The radically different test: Davis Contractors
Frustration occurs when, after formation and without the fault of either party, an unforeseen event renders performance impossible, illegal, or fundamentally different from what was contemplated. The governing test is Lord Radcliffe's in Davis Contractors Ltd v Fareham UDC [1956] AC 696: frustration arises where performance would be a thing radically different from that which was undertaken by the contract.
The Latin tag non haec in foedera veni - it was not this that I promised to do - captures it. Performance must have become something fundamentally different, not merely more burdensome. When it does, the contract is automatically discharged - neither party need elect or give notice.
Categories of frustrating event
Frustration is usually grouped into categories. Physical impossibility - destruction or unavailability of the subject matter - is the classic case: in Taylor v Caldwell (1863), a music hall hired for concerts burned down before the dates, discharging the contract. Supervening illegality - where government action, sanctions, or law makes performance unlawful - frustrated the contract in Fibrosa Spolka Akcyjna v Fairbairn Lawson [1943] AC 32 when wartime occupation made delivery illegal.
Frustration of purpose is narrower: in Krell v Henry [1903], a flat hired to view the coronation procession was frustrated when the coronation was postponed, because viewing was the foundation of the contract. Death or incapacity frustrates a personal-service contract that depended on a particular individual.
What frustration does not cover
The doctrine is applied reluctantly and within strict bounds. Increased cost or difficulty is never enough: in Davis Contractors a job that took 22 months instead of eight and cost far more was not frustrated - the obligation was still to build the houses. In Tsakiroglou v Noblee Thorl [1962] AC 93, closure of the Suez Canal did not frustrate a sale even though the alternative route round the Cape was far longer and costlier.
Self-induced frustration gives no relief: in Maritime National Fish v Ocean Trawlers [1935] AC 524 a party's own allocation of licences defeated the claim, and The Super Servant Two [1990] showed that even a reasonable commercial choice can make frustration self-induced. And foreseeability undermines a claim - if the event could have been anticipated and provided for, the court will not excuse performance. A force majeure clause covering the event usually rules frustration out altogether.
The modern multi-factorial approach
The modern framework is The Sea Angel (Edwinton Commercial Corporation v Tsavliris Russ) [2007] EWCA Civ 547, where Rix LJ described frustration as requiring a multi-factorial approach. The court weighs the contract terms and risk allocation, the parties' knowledge and expectations, the nature of the supervening event and whether it can be overcome, and the effect a finding of frustration would have.
On the facts, a vessel detained by port authorities for around 108 days against a 20-day charter was not frustrated - the detention was a foreseeable industry risk and the effect was really just the financial consequence of delay. The COVID cases applied the same rigour: in Bank of New York Mellon (International) Ltd v Cine-UK Ltd [2021] EWHC 1013 (QB), the court confirmed there is no doctrine of temporary frustration, and lockdown closures did not frustrate leases with many years left to run. And in Canary Wharf (BP4) T1 Ltd v European Medicines Agency [2019] EWHC 335 (Ch), Brexit did not frustrate a 25-year lease.
Financial consequences: the 1943 Act
At common law, frustration left losses where they fell. The Law Reform (Frustrated Contracts) Act 1943 introduced a fairer regime, aimed at preventing unjust enrichment rather than apportioning losses. Under section 1(2), money paid before discharge is recoverable and money then due ceases to be payable - though the court may let a payee retain or recover expenses incurred. Under section 1(3), where one party obtained a valuable benefit before discharge, the court may award the other a just sum not exceeding that benefit's value.
Certain contracts are excluded from the Act - including voyage charterparties, contracts for the carriage of goods by sea, insurance, and sales of specific goods that perish under section 7 of the Sale of Goods Act 1979. Check whether the Act applies before relying on it.
Use at the desk
Practical checklist
- Ask whether performance is radically different, not merely harder or costlier (Davis Contractors v Fareham [1956] AC 696).
- Do not expect frustration for added cost or delay (Tsakiroglou) or a foreseeable, provided-for event.
- Check the event is not self-induced - even a reasonable choice can defeat the claim (The Super Servant Two; Maritime National Fish).
- Remember a force majeure clause covering the event usually rules frustration out.
- Apply the multi-factorial approach - terms, expectations, the event, and the effect (The Sea Angel [2007] EWCA Civ 547).
- For the financial fallout, check the Law Reform (Frustrated Contracts) Act 1943 and its exclusions.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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