Frustration Cases 1l1r7

Frustration cases Performance is illegal (supervening illegality) B v Fairbairn [1943] AC 32 Facts: - Pf made advance payment of 1000 pounds to Df for a machine to de delivered to Poland - Before shipping, German occupied Poland Held: - Contract frustrated - Court allowed Pf to recover 100 pounds on the basis of unjust enrichment - Total failure of consideration

Performance impossible (supervening impossibility) Destruction of subject matter Taylor v Caldwell [1863] 3 B & S 826 Facts: - Pf rented music hall from Df, but music hall burned down before the concerts Held: - Parties contracted on the basis of continued existence of the music hall as implied term as it is essential for the concert - Impossible for performance of contract Death or incapacitation of contracting party Norcutt v Universal Equipment Co [1986] 3 All ER 582 Facts: - Pf, a machinist contracted with Df - Pf heart attack, diagnosed never to be able to work again - Pf sought to claim sick pay from initial absence to termination of contract Held: - Contract frustrated from the point of diagnosis, cannot claim sick pay - For frustration to occur, dead or incapacitated party must have special knowledge to carry out a specific job, and requires personal performance of the party. Unavailability of subject matter Lim Kim Som v Sheriffa Taibah bte Abdul Rahma [1994] 1 SLR(R) 233 Facts: - Parties contracted sale and purchase agreement for property - Gahmen issue statement of compulsory acquisition of land Held: - Contract frustrated - Df could recover deposit Failure of source of supply Source specified in the contract Howell v Coupland [1876] 1 QBD 258 Facts: - Parties contracted for potatoes of specific kind grown in specific location

Held: -

Outbreak of fire, supplier could not produce potatoes from the location, shortfall made up from another location Contract frustrated Not mere contract of delivery as parties have specified in contract the location the potatoes must come from

Unspecified source only intended by one party Blackburn Bobbin Co Ltd v TW Allen & Sons Ltd [1918] 2 KB 467 Facts: - Parties contracts for Finland birch timber, standard practice is to be shipped from Finland - War broke out and German declared timber contraband - Can still be delivered indirectly through Scandinavia Held: - No frustration - No common intention that the timber come from a particular source - Only 1 party intended it to be from Finland, not specified in the contract Both parties intended an unspecified source Alliance Concrete v Sato Kogyo [55] - May frustrate a contract where both parties contemplated or could reasonably have contemplated that unspecified source - Subject to ‘radical change in obligation’ test - If source not specified as term in the contract, strict performance still technically possible but not the same as originally intended by parties. Frustration of purpose Foundation of contract ceases to exist Krell v Henry [1903] 2 KB 740 Facts: - Pf rooms to be rented to view Royal coronation - Coronation cancelled as King fell ill Held: - Contract frustrated - Purpose of rent is to view coronation, foundation of contract destroyed Many purpose to the contract, only 1 purpose fails Herne Bay Steamboat Co v Hutton [1903] 2 KB 683 Facts: - Df rented boat from Pf to take people to see naval review arising from Royal coronation and also to tour the fleet - Navel review cancelled as coronation cancelled, but fleet remained Held: - No frustration - Still possible to tour the fleet - Substantial part of the contract can be fulfilled, naval review is not the only foundation of the contract

Supervening impracticability Impracticability arise from increased cost of performance rarely discharges a contract Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 Facts: - Pf agreed to build council house for Df in 8 months, but Df took 22 months due to severe labour shortage - Df paid contract price, Pf argued frustration in attempt to get higher price Held: - Labour shortage on made the contract more onerous and expensive - No radical change in obligation (test for frustration that can be applied widely) - Situation for frustration must be very severe, such that change in the significance of the obligation, if performed, would be a different thing from that contracted for Holcim (Singapore) Pte Ltd v Kwan Yong Construction Pte Ltd [2009] 2 SLR(R) 193 Facts: - Pf supplier of concrete, Df construction company - Indonesia sand ban - Pf claimed sum of $305,153.40 and rely on force majeure clause to justify suspension of performance of obligation - Df claimed clause was introduced under economic duress and no consideration when clause introduced, hence unenforceable Held: - Frustration not from increased anticipated expenses, but from impossibility due to sand ban - All sand in the building industry sourced from Indonesia - Df failed to mitigate losses as Df did not assist Pf with obtaining sand from gahmen stockpile. High degree of impracticability may frustrate M P Bilt Pte Ltd v Edy Yumianto [1990] 2 SLR(R) 655 Obiter Dicta: Runaway inflation in Indonesia insufficient for frustration but exceptionally high inflation may warrant finding of frustration. Temporary impossibility (supervening delay) Delay makes performance useless to recipient party Jackson v Union Marine Insurance Co Ltd [1874] LR 10 125 Facts: - Vessel to go from Liverpool to Newport to load rails to be delivered to San Francisco, but ran aground on the way to Newport - Spring voyage became Autumn voyage Held: - Contract frustrated - Basis of contract was for ship to arrive in time for contemplated commercial venture - Late performance radically different from what both parties contemplated at time of contract Delay makes performance too onerous to the party performing Metropolitan Water Board v Dick, Kerr & Co [1918] AC 119 Facts:

Held: -

Pf contracted Df to construct a reservoir in 6 years Contract allowed for generous time extension A few months after conclusion of contract government ordered work to be ceased and Df’s plant to be sold Contract frustrated Government order caused an indefinite delay, works even if resumed would be at the later end of the 6 year contract At that time, labour and material conditions would become ‘absolutely different’ Even with time extension clause, it was unlikely to intend to cover indefinite delay

Inconvenience is not ‘more onerous’ (smaller degree) Tsakiroglou & Co Ltd v Noblee Thorl Gmbh [1962] AC 93 Facts: - Ap contracted with Rp to sell Df peanuts - Contract was cost, insurance, freight (CIF) - Both parties intended to ship via Suez Canal but Suez Canal closed - Ap refused to ship due to increased cost and delay, Rp sued Held: - No frustration - In CIF contracts, Suez Canal not implied term although customary, reasonable route can be taken - New route not fundamentally different. Therefore no radical change in obligations although different method of performance is necessary Self-induced frustration Choice Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524 Facts: - Pf operates 5 fishing boats, 3 owned by Pf, 2 chartered from Df - Pf applied for 5 fishing boat licenses but only granted 3 - Used 2 for own boats and 1 for Df boats, claimed frustration for the other Df’s boat and refused to pay Held: - No frustration - Frustration self-induced as Pf could have allocated license to Df’s boat - Refusal to grant license by authorities is not frustration as Pf could still carry out contract J Lauritzen AS v Wijsmuller BV [1930] 1 Lloyd’s Rep 1 (The “Super Servant”) Facts: - Df contracted to transport Pf’s drilling rig, and allowed for either of Df’s ships to be used - Df elected to use “Super Servant Two” and “Super Servant One” was allocated to another contract - “Super Servant Two” sank and Df claimed frustration Held: - No frustration - Df could have used SS1 when SS2 sank as contract provided for alternative

Foreseen or foreseeable events Supervening event cannot be foreseen or foreseeable Alliance Concrete Singapore Pte Ltd v Sato Kogyo (S) Pte Ltd [2014] 3 SLR 857 Facts: - Ap supplied concrete to Rp - Export of sand, a main ingredient for the concrete, was banned by Indonesian gahmen - SG gahmen release sand from stockpile to Sato, but there was still shortfall - Ap sought to increase price, Rp argued to maintain original contract price - Ap sued for increased price, Rp countersued for losses by Ap’s repudiatory breach - Ap argued no breach due to frustration Held: - Contract frustrated - Sand ban is supervening event not within reasonable control of parties, and cannot be foreseen, nor is it reasonably foreseeable at the time contract was entered into Foreseeability may not be sufficient to reject frustration Lim Kim Som v Sheriffa Taibah bte Abdul Rahman [1994] 1 SLR(R) 233 Held: - Rigid insistence on the fact that the event ought to have been foreseen cannot be an adequate solution as it would negate the Davis Contractors test Foreseeable not frustrated, frustration cannot be invoked lightly Glahe International Expo AG v ACS Computer Pte Ltd [1999] 1 SLR(R) 945 Facts: - Pf contracted with Df to purchase computers to be exported to Russia - Pf made advance payment, political and economic events in Russia led to heavy tax on computers and drop in exchange rate - Pf claimed frustration Held: - No frustration - Event was foreseen or reasonably foreseeable because likelihood of occurrence is sufficiently high HDB v Microform Precision Industries [2003] SGHC 214 Facts: - Parties contracted for lease of a plot of land - Land was land-locked and completely inaccessible - Df failed to get access to land from gahmen and claimed frustration Held: - Df contemplated the risk that gahmen would not grant access and yet concluded contract Force Majeure clauses (separate from frustration) If FM clauses are invoked there is no frustration, it is either or Party seeking to benefit from the clause only has to take steps to for foreseeable contingency The “Neptune Agate” [1994] SGHC 187 Facts: - Pf contracted with Df to carry 6 containers from Taiwan to Ireland

Held: -

2 were delivered to the container terminal and typhoon struck causing flooding in the terminal, damaging the cargo Parties agreed Df’s standard bill would govern their rights and liability Pf claimed for consequent loss and damage Relied on FM clause FM clause applied as reasonable steps had been taken Nothing in the history of the region indicates a reasonable probability of a flood Although practicable to rearrange the containers, there was no reasonable foreseeability of flood, when flood became a real possibility it was too late

Party relying on FM clause need not take impossible or commercially impracticable steps China Resources (S) Pte Ltd v Magenta Resources (S) Pte Ltd [1997] 1 SLR(R) 103 Facts: - Rp contracted Ap to sell urea and furnished performance bond in favour of Ap - Rp could not deliver in time and gave notice to invoke FM clause due to political situation in Russia, and stated a latest delivery date - Ap agreed, but reserved rights to sue, subsequently made claim - Rp claimed Ap was in repudiatory breach and sued Held: - Ap in repudiatory breach - Ap said Rp could have overcome FM event by obtaining urea from an Eastern European port - Such an arrangement is equally impossible as the original as it is too great a risk to ship without insurance and too much for Rp to take out an insurance Party seeking to rely on FM clause bears the burden of bringing themselves within it Metropolitan Water Board v Dick, Kerr & Co [1918] AC 119 Facts: - As per above - Df claimed frustration but Pf relied on FM clause which provided that in delay, Df can apply to engineer for extension Held: - FM clause only construed to cover temporary difficulties not fundamental changes RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd [2007] 4 SLR 413 Held: - Although contract became more onerous for Df, circumstances did not constitute FM event within contract - Df did not take reasonable steps to avoid operation of FM clause causing themselves to be brought within the clause - Party relying the clause must show the courts that nothing it could have done to avoid operation of the FM clause or mitigate its results FM clauses require very factual inquiries Holcim (Singapore) Pte Ltd v Precise Development Pte Ltd [2011] 2 SLR 106 Facts: - Ap contracted to supply concrete to Rp, but unable to supply due to Indonesian sand ban, and offered to continue to supply only if price increase Held:

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Literal performance still possible but commercially impracticable, non-frustrating event can still come within FM clause To bring themselves within FM clause, Ap had to show there were no reasonable steps then could have taken to avoid or mitigate the event or its consequences Ap had taken reasonable steps by asking Rp for help in procuring sand from gahmen stockpile, but was ignored by Rp

Effects of frustration in statute Frustrated Contracts Act Section 2 of FCA, specifically section 2(3) and section 2(4) Recovery for partial performance conferring valuable benefit BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 Facts: - Df own oil concession over land in Libya but did not have resources to find and harvest - Agreed to share concession with Pf if Pf would explore and harvest - Oil found but Libya gahmen forfeited concession - Contract frustrated Pf claimed against Df on s2(3) of FCA for exploratory services Held: - Step 1, identify and valuation of Df’s benefit - In this case benefit is the end product of the service - In the case where end product is destroyed, award is kosong as value of benefit is kosong - Value is to be assessed after frustrating event - Step 2, award of just sum - Cannot be greater than amount of valuable benefit - Purpose of FCA is to prevent unjust enrichment - Amount that is just is what the trial judge thinks is just, appeal judge cannot interfere with the assessment of just sum, unless it is plainly wrong it cannot be just.