Obligations are frustrating event remain binding, obligations arising after event are extinguished.
National Carriers v Panalpina per Lord Simon – An event which changes the nature of obligations so dramatically that the parties would have found it unjust to enforce at time of formation.
Justification
Implied term the parties had an implied term to that extent – Taylor v Caldwell, The Eugenia
Construction true construction of contract not apply to new situation
Davis v Fareham - Job of court is to determine whether on true construction of contract, the new factual situation was covered by the contract. If it was, then the contract was not frustrated. Where the new situation was not covered, then the contract was frustrated. There must be such a change that the thing performed would be so different from that agreed. The court held the contract covered the new situation.
Codelfa: Court also adopted the construction theory. In this case an injunction was granted to prevent construction of railway between certain hours. Held that the injunction amounted to a frustrating event. Aickin J: Here because both the significance of the obligations undertaken as well as the surrounding circumstances had changed, the contract, on its true construction didn't apply to the new facts – hence it was frustrated.
Total failure of consideration some judges in National Carriers.
No steamer sailing from Japan to Sydney anywhere near agreed time: Cornish v Kanematsu.
Suez canal crisis. Not frustrated because did not explicitly state to take canal. Increased expenditure does not lead to frustration – Tsakiroglou v Noblee per Lord Simmons.
Temporary impossibility
Ran aground. Repairs. Late. Looks at context of overall duration to determine frustration. Deemed to frustrated – Jackson v Union Marine
Increased burden of performance
Increased burden doesn’t cause frustration. Must be fundamentally different – The Eugenia – stuck in Suez Canal.
Codelfa
Illegality
Can’t trade with enemy during war – Fibrosa v Fairbairn
Hired room to watch procession. Cancelled procession. Contract did not explicitly state reason for hiring. Frustrated – Krell v Henry
Similar facts as Krell but for boat. Comes down to how do you define common purpose – Herne Bay Steam Boat v Hutton
War decision. Did not guarantee neon sign could be illuminated. All terms could be performed. Matter of contractual interpretation – Scanlan’s New Neon v Toohey
Purpose of obligations compared to those present in actual situation – Bris. CC v Group Projectsper Stephen J
Limits on frustration
Self-induced Given 3 licenses. Used on other boats. Could have chosen to use it on boat in question – Maritime National Fish v Ocean Trawlers
One ship sank, had to choose who to charter other to- self induced: The Super Servant
Foreseen events if you contemplate an event it prevents frustration (fits with true construction theory)
Denning in The Eugenia distinguishes foreseeing and making a contractual provision
Whether it is catered for is a matter of construction – Codelfa, Meriton, AGL.
Special case of land
Courts traditionally reluctant.
UK change can apply to leases 10 year lease. No access for 20 months not frustrated but in theory could in dire circumstances – National Carriers
AUS cannot apply to lease contracts – Halloran v Firth in the NSWSC, but contrary HC obiter
Frustration only excluded if lessee taken possession of land – obiter per Williams J in S. New Neon
