Chapter 7Introduction to the law of contractemployment, for example, can be brought to an end by
either the employer or employee giving reasonable
notice to the other. The Employment Rights Act 1996
lays down statutory minimum periods of notice. Em-
ployers must also consider the rules about unfair dis-
missal and redundancy. A contract may be discharged
by the execution of a separate agreement. The new
agreement will only discharge the old contract if it pos-
sesses all the characteristics of a valid contract; in particu-
lar, consideration must be present. When neither party
has yet performed his side of the contract, there is no
difficulty. Both sides, by waiving their rights, are provid-
ing something of value which constitutes consideration.
The situation is different where one side has already
completely performed his obligations and the other party
wishes to be released. The person seeking release must
either provide fresh consideration or the agreement
must be drawn up in the form of a deed.
Frustration
An agreement which is impossible of performance from
the outset will be void for mistake, as in Couturierv
Hastie(1856). But what is the legal position where
initially it is perfectly possible to carry out the contract,
and then a change in circumstances occurs making it
impossible to carry out the agreement?
Until the last century, the rule was that the parties were
under an absolute duty to perform their contractual
obligations. A person was not excused simply because
outside events had made performance impossible.
1 Physical impossibility.This is where something or
someone necessary to carry out the contract ceases to be
available.251
Paradinev Jane(1647)During the course of the English Civil War a tenant was
evicted from certain property by Prince Rupert and his
army. In an action by the landlord to recover three years’
arrears of rent, it was held that the tenant was not
relieved from the obligation to pay rent simply because
he had been unable to enjoy the property.Starting with the case of Taylorv Caldwell(1863), the
courts recognised an exception to the rule about abso-
lute contracts under the doctrine of frustration: if
further performance of the contract is prevented be-
cause of events beyond the control of the parties, the
contract is terminated and the parties discharged from
their obligations. The doctrine will apply in the circum-
stances described below.
Taylorv Caldwell(1863)The claimant had hired the Surrey Gardens and Music
Hall for a series of concerts. However, after making the
agreement and before the date of the first performance,
the hall was destroyed by fire. It was held that the con-
tract was discharged and the parties were released from
their obligations.If the presence of a particular person is necessary for
the execution of the contract, the death of that person
will clearly discharge the contract. Frustration may also
apply if a party is unavailable because of illness, intern-
ment or imprisonment.Harev Murphy Bros(1974)Hare was sentenced to 12 months’ imprisonment for
unlawful wounding and was, therefore, unavailable to
carry out his responsibilities as a foreman. It was held
that this frustrated his contract of employment.
Comment. An employee who loses his job as a result of
long-term illness or, as in Hare’s case, a substantial term
of imprisonment, may find that his contract of employ-
ment has been frustrated. The significance of such a
finding is that there will not have been a ‘dismissal’
according to the statutory provisions relating to unfair
dismissal (and redundancy). If there has been no ‘dis-
missal’, the employee cannot bring a claim for unfair
dismissal (or redundancy) against his employer.2 Supervening illegality.A subsequent change in the
law or in circumstances may make performance of the
contract illegal. An export contract will be discharged if
war breaks out with the country of destination.Denny, Mott & Dickson Ltdv James B
Fraser & Co Ltd(1944)
The House of Lords refused to enforce an option to pur-
chase a timber yard which was part of a contract invol-
ving the sale of timber because subsequent government
regulations had made performance of the main part of
the contract, trading in timber, illegal.