Essay: Modern position of frustration in the age of the Force Majeure clause

In this essay I will be critically considering the modern position of frustration in the age of the Force Majeure clause. I will be considering cases that this rule has been applied to and critically discuss the outcomes of each case, also I will be comparing the evolution of the rule and how much more has it developed based on its past proceedings and also basing my researches legitimacy on articles published based on these legislations.
The doctrine of frustration operates to discharge a contract where after the formation of the contract something occurs which renders performance of the contract impossible, illegal or something radically different from the agreement of the parties at the point of entry into the contract. A Force Majeure clause is a clause which entitles a party to suspend or terminate the contract on the occurrence of an event which is beyond the control of the parties and which prevent, impedes or delays the performance of the contract. This clause is however introduced to contracts whenever the doctrine of frustration operates very limitedly. In Toepfer v. Cremer 1975 2 Lloyds Rep 118. It clearly outlines the rules which are attracted to the Force Majeure Clause, it states that sellers shall not be responsible for delay in any shipment of goods or any part thereof occasioned by any Act of God, these included strikes, riots or civil commotion, combination of workmen, breakdown of machinery, fire or any cause comprehended by the term force majeure. However, if there are any delays in shipments it is the seller’s job to constantly update the buyer on any delays before the ending of the contract also outlining the reason as to why there are any delays. If there is a delay in shipment for more than one month the buyer should be given the option to cancel their purchases, if a buyer does not exercise this right, the delay can proceed into another calendar month. The contract will be considered as void if the shipment is still prevented after this calendar month and the buyers do not have the authority to place a claim over the sellers for their delay in shipment. However, the innovation in Nineteenth Century Contract Law 1975/ Paradine v. Jane. The general rule exclaimed that the change of conditions after making a promise does not give one the excuse to not carry out such performance. Unlike the Force Majeure Clause this law does not operate on the Act of God rule. It was held that the defendant was obligated to pay rent even though the house might have been burn by lightning and he might have been expelled from the land.
Both legislations are put in place to protect parties from events that are unforeseen. In most instances it is expected that the challenging issue in various contracts especially in international deals gets that regularly projects when an unexpected occasion obstructs carrying out an agreement. Traditionally, this issue may happen ‘when unanticipated events, consequent to the date of the agreement, render execution either legitimately or physically impossible, or exceedingly difficult, impracticable or costly, or ruin the known utility which the required execution by either party. In England, there are two laws which are used to reference the doctrine of frustration within a contract. One is the English Sale of Goods Act 1979 (Act) which grasped just a minor piece of the relevant law of frustration.
Second is the law reform (frustrated contracts) act of 1943 (chandler v Webster [1904). the act can be dealt with simply in instances together with the frustration of settlement to sell merchandise. it’s far observed that this act particularly affords that during selling the unique products an agreement is refrained from if the products perish without any culpability of the events before the chance has passed to the consumer. However, the law reform act prolonged its degree to all instances of frustration aside from those grasped with the aid of the act. The Law reform act stipulated that parties should repay any instalments previously the season of frustration and furthermore the judge should decide among the party’s reliance prices added in examination of the execution of the settlement. Be that as it may, this act concerned simply the styles of valid assist after the Frustration has been perceived, leaving the fundamental policies of frustration immaculate. Chandler v Webster [1904] supplied that the claimant couldn’t get better the cash he/she had paid on the premise of the contract, could not be recovered after the frustration. The primary alternate that the law reform (frustrated contracts) act 1943 made was to ensure that the sums paid could turn out to be either partially or absolutely recoverable, if a contract turned into impossible to perform. legally, this provided the opportunity for a party to recover the advantage which has unjustly enriched the opposite party.
With the doctrine of frustration there are some boundaries, these are, frustration may be excused whilst there are specific provisions for the befallen occasion within the contract and additionally each time the event become foreseen or anticipated, and also if the incident which occurred was based solely on the negligence of one or more of the party’s. One example of that is the (Ocean Tramp Tankers Corp v v/o Sovfracht) [1964], sailors had sailed right into a risky area knowingly after the agreement had prohibited them from sailing in any zones which are risky as of the result of any real or threatened act of battle. This resulted in the ship being trapped and not launched until January of 1957. Lord Denning MR held that there has been no frustration of the contract. First, that the charterers could not rely on any self-induced frustration (sailing into the canal) as a ground for disagreeing the agreement changed into frustration. If they hadn’t tried the Suez Canal, they would have to sail round the cape, however this would no longer have rendered the contract radically different.
Force majeure provisions serve two purposes: they allocate risk and they provide notice to the parties of events that may suspend or excuse performance. The Fifth Circuit has held that the term “reasonable control” involves two related concepts. First, a party may not affirmatively cause a force majeure event. Second, a party may not rely on an event excusing performance if the party could have taken reasonable measures to prevent the event. It has been argued by the courts that when Force majeure is being assessed that foreseeability test should not be applied in the provisions the event must be unforeseen. Even though Force majeure is often pleaded at the breakdown of an agreement these clauses are regularly no longer given the attention they deserve upfront throughout the negotiation of the agreement.’ as a substitute, parties regularly insert ‘boilerplate’ force majeure clauses into their contracts that are not tailored to reflect the specific agreement, which would possibly cause issues if a force majeure occasion later surfaces. For example, an agreement that includes a force majeure clause and a ‘take or pay’ provision in which the client agrees to take the products or pay for a sure quantity of the goods may be difficult due to the fact even supposing a Force majeure event makes it impossible to take the products, presumably the buyer may want to nevertheless pay for them. It’s consequently useful that parties draft Force majeure clauses to cope with the specificities of their agreements.
However, this judgement was criticised by Professor Treitel (frustration and Force majeure (2nd edn, Sweet & Maxwell, 2004), para 13-14). He argued that this issue can be dealt with on another term. If the judge was to look at the fact that at the point of the contract being signed the canal closing was not foreseen, nor was it foreseeable on the high standard of foreseeability required to exclude frustration. He further argued that as the event was foreseen by the parties as it was allocated in the terms of the charter party. If the doctrine of frustration was to be applied to foreseen events, reverses any allocations of risks that that were deliberately made by the contracting parties. The closure of the Suez Canal did not result in a frustration. The use of a Force Majeure Clause highlights the fact that it is common for practices to include the closure of the Suez Canal in the list of events that sets off the usage of a Force Majeure Clause.
Conclusion
A force majeure clause is a clause that is put in place to allow parties to be free from their contractual agreements whenever an Act of God renders it impossible for their duties to be carried out, however on the other hand the doctrine of frustration is only valid if the fundamental purpose of the contract is destroyed. A frustration can only occur if the even can no longer be carried out due to unforeseen circumstances. Whereas force majeure can come into play if there is a simple delay in performance. Transco Plc v Stockport Metropolitan Council. The doctrine of frustration is present in S. 56 of the Indian Contract Act 1852. It says that any act which was to be performed after the contract is made becomes unlawful or impossible to perform, and which the promisor could not prevent, then such an act which becomes impossible or unlawful will become void. Again force majeure clauses may also provide for extension of time instead of relieving the parties from their obligations on the happening or non-happening of a certain event. This is the difference between force majeure and frustration of contract.