12. Discharge by frustration: subsequent impossibility

Poole’s Casebook on Contract Law provides a comprehensive selection of case law that addresses all aspects of the subject encountered on undergraduate courses. Without the fault of either party, a contract may be automatically discharged due to frustration that renders further performance of the contract impossible, illegal, or radically different from what was originally conceived. In this case, the parties will be excused further performance of their contractual obligations. However, the frustration doctrine applies only where there is no express provision in the contract (a force majeure clause) allocating the risk. This chapter, which examines the frustration doctrine and discharge for subsequent impossibility, first considers the contractual risk allocation before turning to the theoretical basis for the doctrine of frustration. It then discusses limitations on the operation of the frustration doctrine before examining the effects of frustration and the effects on the parties’ positions of the Law Reform (Frustrated Contracts) Act 1943.

8. Mistake

Poole’s Casebook on Contract Law provides a comprehensive selection of case law that addresses all aspects of the subject encountered on undergraduate courses. This chapter considers the area of ‘mistake’. The law distinguishes between several types of mistake. Some mistakes (‘agreement mistakes’) prevent formation of an agreement. These mistakes are mutual mistakes (where the parties are at cross purposes) and unilateral mistakes (where one party is mistaken and the other knows or ought to know this, e.g. unilateral mistake as to identity). The chapter also looks at document mistakes and specifically rectification of a written document to reflect accurately what the parties in fact agreed, and the plea of non est factum (‘this is not my deed’). Finally, a contract having no contractual allocation of risk and made under the same mistaken assumption may be void for ‘common mistake’ if the mistake is so fundamental that it ‘nullifies’ consent. This is known as ‘initial impossibility’ because the impossibility already exists when the parties agree to the contract. This chapter deals with common mistake and initial impossibility, contractual risk allocation, and the theoretical basis for the doctrine of common mistake. It discusses categories of fundamental common mistake, including res extincta, and assesses the legal effects of mistakes as to quality made by both parties. The chapter concludes by considering the relationship between common mistake and frustration.

CONSIDERATION OF CONTRACTUAL RISKS ASSOCIATED WITH COASTAL AND MARITIME ENGINEERING WORKS

Coastal and maritime construction projects are fraught with risks associated with working in or around the sea. Common standard contracts such as those within the FIDIC Red Book do not adequately address the peculiarities associated with this unique environment. This paper will document the major areas of generic contractual risk and uncertainty with regard to coastal and maritime projects through review of literature, case law and other published disputes, as well as personal experience. Through identification and comparison of both the risks associated with these projects and the vulnerability within the standard FIDIC language, recommendations will be made for particular conditions to improve contract wording.Recorded Presentation from the vICCE (YouTube Link): https://youtu.be/1BkXEoaZZow

Part 2 Specific Issues of Arbitration in Brazil, 18 Construction Contracts Involving the Public Administration

This chapter explores arbitration concerning construction contracts involving the public administration in Brazil. Contractual risk allocation is a crucial part of the economy of the contract and should be respected by arbitral tribunals while deciding such disputes. In practice, and especially in contracts involving public entities, it is the owner of the (future) facility who defines the draft contract used in the bidding process and, therefore, has the first say on the allocation of risks. In preparing the contract for the public tender, the public authority, as the owner, may feel tempted to allocate the vast majority of the risks to the private party, i.e., the contractor. However, the owner should avoid the pure and simple transfer of all risks to contractors for two main reasons. Firstly, it may preclude parties from submitting bids, limiting the competition between the market players. Secondly, the bidders will take into consideration the heavy allocation of risk on them when submitting their price offers, which will significantly increase the price of the project and sometimes even affect its viability. The chapter then considers the FIDIC (International Federation of Consulting Engineers) Red Book and Brazilian Law 8,666/1993 on construction works for the public sector.

Settlement agreements, legal information and the mistake of law rule in contract

The extent of the doctrine of contractual mistake of law is evaluated in light of the Court of Appeal’s decision in Brennan v Bolt Burdon through the lens of economic efficiency, the associated incentivisation of productive information acquisition and contractual risk allocation. The Brennan court’s decision limits the relief available for claims of mistake grounded in unanticipated changes in the law to mistakes involving exceptional errors. In so doing it acknowledges the risk inherent in accepting contractual settlement offers as a matter of commercial risk taking which can be offset through express contractual limitation, subject to public policy concerns. The article considers the effects of such contractual risk allocation as well as the cost of dispelling ignorance to recommend a clarification of the scope of the mistake of law. This rule is based upon the gains to be achieved from the underlying contract to the contractual parties as well as advantages to society engendered by the dissemination of information about the law itself.