A contract may be frustrated when there is a change in circumstances which renders the contract either legally or physically impossible of performance. According to the Section 57 (2) of the Contracts Act 1950 stated that, a contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. A contract may be discharged by supervening impossibility or illegality in any of the following circumstances:
Destruction of the subject matters
The subject matter is not destroyed but ceases to be available for the purpose of performing the contract. The subject matter must be unique. In Taylor v Caldwell, the claimant hired out a music hall in Surrey for the purpose of holding four grand concerts. The claimant went to great expense and effort in organising the concerts. However, a week before the first concert was due to take place the music hall was destroyed by an accidental fire. The claimant sought to bring an action for breach of contract for failing to provide the hall and claiming damages for the expenses incurred.
The court held that the contract had been discharged. The claimant could not recover damages. The destruction of the hall excused both parties from the performance of their promises. The contract had been frustrated as the fire meant the contract was impossible to perform. It must be noted that there must be a total destruction of the subject matter of the contract. If only a portion of the subject matter of the contract has been destroyed, the contract is not wholly impossible of performance.
Incapacity where the contract requires personal performance
A prime example of a contract of personal service is the contract of employment and such a contract is always frustrated by the death of the employee. The position is the same where illness or injury renders him permanently incapable of performing the contract. According to the Section 57 (1) of the Contract Act 1950, an agreement to do an act impossible in itself is void. Personal incapacity where the personality of one of the parties is signified may frustrate the contract. In the case Condor v Barron Knights, a 16 year old agreed by contract to play the drums for the defendant band for 7 nights per week at a local club for 5 years. However, the claimant suffered a mental breakdown and was told by his doctor that he should not perform more than 4 nights per week.
The court held that the claimant's action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated. The courts and tribunals dealing with contracts of employment are today very reluctant to find frustration of the contract because in doing so they would deprive the employee of his right to claim unfair dismissal.
Non-occurrence of event basic to contract
Non-occurrence of a specified event may frustrate the contract where the purpose or object of the contract has been defeated by the supervening event. In Krell v Henry, the defendant hired a flat on Pall Mall from claimant with the agreed price of £75 for two days. Both parties knew that the room would be used for the sole purpose of viewing the coronation procession of King Edward VII. The defendant paid £25 deposit. The King’s illness caused a postponement of the procession, the coronation was cancelled. Therefore, the defendant did not use the flat. The claimant ask for the claim of outstanding £50.
The court held that the contract was frustrated as cancellation of the procession deprived it of its commercial purpose. The defendant was excused from paying rent for the flat. The necessary inference to be drawn from circumstances surrounding conclusion of the contract was that the holding of the procession on the dates planned was regarded by both parties as basic to performance of the contract. The claimant's action for breach of contract was thus unsuccessful.
However in the case of Herne Bay Steamboat Co v Hutton, the claimant company agreed to hire out a steamboat to the defendant for a fee of £250 for a period of two days for the purpose of taking passengers to Spithead to cruise round the fleet and view the Naval Review which was part of King Edward VII's coronation celebrations. The Naval Review was cancelled as the King was ill, but the boat could still have been used to cruise round the assembled fleet. The defendant refused to use the steamship and pay the balance of the agreed fee still outstanding. The claimant brought an action and sued for the agreed contract price of payment. The defendant argued the contract had become frustrated due to the cancellation of the Naval Review.
It was held that the contract was not frustrated. When the coronation procession was cancelled, only one purpose has been frustrated but the other purpose could have been fulfilled as it was still possible to perform the days cruise. The other object of the contract was to cruise around the fleet and this remained capable of fulfilment.
On an extensive interruption which alters performance
An extensive interruption to performance may make any further execution of the contract fundamentally impracticable or essentially different to performance as originally contemplated by the contracting parties. In the case of Metropolitan Water Broad v Dick Kerr & Co Ltd., The defendants agreed to construct a reservoir for the water board within a period of six years. During the First World War, they received a notice from the Ministry of Munitions telling them to stop work and now discharged them from their obligations under the contract. The claimant said that the effect was only to suspend their obligations in accordance with a clause in the contract.
Although the event that occurred was literally within the delay clause and seemingly precluded frustration, nonetheless the contract has been frustrated. The interruption to the work was of such a character and duration that is vitally and fundamentally changed the conditions of the contract. If performance was resumed it would be essentially different to the type of performance as originally envisaged.
Government Interference
Where there is a change in the law or passing of new legislation which renders the performance of the contract illegal. In the Lee Kin v Chan Suan Eng, there was a lease which provided for renewal every five years. The state government passed a new law prescribing annual renewals. The court held that the lease had been frustrated by reason of the new law.
In the similar case of Re Shipton, Anderson & Co, a contract was made for the sale of some wheat, which was stored in a warehouse in Liverpool. Before the seller could deliver, it was requisitioned by the Government under wartime emergency powers. It was held that the seller was excused from performance. Due to the requisition, it was no longer possible to lawful delivery the wheat.
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