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Arbitration and Contract Law pp 273–278Cite as

Frustration and Termination by Notice

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Part of the book series: Ius Gentium: Comparative Perspectives on Law and Justice ((IUSGENT,volume 54))

Abstract

The central proposition is that mere hardship or difficulty or increased expense will not form the basis for terminating the contract under general law. Instead the doctrine of frustration is confined to supervening impossibility, (non-culpable and non-elective) incapacitation, or illegality. Another topic treated here is contracts of indefinite duration. These are normally capable of being terminated by one party giving reasonable notice to the other.

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Notes

  1. 1.

    GH Treitel, Frustration and Force Majeure (3rd edn, London, 2014); E McKendrick (ed), Force Majeure and Frustration of Contract (2nd edn, London, 1995); Clarke in Neil H Andrews, MA Clarke, AM Tettenborn, G Virgo, Contractual Duties: Performance, Breach, Termination and Remedies (London, 2012), Part III, chapters 16 to 18.

  2. 2.

    Pioneer Shipping Ltd v. B T P Tioxide Ltd, ‘The Nema’ [1982] AC 724, 752, HL, per Lord Roskill; ‘The Super Servant Two’, J Lauritzen AS v. Wijsmuller BV. [1990] 1 Lloyd’s Rep 1, 8, CA, per Bingham LJ.

  3. 3.

    Davis Contractors Ltd v. Fareham Urban District Council [1956] AC 696, 729, HL, per Lord Radcliffe; considered in Pioneer Shipping Ltd v. BTP Tioxide Ltd (‘The Nema’) [1982] AC 724, 744, 751–2, HL (at 753, noting the weak chances of a successful appeal if the right test has been applied; see also ‘The Mary Nour’ [2008] EWCA Civ 856; [2008] 2 Lloyd’s Rep 526, at [11]); The current approach is to follow the guidance of Rix LJ’s ‘multi-factorial’ approach in ‘The Sea Angel’[2007] EWCA Civ 547; [2007] 2 Lloyd’s Rep 517, at [111], see also [110], [112], and [132]. This test focuses on (a) whether the event falls within the scope of the established categories of frustration (b) whether the risk of the event is allocated, expressly or impliedly, to one of the parties and (c) whether a finding of frustration would be consistent with commercial conceptions of fairness. This case was cited by Flaux J in Bunge SA v. Kyla Shipping Co Ltd (No 2)[2012] EWHC 3522 (Comm); [2013] 1 Lloyd’s Rep 565, at [39] to [41]; Bunge SA v. Kyla Shipping Co Ltd (No 1) [2013] EWCA Civ 734; [2013] 3 All ER 1006; [2013] 2 All ER (Comm) 577; [2013] 2 Lloyd’s Rep 463, at [7], per Longmore LJ; Melli Bank plc v. Holbud Ltd [2013] EWHC 1506 (Comm), at [15], per Deputy High Court judge Robin Knowles QC; Islamic Republic of Iran Shipping Lines v. Steamship Mutual Underwriting Association (Bermuda) Ltd[2010] EWHC 2661 (Comm); [2011] 1 Lloyd’s Rep 195; [2011] 2 All ER (Comm) 609, at [105], per Beatson J. See also the NZ Supreme Court’s discussion in Planet Kids Ltd v. Auckland Council[2013] NZSC 147; [2014] 1 NZLR 149, at [60] to [62]; Mustill LJ in FC Shepherd v. Jerrom [1987] QB 301, 321–2, CA, attractively chronicled the evolution of the frustration doctrine; there is a careful analysis of the leading authorities in Islamic Republic of Iran Shipping Lines v. Steamship Mutual Underwriting Association (Bermuda) Ltd [2010] EWHC 2661 (Comm); [2011] 1 Lloyd’s Rep 195; [2011] 2 All ER (Comm) 609, at [101] to [107], per Beatson J.

  4. 4.

    GH Treitel, Frustration and Force Majeure (3rd edn, London, 2014), chapter 16.

  5. 5.

    [1956] AC 696, HL.

  6. 6.

    [1964] 2 QB 226, 238, CA.

  7. 7.

    British Movietonews Ltd v. London & District Cinemas Ltd [1952] AC 166, 183–4, 188, HL, per Viscount Simon and Lord Simonds; ‘The Mary Nour’[2008] EWCA Civ 856; [2008] 2 Lloyd’s Rep 526, at [14], [23], [27] (supplier’s duty to procure suppoly of goods; embargo by cartel of cement producers not an excuse).

  8. 8.

    British Movietonews case [1952] AC 166, 185, HL (repudiating Denning LJ’s unorthodox leniency in the lower court, at [1951] 1 KB 190, 201–2, CA); cf no repentance shown by Lord Denning MR in his minority judgment in Staffordshire A H A v. S Staffordshire WW Co [1978] 1 WLR 1387, 1397–8, CA.

  9. 9.

    National Carriers Ltd v. Panalpina (Northern) Ltd [1981] AC 675, 712, HL, per Lord Simon.

  10. 10.

    For cases where express terms were construed not to preclude frustration, see Metropolitan Water Board v. Dick, Kerr & Co [1918] AC 119, HL; and Bank Line Ltd v. Arthur Capel & Co [1919] AC 435, HL.

  11. 11.

    ‘The Great Peace’ [2002] EWCA Civ 1407; [2003] QB 679, at [74], per Lord Phillips CJ.

  12. 12.

    Edwinton Commercial Corporation v. Tsavliris Russ Ltd (‘The Sea Angel’) [2007] EWCA Civ 547; [2007] 2 Lloyd’s Rep 517, at [111].

  13. 13.

    [2010] EWHC 2661 (Comm); [2011] 1 Lloyd’s Rep 195; [2011] 2 All ER (Comm) 609, at [105]; see also Bunge SAv. Kyla Shipping Ltd[2012] EWHC 3522 (Comm); [2013] 1 Lloyd’s Rep 565, at [69] per Flaux J.​

  14. 14.

    Edwinton Commercial Corporation v. Tsavliris Russ Ltd (‘The Sea Angel’) [2007] EWCA Civ 547; [2007] 2 Lloyd’s Rep 517, at [127].

  15. 15.

    ‘The Eugenia’ [1964] 2 QB 226, CA; cf C Hall, (1984) 4 LS 300 (proposing a recklessness basis).

  16. 16.

    Maritime National Fish Ltd v. Ocean Trawlers Ltd [1935] AC 524, PC.

  17. 17.

    Generally on these factors, GH Treitel, Frustration and Force Majeure (3rd edn, London, 2014), chapter 13.

  18. 18.

    ‘The Eugenia’ [1964] 2 QB 226, CA; C Hall (1984) 4 LS 300 (proposing a recklessness basis).

  19. 19.

    Section 1(1), Law Reform (Frustrated Contracts) Act 1943 refers to contracts which have become ‘impossible of performance or been otherwise frustrated’.

  20. 20.

    [1903] 2 KB 740, CA (Lord Wright in the Maritime National Fish case, [1935] AC 524, 529, PC, noting the exceptional nature of Krell v. Henry).

  21. 21.

    [1903] 2 KB 683, CA.

  22. 22.

    [1981] AC 675, HL (e.g., a lease would be terminated if there were a 99 year lease and after only a couple of years the demised premises, situated on a cliff-top, fell into the sea as a result of coastal erosion); generally, GH Treitel, Frustration and Force Majeure (3rd edn, London, 2014), chapter 11.

  23. 23.

    Gamerco SA v. ICM/Fair Warning (Agency) Ltd [1995] 1 WLR 1226, Garland J.

  24. 24.

    BP Exploration Co (Libya) Ltd v. Hunt (No 2): main discussion by Robert Goff J is at [1979] 1 WLR 783, 799; subsidiary aspects are examined in successive appeals, [1981] 1 WLR 232, CA; [1982] 2 AC 352, HL.

  25. 25.

    Generally on the 1943 Act, GH Treitel, Frustration and Force Majeure (3rd edn, London, 2014), chapter 15; E McKendrick (ed), Force Majeure and Frustration of Contract (2nd edn, London, 1995); Goff and Jones, The Law of Unjust Enrichment (8th edn, London, 2011), chapter 15; E McKendrick, ‘Frustration, Restitution and Loss Adjustment’, in AS Burrows (ed), Essays on Restitution (Oxford, 1991), 147; GL Williams, Law Reform (Frustrated Contracts) Act 1943 (1944).

  26. 26.

    K Lewison, Interpretation of Contracts (6th edn, London, 2015), 6.18; Malcolm Clarke in Neil H Andrews, MA Clarke, AM Tettenborn, G Virgo, Contractual Duties: Performance, Breach, Termination and Remedies (London, 2012), 17–083 ff.

  27. 27.

    [1978] 1 WLR 1387, CA, per (Reginald) Goff and Cumming-Bruce LJJ; at ibid, 1397–8, Lord Denning MR, in a minority opinion, reached the same conclusion by the heterodox route of finding frustration to be satisfied by inflation; T A Downes, (1985) 101 LQR 98, 104–8; K Dharmananda and L Firios (eds), Long Term Contracts (Federeation Press, Sydney, 2013) (collection of comparative essays); McKendrick, ‘The Regulation of Long-Term Contracts in English Law’, in J Beatson and D Friedmann (eds), Good Faith and Fault in Contract Law (Oxford, 1995), 305.

  28. 28.

    [1978] 1 WLR 1387, 1399–1400, CA, per (Reginald) Goff; Goff LJ’s judgment and supporting authorities were followed by Buxton LJ in Colchester and East Essex Co-Operative Society Ltd v. The Kelvedon Labour Club and Institute Ltd [2003] EWCA Civ 1671, at [9].

  29. 29.

    [2009] EWHC 179 (Ch); [2010] 1 All ER (Comm) 238, at [25] ff (William Trower QC).

  30. 30.

    [2007] EWHC 2433 (QBD); [2008] 1 Lloyd’s Rep 305, at [60] to [66], per Coulson J.

  31. 31.

    [2010] EWHC 464 (Ch), Sales J.

  32. 32.

    See his cogent articulation of supporting reasons, ibid, at [18].

  33. 33.

    Harbinger UK Ltd v. GE Information Services Ltd [2000] 1 All ER (Comm) 166 (severable clause, surviving termination of main contract, that company ‘in perpetuity’ would provide support and maintenance of software supplied to a customer; the reality was that the customer would not everlastingly be prepared to use this soft-ware; so long as it did, the supplier’s obligation would endure).

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    Neil Andrews

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Andrews, N. (2016). Frustration and Termination by Notice. In: Arbitration and Contract Law. Ius Gentium: Comparative Perspectives on Law and Justice, vol 54. Springer, Cham. https://doi.org/10.1007/978-3-319-27144-6_16

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