CHAPTER-II

DOCTRINE OF FRUSTRATION – ENGLISH LAW

2.1 Introduction
Historically every contract was an adventure. The time was so uncertain that a b
usiness transaction had to face either the perils of the sea or the hazards of t
he road journey. It was common happening that the mechandise was robbed by bandi
ts or ships carrying stores were raided by pirates and buccaneers. And for this
reason, the Journey was started by praying to god and end with thanksgiving cere
mony to god on safe arrival. And therefore, every contract had element of risk
and today it has nature of risk but changed. Today, risk is of market fluctuatio
n, government control, international events relating to war and peace having the
ir impact on commerce and industry and ultimately performance of executory contr
act.
Initially the idea in English law was that if a man binds himself, by a positiv
e, express contract, to do an act itself possible he must perform his committeme
nt unless prevented by the act of God or the other party to the contract. No har
dship, No unforeseen hindrance, no difficulty short of absolute impossibility, w
ill excuse him from doing what he has expressly agreed to do and this was puttin
g some time heavily burden on the parties to the contract and thus doctrine of f
rustration was developed in the English law for reliving the parties to the cont
ract from their burden in situation which is beyond their control.
Frustration in English law is an English contract law doctrine, which acts as a
device to set aside contracts where an unforeseen event either renders contractu
al obligations impossible, or radically changes the party’s principal purpose for
entering into the contract. After 1863 in the case of “PARADINE vs. JANE” and “TALOR
vs.CANDWILL” doctrine of frustration was recognised in the English law.
In the classic case of Paradine vs. Jane, the fact was that paradine sued Jane f
or rent due upon a lease. Jane pleaded “that certain German Prince, by name Prince
Rubert, an alien born, enemy to the king and kingdom, had invaded the realm wit
h a hostile army of man and with the same force did enter upon the defendant’s pos
session, and had him expelled and held out of possession and whereby he could no
t take the benefit of the profits.” The plea in substance was that the rent was no
t due because the lessee had been deprived, by an event beyond his control. Howe
ver, the Court held that this was not excuse. The Court held “but where the law cr
eates a duty or charge upon himself, he is bound to make it good, if he may, not
withstanding any accident by inevitable necessity, because he might have provide
d against it by his conduct, And therefore, if lessee covenant to repair a house
, though it be burnt by lightning or thrown down by enemies, yet he out to repai
r it. How surprising this decision is , a state which failed to protect its citi
zen from the enemy was so keen to enforce the contract. But first time in this c
ase “frustration of purpose” came into picture, but still principle of absolute cont
ractual liability was relied upon.
In “Taylor Vs. Caldwell” the reality of the situation was recognised by the court an
d we can say that this case paved the way for fundamental recognition of the do
ctrine of frustration in the English law. In this case “the defendant had agreed t
o permit the plaintiffs to use a music hall and gardens for concerts on four spe
cified nights. After the contract was made, but before the first night arrived,
the hall was destroyed by the fire”. The Court held that the defendants were not l
iable in damages, since the doctrine of sanctity of contracts applied only to a
promise which was positive and absolute and not subject to any condition express
or implied
And further held that particular contract in question was to construe “as subject
to an implied condition that the parties shall be excused in case, before breach
, performance becomes impossible from the perishing of the thing, without defaul
t of the contractor.
Therefore, these two cases is leading sight on horizon of contractual liability
. The first regarding fiction of absolute absolute liability, the other regardin
g reality of supervening circumstances rendering performance impossible.
Paradine vs. Jane is generally regarded as authority for the doctrine of absolut
e contract whereas Taylor case is considered to have established the doctrine of
 discharge by supervening events, the doctrine of frustration.
A qualification of the doctrine of absolute contractual liability was spelt out
by Blackburn, j by giving example that of a sale of “specific chattels” to be delive
red on a future day, which perish without the fault of the seller after the prop
erty in them, has passed to the buyer but before the day fixed for delivery. It
followed that the purchaser must pay the price and the vendor is excused from pe
rforming his contract to deliver, which has thus become impossible.
Taylor case is turning point as the law moved away from the doctrine of absolute
contracts to the doctrine of supervening event. Three situation was pointed out
in this case –a) cases in which death or permanent incapacity prevent performance
of a contract for personal service b) cases in which specific goods are sold an
d perish after the property in them has passed to the buyer and c) cases in whic
h the subject matter of bailment was destroyed without any fault on the part of
the bailee.
The doctrine of frustration was further illustrated in JAKSON Vs. UNION INSURANC
E CO.LTD. In this case “ a ship was chartered in November ,1871 to proceed with a
ll possible dispatch , danger and accidents of navigation excepted , from liver
pool to New port and there to load a cargo of iron rails for carriage to san Fra
ncisco. She sailed on January 2, but on the 3rd ran aground in Carnarvon Bay. Sh
e was got off by 18 feburary and was taken to Liverpool where she was still unde
r repair in August. On 15th Feburary the Chartered repudiated the contract”. The p
ivotal question fro consideration was whether the charterers justified in throwi
ng up their contract in throwing up their contract instead to waiting until the
ship were repaired and then loading her.” It was held that the delay (six weeks to
refloat and six months to complete repairs) was so long as to put an end, in co
mmercial sense, to the commercial speculation. It is important to mention here t
hat this was so held despite the stipulation “danger and accidents of navigation e
xcepted.
The doctrine of frustration was carried forward by propounding the theory of imp
lied term in 1881 in DAHL Vs. NELSON, DONKIN and CO., wherein it was held that “T
he meaning of contract must be taken to be, not what the parties did intend but
what which the parties, as fair and sensible men would presumably have agreed up
on if, having such possibility in view, they have made express provision as to t
heir several rights and liabilities in the event of its occurrence.

2.1Instances of Frustration:
Before turning to the theoretical basis of the doctrine of frustration , it
may be useful to consider certain factual situation wherein , the court has been
ready to infer to , from the nature of the contract and from the circumstances
surrounding it , that it has been by the happing of subsequent event.
a) Destruction of Subject matter of the contract:
The simplest case is where the performance of the contract is made impossible by
the destruction of the subject-matter. E.g. – destruction of subject matter in “Tay
lor vs. Cadwell (supra).
b) Non-Occurrence of a particular event:
The principle of frustration has also been held to apply to cases concerning the
cancellation of an expected event. In “KRELL Vs. HENRY” case wherein H agreed to hi
re a flat from K for 26 and 27 june, 1902; the contract contained no reference t
o the coronation processions, but they were to take place on those days and to p
ass the flat. Later, the procession was cancelled. Two-third of the rent had not
been paid when the procession was abandoned and the Court of Appeal held that K
could not recover it. The Court considered that the processions and the relativ
e position of the flat lay at the foundation of the agreement. The Contract ther
efore was discharged.
c) Death , or Incapacity for personal service:
Where performance of obligation under a contract for personal service is rendere
d impossible or radically different by the death or incapacitating of the promis
or, the contract will be frustrated. In case of “STUBBS Vs. HOLYWELL RAILWAY CO” it
was held that a contract for personal service was put an end to by the death of
the party by whom the service was to render. Similarly in case of ‘ROBINSON Vs. D
AVINSON’ In this D’s wife, an eminent piano player, promised to perform at a concer
t, but was prevented from doing so by a dangerous illness. An action was brought
against D claiming damages for breach of contract. The Court held that the cont
ract was discharged by D’s wife’s illness, and it was not broken by her failure to p
erform , nor on the other hand she could insisted on performing when she was unf
it to do so as frustration is not brought about by an act of election.
d) Requisitioning of ships and interferences with charter parties:
In war time , ships are often requisitioned for such time and for such purposes
as the Government may acquire them. If the ship is under charter party the quest
ion will arise whether or not the requisitioning operates so as to frustrate the
rights of the ship owners and charters under the agreement. In case of “F.A.TAMPL
IN STEAMSHIP CO. LTD. Vs. ANGLO-MEXICAN PETROLEUM PRODUCTS CO.LTD ” the steamship
F.A.Tamplin was chartered by a time charterparty for 5 years from 4 December 191
2 to 4 December ,1917. In february 1915 the Government requisioned the ship for
use as troopship and made certain structual alterations to her for this purpose.
The Charterers were willing to go on paying the agreed freight under the charte
rparty ,but the owners claimed that the contract had been frustrated by the requ
isition as they wished to obtain a large amount of compensation from the crown.
The House of Lord by a bare majority held that the contract still continued. The
interruption was not of sufficient duration to make it unreasonable for the par
ties to go on. There might be many months during which the ship would be availab
le for commercial purposes before the five years expired.
e) Building Contracts:
In building contact event may occur which hold up the works of construction the
reby increasing the loss or decreasing the profit of the parties involved therin
. If the contract is a fixed price contract , the contractor may lose the profit
which it expected to gain , or even be forced into loss. In case of “DAVIS CONTRA
CTORS LTD. Vs. FAREHAM U.D.C” in July 1946, D entered into a contract with Fareha
m U.D.C to build 78 houses for a fixed sum of 94,424 dollar. Owing to the unexpe
cted shortage of skilled labour and of certain materials the contract took 22 mo
nths to complete instead of the 8 months expected, and cost some 1,15,000 dollar
. D contended that the contract had been frustrated and that they were entitled
to claim on a quantum merit for the cost actually incurred.
The house of Lords refused to accept this contention and opined mere fact that
unforeseen circumstances had delayed the performance of the contract, and render
ed it more onerous to the appellants, did not discharge the agreement. The ultim
ate situation was still within the scope of the contract; the thing undertaken w
as not , when performed , different from that contracted for.
Strict interpretation in above said case was liberalized in case of “METROPOLITAN
WATER BOARD Vs. DICK, KERR, & CO. LTD. Wherein D.K.&Co. contracted with the M.W
.B to construct a reservoir within 6 years. After two years, the Minister of Mun
itions, acting under statutory powers, required them to cease work on their cont
ract and to remove them and sell their plant. The M.W.B. brought an action claim
ing that the contract still continued.
The House of Lords held that the interruption created by the prohibiton was of s
uch a character and duration as to make the contract , if resumed, in effect a d
ifferent contract , and that the original contract was therefore discharged.
f) Change in the Law:
The performance of a contract may be made legally impossible either by a change
in the law or by a change in the operation of the law by reason of new facts sup
ervening. For there to be frustration, the change in the law must be such as to
strike at the root of the agreement, and not merely to suspend or hinder its ope
ration in part. In case of “CRICKLEWOOD PROPERTY AND INVESTMENT V. LEGGHTON’S INVEST
MENT TRUST LTD” it was held that 99 year building lease was not frustrated by Gov
ernment restriction on building for only a small part of them.
2.2 The theoretical basis of frustration:
 Successive pronouncement of the House of Lords have set forth a numb
er of learned but often contradictory opinion concerning with the doctrine of fr
ustration and a number of theories have been put forward which are as follows:
At one time the judicial opinion favored the view that frustration of c
ontract depended upon the implication of the term. Lord Loreburn’s speech in F.A.
TAMPLIN STEAMSHIP CO.LTD. v ANGLO –MEXICAN PETROLEUM PRODUCTS CO. LTD.” Contains t
he classic exposition of the reason on which the implied term theory of frustrat
ion was based. It says “ Court can and ought to examine the contract and the circu
mstances in which it was made , not of course to vary ,but only to explain , in
order to see whether or not from the nature of it the parties must have made the
ir bargain on the footing that a particular thing or state of thing would contin
ue to exist . And if they must have done so, then a term to that effect will be
implied, though it be not expressed in the contract.. Sometimes it is put that p
erformance has become impossible and that the party concerned did not promise to
perform impossibility. Sometimes it is put that the parties contemplated a cert
ain state of things which fell out otherwise. In most of cases it is said that t
here was an implied condition in the contract which operated to release the part
ies from performing it , and in all of them I think that was at bottom the princ
iple upon which the court proceeded. It is in my opinion the true principle, for
no court has absolving power ,but it can infer from the nature of the contract
and the surrounding circumstances that a condition which was not expressed was a
foundation on which the parties contracted…. where the altered conditions such th
at, had they thought of them ,they would have taken their chance of them , or su
ch that as sensible men they would have said, “ if that happens, of course , it is
all over between us.”
It is therefore clear that an ‘implied term” mean to say that a term which the court
reads into the contract in order to give effect to what it regards as the party’s
real intention at the time of contracting. Implied term may be formulated more
objectively wherein it may mean a term which, in the light of the events which h
ave actually arisen, the parties as reasonable man would have imported into cont
ract to deal with that possibility.”
b) Just and Reasonable cause:
In case of “HIRIJI MULJI v. CHEOUG YUE S.S.CO. LTD.” Wherein it was pointed out
by Lord summer “the doctrine of frustration is a device , by which the rules as t
o absolute contracts are reconciled with a special exception which justice deman
ds.” And recognition of this fact led certain Judges to the conclusion that the ba
sis of the doctrine of frustration was the desire of the Courts to reach a just
and reasonable result. The Lord Wright says “that the court or jury as judge of fa
cts decides the question in accordance with what seems just and reasonable.”
c) Foundation of the contract:
While deciding the question, whether contract was frustrated or not , it is n
ecessary to look upon the foundation of the contract. In case of “ W.J.TANTEM LTD.
GAMBOA” wherein during the Spanish Civil War, T chartered to G, acting on behalf
of the Republican Government of Spain, a steamship, for 30 days from 1 July 193
7. The ship was to be used for the evacuation of refugees from Northern Spain to
French ports. The hire was to be at the rate of 250 dollar a day and was payabl
e until the ship was returned to T. On 14 July, the ship was seized by the Nati
onalists and detained in the port of Bilbao until 11 september. G pleaded that t
he contract was frustrated. Goddard J. held that “ the circumstances of the contra
ct (including the very high rate of hire) showed that the parties contemplated t
hat seizure and detention of the vessel might occur ,however , the contract was
frustrated: the foundation of the contract was destroyed by the seizure, as G th
ereafter no longer had the use of the vessel.”
d) Radical Change in the obligation:
Now, there is general agreement that the appropriate test to apply to determine
whether a contract has been frustrated is that of “radical changes in the obligati
on” In case of “NATIONAL CARRIERS LTD. V PANPANIA (NORTHERN) LTD. Lord Simmon opine
d that “ Frustration of contract takes place when there supervenes an event ( with
out default of either party and for which the contract makes no sufficient provi
sion) which so significantly changes the nature (not merely expense or onerousne
ss) of the outstanding contractual rights and / or obligations from what the par
ties could reasonably have contemplated at the time of its execution that it wou
ld be unjust to hold them to the literal sense of its stipulations in the new ci
rcumstances ; in such a case the law declares both parties to be discharged from
further obligations.”
This approaches sometimes also called “construction theory”.
2.3 Incidence of Risk:
The doctrine of frustration is mainly concerned with the incidence of risk i.e.
who must take the risk of the happening of the supervening event? And, therefore
, the courts have to determine whether the contract, on its true construction, h
as made a provision for that risk.
Where the contract makes provision for a given contingency, this precludes the C
ourt from holding that the contract is frustrated.
The second question is whether events which were foreseen by the parties at the
time of contracting can be relied upon to establish frustration. In many of the
cases reference is made to the occurrence of an ‘unforeseen’ or ‘unexpected’ or ‘uncomplat
ed’event, and it may be argued that the parties must be taken to have assumed that
risk of an event which was present in their minds at the time the contract was
made. For example W.J.TANTEM LTD. V GAMBOA (supra), wherein the fact that seizur
e of the ship was within the contemplation of the parties did not preclude the o
peration of frustration since the contract made no express provision of the cont
ingency.
The third question is whether a contract will be frustrated by an event which pr
events performance in a manner intended by one party alone. In ‘BLACKBURN BOBBIN C
O. v. ALLEN (T.W) &SONS LTD’ wherein A agreed to sell and deliver to B. B at Hull
a quantity of finish birch timber. A found it impossible to fulfill this contrac
t because the outbreak of war cut off its source of supply from Finland. B was u
naware that timber from Finland was normally shipped direct from a finish port t
o England, and that merchants did not , in practice, socks of it in England. The
Court of Appeal held that “there was no frustration. What had happen was merely t
hat an event had occurred which rendered it practically impossible for the defen
dants to deliver; that event might have been, but was not, provided for in the c
ontract. To free A from liability, it would have to be shown that the continuanc
e of the normal mode of shipping the timber from Finland was a matter which both
parties contemplated as necessary for the fulfillment of contract. Since this w
as not the case, A bore the risk.
The forth question is whether delay in performance may invite the doctrine of fr
ustration in case of BANK LINE LTD. V CAPEL (A) &CO.(supra) Lord Summer opined t
hat “ Delay even of considerable length and of wholly uncertain duration is an inc
ident of maritime adventure , which is clearly within the contemplation of the p
arties….so much so as to be often the subject of express provisions. Delays such a
s these may very seriously affect the commercial object of the adventure, for th
e ship’s expense and overhead charges are running on …None the less this is not frus
tration.
It is often necessary to wait upon events in order to see whether the delay alre
ady suffered and the prospects of further delay from that cause will make any ul
timate performance of the relevant contractual obligations “radically different” fro
m that which was undertaken by the contract. But as has been often said , busine
ss men must not be required to await event too long. They are entitled to know w
here they stand. Whether or not the delay is such as to bring about frustration
must be a question to be determined by an informed judgment based upon all the e
vidence of what has occurred and shat is likely thereafter to occur.
The next question is whether inflation may invite frustration of contract. In “ ST
ANFFORDSHIRE AREA HEALTH AUTHORITY v. SOUTH SATFFORDSHIRE WATERWORKS CO.” a contra
ct was entered into in 1929 under which the defendants agreed “at all times hereaf
ter” to supply water to a hospital at a fixed price of seven pence per 1000 gallon
s. By 1978 the equivalent cost of supplying the water was some twenty times the
contract price. The Court of Appeal held that “the contract was on its true constr
uction, terminable by the defendant upon reasonable notice.”
2.4 Self Induced Frustration:
It is well established that a party whose act or election has given rise to the
event which is alleged to have frustrated the contract cannot invoke the doctrin
e of frustration. Self induced frustration cannot be a ground for frustration of
the contract. In case of ‘MARITIME NATIONAL FISH LTD. V.OCEAN TARWLERS LTD. Wher
ein O.T. chartered to M.N.F a steam trawler fitted with an otter trawl. Both par
ties knew at time of contract that it was illegal to use an otter trawl without
a licence from the Canadian Government. Some months later M.N.F. applied for lic
ences for five trawlers which it was operating, including O.T.’s trawler and three
trawlers owned directly or by M.N.F. It was informed that only three licences w
ould be granted, and was requested to state for which of the three trawlers it d
esired to have licence. It named two trawlers that it owned directly or indirect
ly and a third chartered from a person other than O.T., and then claimed that it
was no longer bound by the charterpartyas its object had been frustrated.’ The Ju
dicial Committee of the Privy Council held that the failure of a contract was M.
F.N. own election and since ‘reliance cannot be placed upon self induced frustrati
on and therefore there was no frustration.
a) Choosing between different contracts:
The position become more complicated where a party enters into a number of
contract and the supervening event means that , while it is possible to perform
one or more of the contracts , but not possible to perform all of them. In Case
of “J.LAURITZEN A.S. v WIJSMULLER B.V(THE SUPER SERVANT TWO)” wherein in July 1980
W contracted with L to carry a drilling rig from Japan to a location off Rotter
dam using, at its option, either the Super servant one or Super servant two. It
also entered into two contracts with third parties containing similar substituti
on clauses, one before the contract with L and one after wards. In its internal
schedules W planned to use the Super servant Two for L’s contract and the Super Se
rvant One for the other two contracts, but prior to time set for performance , t
he super servant two sank. W informed L that it would not transport the rig with
either the Super Servant One or the Super Servant two , but parties agreed with
out prejudice to their rights under the contract , that the drilling rig would b
e transported by another, more expensive method. In answer to L’s claim for the lo
sses suffered, W counter claimed inter alia that the sinking of the super servan
t two frustrated the contract.
The Court of Appeal held that the contract was not frustrated. Even if the sinki
ng of the Super Servant two occurred without any fault on the part of W, It was
not the cause of the inability to perform. The real cause was said to be W’s elect
ion not to use the Super Servant One , something which it would have been physic
ally possible it to do. It was said that exercise of choice meant that W had acc
epted the risk of the super servant two being unable to perform with the result
that is unavailability give rise to a breach not a frustrating event. Moreover,
to allow W to rely on the unavailability of the Super Servant One as a frustrati
ng event would allow it to rely its own act election whereas frustration in theo
ry occurs automatically.
b) Negligent acts
A question can be posed that whether negligent act of either of the parties t
o the contract leads the contract to the stage of frustration? In case of JOSEPH
CONSTANTINE STEAMSHIP LINE LTD. v IMPERIAL SMELTING CORPORATION LTD. wherein L
ord Russell opined that “the possible varieties are infinite , and can range from
the criminality of the scuttler who opens the sea cocks and sins his ship , to t
he thoughtless of the prima donna who sits a draught and loses her voice. I wish
to guard against the supposition that every destruction of corpus for which a c
ontractor can be said, to some extent or in some sense , to be responsible , nec
essarily involves that the resultant frustration is self induced within the mean
ing of the phrase.
On the basis of above said fact it may be said that juristic basis of the
doctrine attempts some time to justify the doctrine, and some time to evolve som
e general formula for describing the conditions in which it operates. The main t
heories of frustration which have been put forward are a) Implied Term b) Just S
olution 3) Foundation of the contract 4) Construction
In ultimate analysis, it is the decision of the court by way of construing the c
ontract that determines that the matter whether the contract is frustrated or no
t. The day is not far off when the law may develop to an extent as to hold that
material change of circumstances would dissolve the contract on the analogy of i
nternational law as relieving the parties from treaty obligation consequent on m
aterial change of circumstances.
The effect of frustration at common law is to release both parties from any furt
her performance of the contract. All obligations falling due for performance aft
er the frustrating event are occurred discharged. In case of APPLEBY v MYERS, w
herein A Undertook to erect machinery upon M’s premises, the agreement providing t
hat the work was to be paid for on completion. While the work was in progress, a
nd before it was completed, the premises and the machinery already erected were
wholly destroyed by fire. The contract was frustrated, but since it had been agr
eed that payment was to be made only on completion, A could recover nothing for
the work already done.
Legal rights or obligation accrued and due , before the frustrating event occurr
ed , are left undistributed. In case CHANDLER v WEBSTER wherein C agreed to hir
e from W a room in pall mall to watch the coronation procession. The price for
the hire was to be 141 ponds, payable immediately. C paid 100 ponds immediately,
but before he paid the balance, the procession was cancelled.
It was held that not only that he could not recover 100 ponds already paid, but
that he was also liable to pay the other 41 pond as this obligation had fallen d
ue before the frustrating event occurred.
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