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Legal Terms - frustration of contract
The unexpected cessation of a contract due to an occurrence that either makes its execution impossible or unlawful, or obstructs the attainment of its primary objective. Frustration may arise, for instance, if the goods delineated in a sale of goods contract are destroyed (impossibility of performance: Sale of Goods Act 1979 s 7); if the onset of war renders one party an enemy alien (illegality); or if X rents a room from Y for the purpose (known to Y) of observing a procession that is subsequently cancelled (failure of main purpose: Krell v Henry [1903] 2 KB 740 (CA)). In the absence of special provisions addressing the frustrating event, a frustrated contract is automatically discharged, and the parties' positions are predominantly regulated by the Law Reform (Frustrated Contracts) Act 1943. Funds disbursed before to the occurrence are recoverable, while outstanding payments that remain unpaid are no longer obligatory. Nevertheless, a party that has received any valuable benefit from the contract is obligated to compensate a reasonable amount for it. The Act excludes specific contracts, including those for the sale of products, contracts for the maritime transportation of goods, and insurance contracts.
The unexpected cessation of a contract due to an occurrence that either makes its execution impossible or unlawful, or obstructs the attainment of its primary objective. Frustration may arise, for instance, if the goods delineated in a sale of goods contract are destroyed (impossibility of performance: Sale of Goods Act 1979 s 7); if the onset of war renders one party an enemy alien (illegality); or if X rents a room from Y for the purpose (known to Y) of observing a procession that is subsequently cancelled (failure of main purpose: Krell v Henry [1903] 2 KB 740 (CA)). In the absence of special provisions addressing the frustrating event, a frustrated contract is automatically discharged, and the parties' positions are predominantly regulated by the Law Reform (Frustrated Contracts) Act 1943. Funds disbursed before to the occurrence are recoverable, while outstanding payments that remain unpaid are no longer obligatory. Nevertheless, a party that has received any valuable benefit from the contract is obligated to compensate a reasonable amount for it. The Act excludes specific contracts, including those for the sale of products, contracts for the maritime transportation of goods, and insurance contracts.
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