Legal effects of frustration
At one time when a contract was found to be frustrated it was said that ‘the
loss lay where it fell’. This meant that all duties ended at the point of
frustration, any money paid remaining paid and any money due remaining
due. This was fair where only a small deposit, or no deposit at all, had been
paid, the rest being due on completion of the contract, but could be harsh
where money had been paid in advance, as this would not be recoverable.
The Fibrosa Case (1942) changed this position a little, holding that where
there was a complete lack of consideration, and nothing at all had been
done under the contract except the paying of money, the money should be
recoverable. But this was still unfair in many cases. What if the work had
just begun before the frustrating event, but all of the money had been paid?
Reform came in 1943 in the form of the Law Reform (Frustrated
Contracts) Act 1943 and this remains the basis of the doctrine of frustration
today. The following provisions were made under the act:
220 Contract law
The owner had a
choice of which boats
he would place
licences onboat 1boat 2boat 3boat 4boat 5licence
licencelicenceFigure 14.2These facts could be applied to a person who wishes to buy a house because
it is a suitable property on which to build an extension for private or
business use. Assuming that planning permission must be obtained from the
local authority before building, what should he do to ensure that the buyer
is not in a similar position to the above case?