A point to note is that in BP v Hunt (1982) it was suggested that if goods
were obtained under a contract which was frustrated, and the goods
themselves were destroyed, for example by fire, then there would be no
valuable benefit, possibly leaving the other party out of pocket. However,
the responsibility of insuring the goods destroyed may be taken into
account by the court in deciding this point, should it arise.
The statutory provision is welcome as an appropriate supplement to the
case law forming the original doctrine of frustration. It means that all money
now moves back to the original position, and the courts can then decide
whether either party needs to be reimbursed for expenses, or to pay for the
value of goods or services already obtained under the contract. In effect
Parliament has given the courts the power to apportion loss fairly between
parties, in a similar way to the apportioning of loss under the concept of
contributory negligence in tort. This hopefully provides a fair solution to a
situation where no one party is to blame for the ending of a contract.
Discharge of a contract 221- Money paid is recoverable – s.1(2).
- Money due is no longer due – s.1(2).
- Where expenses have been incurred, the court may order a just sum to
be paid – s.1(2). - Where a valuable benefit is obtained, the court may order a just sum to
be paid – s.1(3).
Figure 14.3
A comparison between frustration and breach
Frustration Breach- Arises when a contract cannot • Arises where a contract cannot
be performed as expected. be performed as expected. - Arises where neither party is at • Also arises where an untrue
fault. statement is found within a
contract. - Money is returned to where it • All of the blame or fault lies with
came from. one party. - An order for expenses incurred • Full damages are normally
may be made. available for the innocent party. - An order for benefits received • The burden of loss is wholly on
may be made. the party at fault. - The burden of loss is shared.
Figure 14.4