Chapter 12 Multiple-choice questions

. Where a supervening event is governed by a force majeure clause in the contract, there would be no question of that event frustrating the contract.

True

False

. Which of the following statements are consistent with the decision of the House of Lords in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696? [Please select all that apply.]

The doctrine of frustration was based on an implied term of the contract that the parties should be excused if and when a supervening event materialised.

In general, impracticability was not a valid ground for discharge of contract by frustration.

Frustration did not necessarily mean that contract performance was impossible; a supervening event that rendered it radically different from the agreed performance would also frustrate the contract.

Frustration depended upon whether, according to the true construction of the terms of the contract, the supervening event had a sufficiently serious effect upon the agreed performance.

. Which one of the following is not a potentially frustrating event?

A singer contracts bird flu and is unable to fulfil a performance contract at the fixed date for performance.

A fund entered into a contract to finance the operation of a casino but, subsequently, a Money Laundering Act banned that type of contract.

A ship specified in a charter party to complete a voyage within three months runs aground by reason of unforeseeable storms and is not to be ready to sail until five months later.

A seller is unable to fulfil a contract for sale of goods because one of his suppliers' factories has been burned down by accidental fire.

. In deciding whether unavailability of the subject matter frustrates the contract in a given case, the courts apply a similar test to that employed to determine whether a breach of an innominate term constitutes a repudiatory breach.

True

False

. A wins a prize, giving him free entry to the next England v France rugby international, and decides to travel to London by coach to watch the match. He purchases a day return coach ticket from B Ltd. Unfortunately, the rugby match is cancelled owing to a freak storm. A no longer needs his coach ticket and therefore claims that his contract with B Ltd has been frustrated. Which one of the following statements most accurately summarises the legal position between A and B Ltd?

The contract has been frustrated on grounds of impossibility because there is no rugby match for A to attend.

The contract has been frustrated because A's sole purpose of entering the contract, which is to watch the rugby match, has been destroyed.

The contract has not been frustrated because the rugby match does not form the common purpose of the parties.

The contract has not been frustrated because A will gain a valuable benefit from travelling to London.

. Where a contract is severely affected by a subsequent inflation, the courts may hold that the contract is not frustrated but that the contract price must be adjusted to suit the new circumstances.

True

False

. A purchases an 'all-in-one travel and seating package' from B Ltd to view the next England v France rugby international match. This entitles her to a day return coach ticket to London and a seat for the match. Unfortunately, the rugby match is cancelled owing to a freak storm. A claims that her contract with B Ltd has been frustrated. Which one of the following statements is most likely to be followed by a court in determining the legal position between A and B Ltd?

The contract has been frustrated because the common purpose of both parties has been destroyed.

The contract has been frustrated on grounds of common mistake.

The contract has not been frustrated because the rugby match does not form the common purpose of both parties.

The contract has not been frustrated because at least one of the purposes of the contract, namely, travelling to London, is unaffected by the cancellation of the match.

. The doctrine of frustration can never apply to contracts relating to interests in land.

True

False

. A agrees to make a new kitchen table and six chairs for B, at a cost of £2,000 payable on completion. A purchases the materials for £500 and soon completes the table, which he delivers to B. At this point, A's workshop is completely destroyed and A is severely injured. A is physically incapable of completing his contract with B. It is agreed that the contract has been frustrated. Which one of the following statements most accurately summarises the rights that A possesses under the Law Reform (Frustrated Contracts) Act 1943?

A can claim his expenses of £500, subject to the court's discretion, and a reasonable sum of money representing the value of the table received by B.

A can claim his expenses of £500, subject to the court's discretion, but he cannot claim any money for the table received by B.

A cannot claim his expenses of £500, nor any money for the table received by B.

A cannot claim his expenses of £500 but he can claim a reasonable sum of money representing the value of the table received by B.

. Which of the following statements concerning the Law Reform (Frustrated Contracts) Act 1943 are true? [Please select all that apply.]

The 1943 Act does not apply where the parties have made express provision for the consequences of frustration.

The party who has made prepayment pursuant to the contract before the frustrating event occurs must demonstrate a total failure of consideration in order to recover the money under s. 1(2) of the 1943 Act.

The court's discretion to award expenses under s. 1(2) has upper limits, but no lower limit, because the court may order the recipient of an advance payment to repay the full amount, even if it has incurred expenses.

According to s. 1(3), where a party has provided part of the service under the contract before the frustrating event occurs, the court may award it a just sum, even if there has not been any end product of the service.

. A booked a room at B's hotel for the weekend of 12 May, agreeing to make a 10 per cent deposit immediately. They agreed that the deposit would be forfeited only should A cancel the booking without good reason. On the weekend in question, B ensures that there is clean linen, toiletries and a well-stocked mini-bar available in the room allocated to A. Unfortunately, owing to floods, all roads to the hotel are impassable. A and B agree that the booking contract has been frustrated but both are now disputing the question whether the 10 per cent deposit is repayable or not. Which one of the following statements is probably true?

A is automatically entitled to the return of her deposit.

The court may allow B to retain a sum of money representing the expenses incurred for preparing the room, before returning the remainder of the deposit to A.

A automatically forfeits her deposit.

B has a right to deduct any of his expenses for preparing the room, before returning the remainder of the deposit to A.

. Where a contact is frustrated, it automatically becomes void.

True

False

. A enters into two similar contracts with C and D to import certain machinery. The importation of the machinery requires a licence from the government of A's country. In the contract with C, A guarantees to obtain a licence, whilst no such guarantee is given in the contract with D. A applies for two licences for the importation of the machinery but only one licence is granted. A allocates the licence to the contract with C and claims that the contract with D is frustrated. Which one of the following statements most accurately summarises the legal position between A and D?

The contract has not been frustrated, because the unavailability of the licence is not due to any breach of contract by A.

The contract has been frustrated, because the allocation by A of the only licence to the other contract aims to avoid a breach of that contract by A and is thus reasonable.

The contract has not been frustrated, because the unavailability of licence is due to A's allocation of the only licence to the other contract.

The contract has been frustrated, because the contract has not expressly allocated the risk of failure to obtain the licence to A.

. The doctrine of frustration cannot apply to supervening events that are foreseeable at the time at which the contract is made.

True

False

. Where a contract contains a clause that expressly allocates the risk for an event that is alleged to have frustrated the contract then, in the absence of clear terms, a court will interpret that clause contra proferentem (i.e. against the party seeking to rely on it).

True

False

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