Audio recording 24.2 transcript

I want to say something about the effect of frustration on a contract, because unlike mistake, frustration doesn't make a contract void. It’s said that frustration kills off a contract, and it happens automatically. So, frustration, upon the frustrating event occurring, the contract will be killed off. But everything that has been done up to the point of frustration is perfectly valid and remains okay. The concept is killed off for the future. And what we've had in the context of frustration is the development of the law as regards to the remedies available. So, at common law, originally, the loss simply lay where it fell and the courts didn't get involved in sorting out any sort of judicial remedies, it would say the contract was killed off by the frustrating events and any losses suffered simply lay where they fell. Then it developed that the claimant might have a claim against the defendant to recover any benefits transferred in unjust enrichment, on the ground of total failure of consideration. Which we examined in chapter five and we will come back to in chapter twenty-nine. But that's still quite a blunt tool because the consideration, or the basis of the transfer of the benefit has to fail totally. So, it's quite a rigid remedy. And that lead following the Fibrosa case to the 1943 Act. Which now largely governs the remedies awarded where a contract has been frustrated. But it's important to note that common law isn't entirely redundant. Because the 1943Act does not cover all contracts, and parties might agree to a different remedial regime in the contract itself as well. But basically, the general rule is if you're thinking about the consequences of frustration, it's a good idea to go to the 1943Act, and to have a look at the language of the statute and what the Act says. And basically, if you're trying to recover a money benefit, so the claimant's transferred money to the defendant, if you're trying to cover money benefits, then you want to look at section one, subsection two. And if it's a non-money benefit, so the claimant has provided services to the defendant, then you're looking at section one, subsection three. So, money benefits first, section one, two, basically, if the claimant hasn't paid any money yet the claimant shouldn't have to pay any money. And if its claimant has already paid money over to the defendant then that money is recoverable even if there hasn't been total failure of consideration. But those starting points are subject the proviso that the defendant might be able to retain, or recover a reasonable sum to cover expenses which have been incurred. And what constitutes a reasonable sum and whether the defendant should be able to do that is a matter for the court's discretion. And the leading case on this is the Gamerco case about a Guns N’ Roses concert at Athletico Madrid stadium. So that’s to do with money benefits. Looking at non money benefits, section one, subsection three applies. And here, the basic principle is the claimant can recover a sum which does not exceed the value of the benefit conferred upon the defendant. But when determining the just sum that the claimant might be awarded, the court will take into account a range of factors, including any expenses incurred by the defendant. Now the 1943Act is difficult, it's not a wonderful piece of legislation, and there are good reasons for that I think. You know, it was drafted in the middle of a war with a clear sense of urgency, and so it could be improved upon. And one of the difficulties of the act, because it's not clear exactly what the purpose of these provisions is, is it to prevent unjust enrichment, or is it to ensure the proportionment of losses after a frustrating event? And different people reasonably take different views as the purpose of the Act, and that can lead to difficulties. But overall, we don't have a large number of cases dealing with the 1943 Act. And your leading decisions are very much still the Gamerco case on section one, two, and BP v Hunt on section one, subsection three.