The “doctrine of frustration‟ is a common law concept that allows a contract to be discharged when a certain event or event(s) occur, which is beyond the control of the parties. The event needs to make performance of the contract impossible. Contractual promises and obligations are usually absolute, therefore this doctrine is a departure from the absolute nature of contracts and so you must ensure that the strict legal tests are satisfied in order to successfully argue frustration.
In order to satisfy the doctrine of frustration an event needs to occur that is not only unforeseen but an event which significantly alters the relationship between the contracting parties. Some examples where the doctrine of frustration has been successfully applied are set out below;
- Where the subject matter of the contract ceases to exist:
- Death or incapacity of a party where the contract involves obligations of a personal nature:
- Delay and obstruction of performance:
- Performance is rendered illegal by legislation
This is by no means an exhaustive list and therefore you should seek legal advice on whether or not you can argue the doctrine, at the earliest opportunity.
The Frustrated Contracts Act 1944 (“the Act) also assists when dealing with the effect of the discharge of obligations on ‘parts’ of the contract which have already been fulfilled. The Act allows certain rights to contracting parties to a frustrated contact such as;
- There is an ability to recovery money paid in consideration of the contract (even if payment has been made before the date of frustration); and
- The Act allows a party to claim compensation for work done and/or expenses incurred for the purposes of a contract until the date of frustration, and
Again this is not an exhaustive list of what remedies the Act offers. The doctrine of frustration is a legally challenging one to rely on and can also be contracted out of, by the parties, when entering the contract. It is therefore crucial that you seek legal advice not only when problems arise but before actually entering into a contract. Farry and Co are experts in this area and can assist in all aspects of contract law.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co who normally advises you, or alternatively contact:
Kirsten Maclean
(03) 477 8870 or (09) 379 0055
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.