Laytime and Demurrage

Page 573




9.1 Frustration is the discharge of a contract rendered impossible1 of performance by external causes beyond the contemplation of the parties. For example, a contract postponed by Government order would be discharged from its further performance if the interference was so gross when the time did arrive to resume work, the parties would find themselves in completely different circumstances2 Money paid under a contract which is later frustrated may be recoverable as in quasi-contract.3 The key phrase in the above is “impossible of performance”. It must not just be more difficult or expensive. It must amount to completely different circumstances. 9.2 To understand the doctrine fully, it is necessary to see how it has developed, first at common law. Early cases such as Paradine v Jane 4 show the historical line that the courts took toward a frustration of purpose in contract; here the court held that where land under lease to the defendant had been invaded by Royalist forces, the defendant was still under an obligation to pay rent to the land Owner. It was not until the case of Taylor v Caldwell 5 that a doctrine of frustration was formally recognised, alleviating the harshness of previous decisions. Here two parties contracted for the hire of a music hall for the performance of concerts, but after contracting, but prior to the concerts being held, the music hall burned down. It was held the contact was impossible to perform. Judge Blackburn stated that the absolute liability found in Paradine v Jane would not apply, as there was an implied term the music hall would still be in existence at the date of the planned concerts. The implied term test was explained by Lord Loreburn6:

In most of the cases it is said that there was an implied condition in the contract which operated to release the parties from performing it and in all of them I think I think that was at bottom the principle upon which the court proceeded.

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