Chapter 21 Self-test questions

. Taylor v. Caldwell (1863) 3 B & S 826 represented a turning point in English law as regards the doctrine of frustration. The traditional doctrine of absolute contracts was reinterpreted to incorporate an exception based on an implied contractual term as to the existence of the subject matter of the contract. Whilst this authority was followed in later cases, the implied term theory of frustration was questioned and later rejected in Davis Contractors Ltd v. Fareham Urban District Council [1956] AC 696. On what footing was the doctrine then placed?

On the true construction of the terms of the contract and the surrounding circumstances

On its true civil law foundations, in the form of an objective rule of law

On that which the parties would have agreed if they had foreseen the event said to have frustrated the contract

On the intention of the parties

. The doctrine of frustration has proved to be of limited practical significance. Which of the following has not contributed to the limited practical significance of the doctrine?

The doctrine of frustration does not apply where the event was foreseeable

The draconian consequences of a finding of frustration ensure that it is rarely invoked by the courts

The unwillingness of the courts to set aside a contract on the ground that it is unfair

The doctrine cannot be invoked where one of the parties was at fault

. The presence of a force majeure clause will not have the automatic effect of excluding the operation of the doctrine of frustration. True or false?

True

False

. A ship owner S agrees to charter the Tasman Beauty to T for a period of four months, to run from 1st November 2015. The ship is to sail between Papua New Guinea and Tasmania with a cargo of palm oil. Both parties are aware of the fact that, at the time of the agreement, Australia is engaged in a bloody sea battle with New Zealand over oil resources. Furthermore, there is speculation that Tasmania's ports are to be closed and the island used as a secure site for prisoners of war captured at sea. Indeed, S and T discussed this issue prior to signing the agreement but decided that the war would likely be over by the time the ship set sail. The only provision they make is an option to extend the contract for a further four months to cover any delays. In late November 2015, the Tasman Beauty is about to set sail when T hears that the Australian navy are stopping all traffic headed for Tasmanian ports and word is that the ports are to remain closed indefinitely. T rings S and tells him the contract has been rendered impossible. He takes up other work to cover his losses. In fact an armistice is reached the following day and the Tasmanian ports are re-opened. On which of the following bases might S found a claim for recovery? Select all that apply.

The 'frustrating event' was foreseeable and in fact foreseen by both parties, therefore the contract was never frustrated and T was in breach of contract

The 'frustrating event' was a foreseeable possibility, but the parties made provision for such an event by including an option to extend the contract to cover any delays; therefore, there could be no avoidance of the contract on the basis of frustration

A frustrating event must be some extraneous change of situation, whereas in this case the 'frustration' was brought about by T's election not to go ahead with the voyage

T cannot rely on a 'frustrating event' for which he is to blame, therefore there can be no defence of frustration on these facts

. A young barrister, Alex, still active in the academic field, is invited by Huckleberry University Press (HUP) to write a series of 150 multiple choice questions for first year law students. A simple contract is drawn up and signed by both parties in which the publishing firm agrees to pay Alex a total of £500 for his questions to be completed within the period of one year. £100 of this is to be paid in advance, with a further £200 paid on completion of 50% and the final £200 when the full 150 questions are received. Alex sends in his work on a regular basis and within a few months has accumulated a total of 70 questions. However, whilst out celebrating completion of his pupillage, he is involved in a serious car crash which leaves him incapacitated and unable to fulfill the contract. Furthermore he is later found to have been almost entirely to blame for the incident and he is facing a charge of dangerous driving. HUP bring a claim against Alex in which they seek to recover damages for the loss which they allege they have suffered as a result of his failure to complete the questions. What is Alex's defence?

Alex may argue that the contract has been frustrated and counterclaim for recovery of at least a portion of the money due to him under the Law Reform (Frustrated Contracts) Act 1943

Alex may argue that the contract has been frustrated

Alex has no valid defence based on frustration since he was himself responsible for the occurrence of the 'frustrating event'

. J Lauritzen AS v. Wijsmuller BV (The 'Super Servant Two') [1990] 1 Lloyd's Rep 1 is a case of considerable significance. What does the case decide? Select all that apply.

The purposes of both parties must be frustrated in order to ground a finding of frustration

Generally a party who was responsible in some way for the 'frustrating event' will not be entitled to invoke the doctrine of frustration

A force majeure clause is unlikely to be interpreted widely enough to encompass an act of negligence on the part of one of the parties, unless very clear words are used

A finding of frustration will be sufficient to set aside the contract ab initio

. Why was the contract in Krell v. Henry [1903] 2 KB 740 frustrated?

Both parties had entered into the contract on the basis that their joint purpose in entering into the contract was that the room was to be used only for the purpose of viewing the coronation

The claimant had entered into the contract on the basis that the room would be viewed for the purpose of viewing the coronation

Both parties had entered into the contract on the basis that one of their joint purposes in entering into the contract was that the room was to be used for the purpose of viewing the coronation

None of the options given are correct

. The effect of frustration is to discharge the contract automatically. What does this imply?

Both parties are discharged from all further performance of the contract and no further liability may arise

If possible, the contract is suspended until the frustration is/can be removed

The termination of the contract is retrospective in its effect

The termination of the contract occurs ab initio

. A number of severe problems plagued the common law rules on the effect of frustration. Which of the following problems remained after the decision in Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32? Select all that apply.

No allowance could be made for expenses incurred by the recipient of pre-payments

There could be no recovery if the consideration for the payment had only partially failed

It is necessary to set aside a contract ab initio in order to create a total failure of consideration

Recovery of benefits bestowed (other than money) was not even discussed

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