Deck 7: Frustration

Question 1

All Sugar Co has decided to expand its operations and import cane sugar from Cuba. It has chartered five ships and plans to arrange for twenty shipments per month from Havana to Bristol. Blucose Industrial Sugar Co agrees to purchase 5,000 tons of cane sugar from All Sugar. Blucose needs the sugar to fulfil a large order for processed glucose for Clairfield Industries. Assuming that the parties have made no express provision in their contract to cover the following eventualities, in which of the following cases has the contract between All Sugar and Blucose been frustrated?

A) Mid-ocean, the ship is caught in a storm and the holding deck is flooded with water. The shipment is totally destroyed.
B) While the shipment is in transit, Blucose's processing plant catches fire and burns down. Blucose has no other facilities to process the sugar for Clairfield.
C) Unknown to both parties, the British Parliament had passed an import ban on all products from Cuba in 1999. The ship is prohibited from unloading its shipment in the port of Bristol by British customs officers.
D) None of the above.

Answer 1

D

Question 2

On 15 July, Brian and Jesse plan to attend a large outdoor rock festival in St James's Park. However, because of a heightened terrorist threat in that period on major London landmarks, including Buckingham Palace, the concert has been cancelled at the last minute. Which of the following contracts has been frustrated?

A) Brian's contract with a cab driver to bring him to the concert.
B) Brian's contract with the boat house to hire a rowing boat to use on the lake in the park while the concert is taking place.
C) Brian's contract with a restaurant opposite the stage offering a special 'rock & roll buffet' for the festival.

Answer 2

C

Question 3

Consider the following two statements.
I)A contract may be frustrated even if it is still physically capable of performance.
II)A supervening event which is foreseeable, even if only remotely, can never frustrate a contract.
Which of the following statements is true?

A) Both I and II.
B) Only I.
C) Only II.
D) Neither I nor II.

Answer 3

B

Question 4

Which of the following statements is true?

A) Parties may exclude the operation of the doctrine of frustration in their contract.
B) A contract will always be frustrated by the death of one of the contracting parties.
C) The doctrine of frustration does not apply to interests in land, such as a lease.

Question 5

Contract parties in warring countries may prevent their contract from being frustrated by a prohibition on trading with enemy aliens by providing in their contract a clause postponing their obligations until the cessation of hostilities.

Question 6

The Midlands Touring Company contract with Lawrence, owner of the Montgommery Theatre, to hire the premises for two weeks to perform their new production of 'Waiting for Godot'. The Montgommery has been in financial difficulties for years and the bank is threatening to foreclose. Two days before opening night, a fire breaks out in the basement of the premises. A maintenance worker notices smoke coming from the stairs and calls Lawrence. Lawrence tells the maintenance worker to vacate the premises immediately and that he will call the fire department. Realizing the insurance on the premises will get him out of his financial difficulties, Lawrence waits half an hour before making the call to the fire department. By that time, the theatre can no longer be saved and the show will have to be cancelled. Can The Midlands Touring Company claim damages from Lawrence for his non-performance, although they have not yet paid the rental price?

A) No, the contract has been frustrated and automatically discharged. Lawrence is excused from performance.
B) Yes, the contract has been frustrated and statutory damages can be claimed through the Law Reform (Frustrated Contracts) Act 1943.
C) Yes, the contract has not been frustrated. Lawrence is in breach of contract.

Question 7

Which of the following contracts has been frustrated?

A) Dreamhomes Co is planning to construct 40 semi-detached homes. After a public offer has been made and all prospective units have been sold but not allocated, the City Council only gives permission to build 36. The four purchasers left out in the cold after allocation of the homes claim damages. Dreamhomes claims that those contracts have been frustrated.
B) Flytech Industries Co has been contracted by Libyan National Airways to construct a passenger jet for immediate use. Libyan Airways plans to use the passenger jet for a new route between Tripoli and Rome. As construction nears completion, Libyan Airways is told by the authorities at Da Vinci Airport in Rome that it will not be issued landing rights at the airport.
C) United Tankers Co operates two tankers for the shipment of oil from the Middle East, the Monaco and the Lichtenstein. United Petroleum contracted with United Tankers for the shipment of oil from Qatar to Portsmouth in April. Internally, United Tankers allocates the Lichtenstein for this job. In February, the Lichtenstein is attacked by terrorists and sunk off the coast of Yemen. The Monaco is occupied with another job. United Petroleum sues for damages. United Tankers claims frustration.
D) None of the options given is correct.

Question 8

Which of the following statements is true?

A) Where a supervening event results in partial impossibility of performance, a court can award partial rescission of the contract for frustration.
B) Where a frustrating event takes place, a party who has already (partly) performed his obligations under the contract may elect to affirm the contract rather than allowing it to be discharged.
C) While a party cannot rely on an otherwise frustrating event because it is self-induced, the other contracting party can rely on that event as discharging the contract for frustration.

Question 9

In January, Angela books a cottage from Summer Tours Co for £700 for use in August. According to the contract, half of the fee is due by 1 June and the remainder by 1 August. Angela's husband, Rodney, is wheelchair bound and Summer Tours agrees to add wheelchair access to all their facilities by the time he arrives. By mid-April, all wheelchair ramps have been completed, costing a total of £300. In the middle of May, a forest fire decimates all of Summer Tours' cottages, frustrating its contract with Angela. What are the financial consequences of frustration?

A) Angela is still liable for the £700 fee.
B) Angela is not liable for the fee, but Summer Tours can claim £300 from her as 'just expenses' for the construction of the wheelchair ramps.
C) Angela is not liable for the booking fee, but Summer Tours can claim a 'just sum', determined by the court, for the construction of the wheelchair ramps.
D) Angela is not liable for the booking fee and Summer Tours can claim nothing from her for the construction of the wheelchair ramps.

Question 10

Bad Girls (a pop group) contracted to give Ziggy (a promoter) ten performances for £2 million. After five, further performances had to be cancelled because of the government's ban on congregating in large numbers due to the outbreak of a vicious and contagious disease. At that point, Ziggy had made gross profits of £4 million from the sale of tickets, DVD, and CD rights. Bad Girls had only been paid £100,000, the rest of the £2 million being payable on completion of the tenth performance. In their claim for payment under section 1(3) Law Reform (Frustrated Contracts) Act 1943, which of the following statements are false?

A) The court must first identify the value of the benefit conferred on Ziggy.
B) Ziggy can ask the court to take into account his payment of £100,000 and his wasted expenditure.
C) Bad Girls should get half of £2million (the contract price) or half of £4 million (the benefit Ziggy received).
D) None of the options given is correct.