16. Frustration of the Contract
This chapter focuses on the frustration of the contract. It is possible for an unexpected event to take place that would make the performance of a contract completely different to what both parties intended. It might be that the event made performance physically impossible or illegal. Alternatively, perhaps the contract was based on a state of affairs that no longer exists as a result of the event. In such circumstances, it might be that the event has ‘frustrated’ the contract so that the contract is ended automatically. The chapter presents the background and basis of the frustration principle before turning to the ways in which a contract can be frustrated. It then addresses the factors limiting the scope of the principle. Finally, the chapter examines the effects of a frustrated contract, which includes limited ‘restitutionary’ financial adjustments between the parties based on specific legislation. Unlike misrepresentation, duress, and influence, frustration is not about remedying wrongdoing. But nor is it about providing a fair distribution of the loss in response to unexpected risks. Rather, the law seeks to prevent one party unfairly benefiting from an unforeseen windfall at the expense of the other in the aftermath of a frustrating event.