9084 · 3.3.3
Frustration flashcards
Revision flashcards for Cambridge 9084 Frustration (syllabus 3.3.3). Flip, recall, then mark a real past-paper question.
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What is frustration?
A supervening event, without the fault of either party, that makes performance of a contract impossible, illegal, or radically different from what was contemplated. The contract is automatically discharged.
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What is the principle from *Taylor v Caldwell* (1863)?
Where performance becomes impossible due to the destruction of the contract's specific subject matter (e.g., a music hall burning down), without the fault of either party, both parties are discharged from future obligations.
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Explain 'frustration of purpose' using *Krell v Henry* (1903).
This occurs when the fundamental commercial purpose of the contract is destroyed. In *Krell*, the cancellation of the coronation procession frustrated the contract to hire a room with a view of it, as viewing the procession was the 'foundation of the contract'.
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Why was the contract in *Davis Contractors v Fareham UDC* (1956) NOT frustrated?
A shortage of labour and materials made a building contract take longer and cost more than expected. The House of Lords held that a contract becoming more difficult or expensive to perform is not a ground for frustration. It was just a 'bad bargain'.
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What is 'self-induced' frustration?
A situation where a party's own act, negligence, or choice causes the supervening event. That party cannot rely on frustration as a defence. See *Maritime National Fish Ltd v Ocean Trawlers Ltd*.
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What are the main financial remedies under the Law Reform (Frustrated Contracts) Act 1943?
1. s.1(2): Money paid before frustration is recoverable, and money payable ceases to be so, subject to a court's discretion to award expenses. 2. s.1(3): A party can recover a 'just sum' for a valuable, non-monetary benefit conferred on the other party before frustration.
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How does frustration differ from a contract being merely more expensive to perform?
Frustration requires performance to be impossible, illegal, or 'radically different'. A contract simply becoming more difficult, less profitable, or more expensive to perform is not a ground for frustration, as established in *Davis Contractors Ltd v Fareham UDC*.
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What was the common law position on losses before the 1943 Act?
The harsh rule was that 'the loss lies where it falls' (*Chandler v Webster*). This meant advance payments could not be recovered, and payments due before the frustrating event remained payable.
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Why was the contract in *Herne Bay Steamboat Co v Hutton* NOT frustrated?
The contract's purpose was twofold: to view a naval review and to cruise the fleet. The cancellation of the review only frustrated one part of the purpose. As the cruise was still possible, the contract's fundamental basis was not destroyed, so it was not frustrated.
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What is the significance of *Gamerco SA v ICM/Fair Warning (Agency) Ltd* (1995)?
It is a leading case on the court's broad discretion under s.1(2) of the 1943 Act. The court decided it was 'just' for the promoters to recover their entire advance payment (£412,500) without any deduction for the band's expenses, highlighting that retention for expenses is not automatic.
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How does s.1(3) of the 1943 Act address 'valuable benefits'?
It allows a party to claim a 'just sum' for a non-monetary benefit conferred on the other party before frustration. The value is assessed at the time of frustration. In *BP v Hunt*, the benefit (enhanced value of an oil concession) was destroyed by the frustrating event (expropriation), so no sum was awarded under s.1(3).
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What types of contracts are excluded from the Law Reform (Frustrated Contracts) Act 1943?
The Act does not apply to contracts for the carriage of goods by sea (except time charterparties), contracts of insurance, and certain contracts for the sale of specific goods that have perished (s.2(5)).
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What is a 'force majeure' clause?
An express contractual term that anticipates specific supervening events (e.g., war, pandemic, 'acts of God') and provides a mechanism for what happens, such as suspension or termination. If an event is covered by such a clause, the clause applies instead of the common law doctrine of frustration.
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What happens to obligations that were due before the frustrating event?
At common law, they remained binding. Under the 1943 Act (s.1(2)), money payable before the frustrating event ceases to be payable. All future obligations for both parties are discharged.