In this case there was a fire in the hall which mainly affected the office and there was smoke damage to the main hall. One of the main cases under the doctrine of frustration is that of Taylor v. Caldwell where there was the hire of a musical for a concert and the concert hall was destroyed by fire 6days prior to the contract starting. The courts held that it was an implied term within the contract that the hall should exist for the contract to go ahead. The same can be applied to Rebecca’s case, since the main hall was damaged by smoke it would be impossible for her to carry out her normal contractual obligations under the contract. The hall comes to the essence of the contract therefore with damage to it; it means that the contract is not serving the purpose which it should therefore Rebecca may have a claim under the doctrine of frustration. The argument that might be used by the defence is that damage to the essential parts of the contract was temporary and minimal therefore this is not adequate for her to claim under frustration. Partial destruction of the subject matter may result in the contract being frustrated if it hinders performance of the contract , in Rebecca’s case although the fire mainly damaged the office and the hall suffered smoke damage this meant that normal performance under the contract was impossible. In Taylor v. Caldwell the contract was for the hire of the music hall and the Surrey Gardens but only the music hall was destroyed and the courts held the contract had been frustrated as the destruction was not the fault of neither party, the same principle would be applied to Rebecca. To reinforce this point Rebecca would be able to use the authority of the case of Jackson v. Union Marine Insurance Co. Ltd whereby the courts held that temporary unavailability of the subject matter is adequate to frustrate the contract.
Rebecca might also be able to frustrate the contract under impossibility of purpose, she might claim that the fire has undermined the purpose of the contract to her that she should not be required to stay bound in it or pay for the remaining rent. The building was no longer fit for her purpose therefore she could have the right to frustrate the contract on this basis. However, problems might start to emerge here, as it was held in the House of Lords case of Bunge Corp v. Tradax Export SA that the frustrated purpose of only one party will not frustrate the contract, in this case if Rebecca decides to claim through impossibility of purpose then there would be no common purpose since the frustration only serves her needs and at the same time not considering that of the Committee.
As highlighted above there are a number of hindrances to Rebecca frustrating the contract and one of them are that she cannot base the frustration claim that the Committee failed to provide consideration. In this case she might say that there was total failure of consideration, this normally arises where the claimant has no part of what he had bargained for. From the facts of the case it seems that Rebecca is saying that the hall is no longer suitable for her purposes and therefore she would like to claim for the rent she had paid already and not paying for that of October and until the lease expires. It will not be possible for her to claim for the money she has paid already as at common law any money paid before the frustrating event is lost. However, the common law approach was superseded by the Law Reform (Frustrated Contracts) Act 1943 which will be discussed later in the memorandum. In regards to the issue of consideration, both parties had fulfilled their consideration towards each other. The courts had fulfilled their consideration by renovating the hall as per Rebecca’s request and Rebecca kept to her payments. Consideration is value paid for a promise, this should not always be monetary and one of its principles is that it should be of detriment to the offeree. In this case both parties had received benefits and losses as a result of the contract therefore the claim for the rent already paid by Rebecca would be unsuccessful as she enjoyed the benefits of using the hall for 5months.
Following the rule laid out in Chandler v. Webster courts were following the common law approach to frustration whereby it was stated that any losses incurred before the frustrating act are not recoverable. The case of Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd replaced the common law rule in Chandler v. Webster and it came backed by the Law Reform (Frustrated Contracts) Act. This outlined that the party that receives payment is awarded “quantum meruit” which is whereby the party is entitled to recover payment for work performed. If Rebecca claims that the contract is frustrated then the Committee will be able to claim for the total sum of £5,000 which was spent on painting the interior and flooring. However, at the same time Rebecca would not be able to claim under Section 1(2) of the Act since payment of rent is a condition of the lease therefore by claiming it back she would be going back on the terms of the contract.
This then leads to the issue of the contract between Rebecca and the Committee being breached. Just to refresh your memory, breach of contract is whereby a party excuses himself or refuses to carry out his obligations from a contract without a valid lawful reason. By not paying the rent for October and deciding to pull out of the contract prematurely amounts to breach of contract by Rebecca. A contract is made up of terms; there are mainly 3 types of terms which are namely conditions, warranties and innominate terms. A condition is a term which is of the essence to the contract therefore when breached the innocent party is given the right to discharge the contract and may also claim damages. Warranties are terms which are not fundamental to the contract therefore if breached the innocent party can only claim for damages. Lastly innominate terms are those which are neither conditions nor warranties and breach may result in the contract being discharged.
In this case it seems that the contract was breached by Rebecca refusing to pay the rent for October and choosing to withdraw from the contract without a lawful excuse. However, the breach of contract by Rebecca does not automatically mean that the contract is ended as outlined in the case of Decro-Wall International v. Practitioners in Marketing Ltd in which the courts held that the breach of contract by the defendants did not justify termination of the whole contract. The Committee in this instance is the innocent party therefore it has the right of election; they can chose whether they want the whole contract with Rebecca cancelling or affirming it. The lease clearly outlines the terms of the contract so as already mentioned Rebecca has broken a condition of the contract by not paying the October rent. The Committee can therefore terminate the contract and claim for damages from Rebecca, the damages aim to put the Committee in the position they would have been had the contract not been breached. The damages could be the amount of rent that was remaining from the lease. The decision to terminate the contract should be communicated to Rebecca as set out by the case of Vitol SA v. Norelf Ltd. The Committee can also affirm the contract and accept damages for the losses incurred as a result of the breach. In this case both parties are still bound by the terms of the contract and still have to carry out their obligations under the contract.
The type of breach specific to Rebecca and the Committee is anticipatory breach; this is whereby one party informs the other that he will not perform their contractual obligations. The innocent party i.e. the Committee is entitled to terminate performance of the contract. Rebecca wrote to the Committee informing them that she wishes to withdraw from the contract. It is clear that the Committee is not willing for the contract to be terminated as there is a breach of an implied term of the contract. Under the doctrine of anticipatory breach neither party without reasonable cause is allowed to withdraw from the contract. The Committee is not obliged to exercise their right to terminate the contract, instead they can choose to affirm the contract and force Rebecca to fulfil her contractual obligation as stipulated in the contract. The Committee may still continue their performance of their obligations despite knowing that Rebecca does not want their performance as illustrated by the case of White and Carter (Councils) Ltd v. McGregor.
From all the above it can be summarised that there is difficulty in proving that the contract was frustrated and on the other hand it is clear that Rebecca breached the contract. I really hope that my advice would be of help to you and Rebecca.
Mindy Chen-Wishart: Contract Law, Second Edition, Oxford, Oxford University Press
Law Reform (Frustrated Contract) Act 1943