Describe the doctrine of frustration and explain how the rules relating to frustrated contracts have been developed to ensure the parties are fairly treated.

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Paper 1, Nov. 97, Question 7

Describe the doctrine of frustration and explain how the rules relating to frustrated contracts have been developed to ensure the parties are fairly treated. (25m)

                The term “frustration of a contract” defines the unforeseen termination of a contract as a result of an event that either renders the performance impossible or illegal, or prevents its main purpose from being achieved. For a contract to be frustrated, there must first be a contract between the parties. The frustrating event must also occur after the formation of the contract. The frustration must be beyond the control of the contracting parties, and the event must bring the contract to an end.

                A contract is discharged when the subject matter of the contract has been destroyed or is unavailable. In Taylor v. Caldwell, the contract to hire a music hall was held to be frustrated, by the destruction of the music hall by fire. Similiarly a contract is frustrated with the death, incapacity or unavailability of a party to a contract of personal service, or when the personality of one party is important. A contract between a pop group and its drummer in Condor v The Baron Knights, was held frustrated when the drummer became ill and was unable to fulfill the terms of the contract. Also, in Robinson v Davison, a piano player who was booked to perform fell ill on the day of the concert. It was held that the contract had been frustrated when his affliction made it arduous for him to perform.

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Frustration of a contract can also occur in circumstances where there is considerable government interference or delay involved. In Metropolitan Water Board v Dick Kerr, a contract was formed in 1913 to build a reservoir, then in 1915, work was ordered to be halted, and the plant sold by the government. The contract was held to be frustrated, likewise in Jackson v Union Marine Insurance Co., where a ship was not available for voyage for which she had been charted.

                Until the 19th century, the courts adhered to a theory of “absolute contracts”, as in Paradine v Jane. It ...

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