C. The Standard Categories of Frustration

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 573-579

Contenidos

• 1) Impossibility.
• 2) Frustration of Purpose.
• 3) Temporary Impossibility.

Page 573

The doctrine of frustration has provided an excuse for non-performance on the basis of changing circumstances in three kinds of situations. First, the doctrine has been applied in cases where the frustrating event has rendered performance impossible. Second, there are a small number of cases in which, though performance remains possible, the purpose for which one or both of the parties have entered the agreement has been undermined. Third, there are cases in which temporary impossibility has grounded discharge for frustration.

1) Impossibility

As we have seen,³⁴even at the time of Paradine v. Jane,³⁵courts had recognized exceptions to the rule of absolute contracts. Thus, in a contract to provide personal services, the death of the service provider discharged the agreement.³⁶Similarly, the enactment of subsequent legislation prohibiting the contractual performance in question brought the agreement to an end.³⁷In such cases, performance might be said to be, in some sense, impossible. Similarly, in Taylor v. Caldwell,³⁸the destruction of the concert hall by fire might be said to render performance impossible. Although the rule in the Taylor case is commonly referred to as the doctrine of "impossibility by destruction of specific subject matter," it is clear that the rule has a wider application than this designation would indicate. The term "subject matter"

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for example, does not refer merely to the performance promised under the agreement but as well to a specific person or thing necessary for performance of the promisor’s undertaking. In Nickoll & Knight v. Ashton Edridge & Co.,³⁹for example, the rule was applied to discharge an agreement to sell goods "to be shipped by the steamship Orlando" on the basis that the ship in question had been stranded. Further, it is clear that the rule applies in circumstances short of physical destruction of the "particular person or chattel." It is enough that there exists an incapacity to perform.⁴⁰

Shortly after the decision in Taylor, the doctrine was applied to a case where the performance of the promisor was said to be prevented by an act of the legislature. In Baily v. De Crespigny,⁴¹the defendant had covenanted that he would refrain from building a structure on certain lands. The fact that the legislature had subsequently intervened and permitted a railway company to expropriate the defendant’s land and build a station on it was held to be a complete defence to the plaintiff’s claim for breach of contract. Performance had been rendered impossible by statute. Similar considerations would apply, of course, when the promised performance of the promisor is itself prohibited⁴²by the law of the jurisdiction in which it is to be performed,⁴³or when a declaration of war has the effect of rendering further performance of the contract trading with the enemy.⁴⁴Although some of the pre-Taylor case law had recognized a doctrine of impossibility of performance caused by operation of law,⁴⁵it was in the Baily case that this doctrine was placed squarely on the implied-contract theory.

In sum, the doctrine of impossibility will discharge a promisor where, without his fault, (a) in a contract requiring the personal performance of the promisor, the promisor dies or is incapacitated through illness, (b) in a contract where performance requires the continued existence of a specific thing, that thing perishes or is otherwise unavailable for performance; and (c) performance is subsequently prevented or prohibited by operation of law.

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2) Frustration of Purpose

A well-known series of cases arising from the postponement of the coronation of Edward VII presented problems that could not easily be resolved by resort to the doctrine of impossibility. In the leading case of Krell v. Henry,⁴⁶for example, the defendant had agreed to hire a flat from which the coronation procession could be observed. The agreement made no reference to the coronation. In fact, however, the owner of the flat was aware of the hirer’s purpose for renting the flat. Postponement of the coronation destroyed the value of the agreement for the hirer, but did not render impossible the performance of the expressly stated obligations of either party. Nonetheless, the Court of Appeal, in rejecting the owner’s claim for the fee, held that the Taylor case applied to this set of circumstances. Vaughan Williams L.J., writing for the court, noted that the Taylor rule had been extended to cases "where the event which renders the contract incapable of performance is the cessation or non-existence of an express condition or state of things, going to the root of the contract, and essential to its performance."⁴⁷In his view, the only novel point that arose here was whether the court should look to circumstances beyond the terms of the agreement in applying the rule. He answered this question affirmatively in the following manner:

I think that you first have to ascertain, not necessarily from the terms of the contract, but if required, from necessary inferences, drawn from surrounding circumstances recognized by both contracting parties, what is the substance of the contract and then to ask the question whether that substantial contract needs for its foundation the assumption of the existence of a particular state of things. If it does, this will limit the operation of the general words, and in such case, if the contract becomes impossible of performance by reason of the non-existence of the state of things assumed by both contracting parties as the foundation of the contract, there will be no breach of the contract thus limited.⁴⁸Hence, on a narrow reading, the decision may be said merely to create an exception to...