Monday, 1 April 2013

Limitations of Frustration

Express contractual provision 

In a case where a supervening event has rendered performance radically different to the original agreement, but there is an express contractual provision dealing with such an intervening event, the ocntract will not necessarily be frustrated. 

Clauses such as these should not be confused with force majeure clauses, which merely temporarily makes the contract difficult to fufile

Foreseeable supervening event

Where a supervening event occurs, which would otherwise lead to frustration of the contract, if the event was a reasonably forseeable possibility, the contract may not be frustrated The Davis Contracters case can also apply here, the shortage of labour and raw materials was not unforeseeable. 

The supervening event was caused by one of the parties  - Self Induced Frustration

As stated above, frustration only occurs when a supervening event occurs without default of either party. This prevents a party from self-inducing frustration to escape contractual liability. There is also a strong view that negligence alone by a party could constitute default. The onus of proving that the supervening event was caused by one of the parties lies with the party who makes the allegation. 

An example is J Lauritzen AS v Wijsmuller BV, “The Super Servant Two” 1990,  here the defendant contracted to transport Plantiff’s oil rig from Japan to Holland using either the “the Super Servant One” or the “Super Servant Two” transpotation unit. The defendant intended to use no 2 but it sank. Meanwhile, the defendant allocated no.1 to other contracts. It was self-induced as it was the defendants choice to allocate the ships to other parties. 

The burden of proving that the frustration is self-induced is on the party claiming it. 

Distinguishing Frustration from Force Majeure

In common law jurisdictions, force majeure means an event that does not make the obligations impossible but rather temporarily difficult.By using notice with force majeure obligations can be suspended as opposed to disposed of. 

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