Monday, 1 April 2013

Impossibility of Performance and Frustration

A contract is determined to be frustrated for impossibility if it is no longer possible for either party to perform their obligations for reasons outside their control.

The doctrine of impossibility comes from the case of Taylor v Caldwell (1863). In this case, the defendants owned a music hall which they leased to the plaintiffs who were planning to use the hall to hold four concerts on four different dates. A week before the first concert was to be held, the hall burned down. The judge of the case held that the continued existence of the hall was an implied condition of the contract, and that neither party was entitled to fulfil their contractual obligations as it would be impossible to do so. Here Blackburn wanted to change the law and he did so by saying that an absolute promise has both express and implied condition. Thus, there was an implied condition that the contractual duties should be possible to perform. 

Another significant case was that of Fibrosa Spolke Ackyna v Fairbarin Lawson Combe Barbour [1943] AC, in which the Plaintiff, a Polish producer of textiles, ordered a quantity of machines used in the production of textiles from D. At some point during the performance of the contract Germany invaded Poland, making the contract impossible to perform as the machines would be unable to be delivered, as they end up under control of the Nazi Party. The court found that the contract was frustrated due to impossibility and as such the parties were entitled to retain all performance up to the frustrating event. Furthermore, when the war was declared it became illegal to trade with an enemy as well as there was a total failure of consideration and this is why the contract was rendered frustrated. 

Other events that may cause impossibility of performance include:

- Death 
In contracts involving a personal element, such as employment contracts, will be terminated upon the death of a contracting party. If there is no personal element, the obligation under the contract may be enforced upon the person’s legal representative 

- Incapacity 
There have been situations where the promisor is incapacitated, in instances of a contract involving personal services, where the incapacity has been found to be a frustrating event due to it being over an unreasonable period of time. 
Simmons Ltd v Hay (1964) is an example of this, where the contract was discharged by frustration due to a member of staff who had become permanently incapacitated by sickness. 

- Destruction of subject matter 
See Taylor v Caldwell

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