supervening events may wish to stipulate for

the consequences of such events. Such provisions typically relieve par-

ties from the burden of performance when certain stipulated events of

this kind occur. The interpretation of these force majeure clauses will

6 See Chapter 13, Section C.

7 Griff‌ith v Brymer(1903), 19 TLR 434 (KB).

Frustration 657

be brief‌ly 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 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 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 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 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 thi s general rule of absolute

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

and the enactment of subsequent legislation rendering performance

illegal13 were recognized defences to the promisee’s claim. A substant ial

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 ER 897 (KB) [Paradine].

9 See, for example, Walton v Waterhouse (1673), 2 Wms Saund 420, 85 ER 1233

(KB); Hadley v Clark (1799), 8 TR 259, 101 ER 1377 (KB); Atkinson v Ritchie

(1809), 10 East 530, 103 ER 877 (KB).

10Above note 8 at 27 (Aleyn).

11Ibid.

12Hyde 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).