Agreement Frustrated

One of the cases in which the contract may be terminated out of frustration is when the nature of the contract between the parties has changed due to an unforeseen event and which, by chance, also escapes the control of the contracting parties. In order for the agreement to be denounced out of frustration, the unforeseen event must have changed the obligations so that the original intent of the agreement would no longer be obvious. Furthermore, neither party can be the cause of the unforeseen event, nor can it be to believe that such an event would occur during the trade, hence the absence of a contractual provision to deal with the unforeseen event that causes frustration. Whether a contract is frustrated by a supra-generative event that occurs as a result of coronavirus depends to a large extent on individual facts. The bar of frustration is high. However, it is very likely that this bar will be reached in some cases, for example when it becomes illegal to provide a service. If a contract is frustrated, it is automatically discharged at the time of frustration. This means that the contracting parties are not obliged to fulfil future contractual obligations. In addition, contractors cannot claim damages for non-compliance with these future obligations. The Australian courts held that the determining issue of whether or not to thwart a contract was whether the situation resulting from the event was ”fundamentally different” from that provided by the treaty.

[1] The event must have serious consequences and there must be a ”radical” change that the performance of the contract is impossible. A contract considered frustrated is terminated and outstanding commitments are honoured. Responsibility for obligations that are met with frustration remains. The parties should carefully consider the claim that a contract has been frustrated, because if a party believes that a frustrating event has occurred and is subsequently found to be wrong, the error may have rejected the contract. One of the most common problems in recent months has been the recovery of deposits made under an agreement that was thwarted by the COVID 19 pandemic. The test of a frustrated contract was set by Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696. In the event of the destruction of an object or work essential to the contract – which has been expressly identified – without fault of one of the parties, it cannot be executed as specified in Taylor/Caldwell. However, these principles differ with respect to the review of the sale of goods.