The Doctrine of Frustration

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The old common law had a doctrine of absolute contract under which contractual obligations were binding no matter what might occur (Paradine v Jane, 1647). In order to ease the hardship which this rule caused in cases where the contract could not be properly fulfilled through no fault of either party but due to occurrence of unforeseen events, the doctrine of frustration was developed. The original theory was that frustration discharged the contract through an implied term to that effect (Taylor v. Caldwell [1863], Tamplin Steamship Co. Ltd. v. Anglo-Mexican Petroleum Products Co. Ltd. [1916]), but the modern view is that the parties' actual intentions are irrelevant and that it is up to the courts to impose a just and reasonable solution (per Lord Wilberforce, National Carriers v Panalpina [1981]). I totally agree with Bingham LJ that "the object of the doctrine of frustration is to give effect to the demands of justice, to achieve a just and reasonable result" and here I will explain why. In Krell v. Henry {1903} a plea of frustration succeeded because the court held that the common purpose for which the contact was entered into, could no longer be carried out. But in the same year for similar set of facts, the Court of Appeal decided in Herne Bay v. Hutton [1903] that the contract had not been frustrated because the "common formation of the contract" had not changed. It clearly was a policy decision which shows the reluctance of the courts to provide an escape route for a party for whom the contract ha... ... middle of paper ... ... of Lords in The Fibrosa (1943) which held that where there was a total failure of consideration, losses that accrued up to the frustration would be recoverable. But even after Fibrosa certain problems, such as the expenses incurred before the frustration remained. Therefore seeing that the common law was too rigid, The Law Reform (Frustrated Contracts) Act (1943) was introduced. The Act however did not sort all the problems either because, as Goff J put it in BP v. Hunt (1979) ( in relation to s.1(3)), its focus was upon the prevention of unjust enrichment and consequently it does not address itself to the recovery of reliance losses which don't result in a benefit to the other party, nor does it seek to apportion the losses between the parties.

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