By Adebayo Mubarak Adewumi

ABSTRACT
Frustration is a concept in contract law that refers to situations where an unforeseeable event occurs that make it impossible for one or both parties to fulfill their contractual obligations. Frustration can occur due to events such as war, natural disasters, government action, or a change in the law that makes performance impossible.

When frustration occurs, the contract is terminated automatically, and both parties are discharged from their obligations. The principle of frustration is based on the idea that it would be unfair to hold parties responsible for events that were beyond their control and that they could not have foreseen at the time of entering into the contract.

However, frustration can be a difficult concept to apply in practice, as it requires a careful analysis of the circumstances surrounding the contract and the event that led to frustration. The courts will consider factors such as the nature of the contract, the foreseeability of the event, and the availability of alternative means of performance.

There are two types of frustration: legal and actual frustration. Legal frustration occurs when the performance of the contract becomes illegal due to a change in the law or government regulations. Actual frustration occurs when the performance of the contract becomes impossible due to an event or circumstance that was not anticipated by the parties at the time of the contract’s formation. Actual frustration can arise due to natural disasters, death, illness, or any other unforeseen event that fundamentally alters the basis on which the contract was made.

One important issue in the application of frustration is the distinction between situations where performance is impossible and situations where performance is merely more difficult or expensive than originally anticipated. In general, frustration will only apply in cases where performance is truly impossible, rather than simply more difficult or costly.

Another issue that can arise in cases of frustration is the allocation of risk between the parties. If the contract includes provisions for allocating risk in the event of unforeseeable events, such as a force majeure clause, this may affect the application of frustration.

INTRODUCTION
Frustration is a legal concept that refers to a situation where an event or circumstance, beyond the control of the parties, makes the performance of a contract impossible or radically changes the nature of the performance required. Frustration is a common issue in the law of contract and can have significant implications for the parties involved. This work aims to provide an overview of the concept of frustration, its types, nature, limitations, and effects in the context of the law of contract. This paper will also examine some locus classicus cases of frustration to provide a deeper understanding of the concept.

CONCEPT OF FRUSTRATION
Frustration refers to an event or circumstance that makes the performance of a contract impossible or radically changes the nature of the performance required. Frustration occurs when an unforeseen event occurs that fundamentally alters the basis on which the contract was made, rendering it impossible to perform or frustrating the purpose of the contract. Frustration is a legal concept that releases the parties from their contractual obligations and allows them to avoid liability for breach of contract.

The concept of frustration is an important principle in contract law that addresses situations where an unforeseeable event makes it impossible for one or both parties to fulfill their contractual obligations. Frustration is a complex and multifaceted concept that raises a number of legal issues and challenges. This work will explore the concept of frustration in depth, examining its nature, types, examples, limitations, and effects as they relate to the law of contract.

The Court of Appeal while defining the concept of frustration in the case of AIICO INSURANCE PLC v. ADDAX PETROLEUM DEVELOPMENT COMPANY LIMITED (2014) AELR 4895 (CA) held that:
“…See UBN vs. OMNI Products (Nig) Ltd (2006) 15 NWLR Pt. 1005 pg 660 where the Court defines frustration as follows: “Frustration is the premature determination of an agreement between parties lawfully entered into and in cause of operation at the time of its premature determination, owing to the occurrence of an intervening event or change of circumstance so fundamental as to be regarded by law both as striking at the roof of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the agreement”. See: Mazim Engineering Ltd vs. Tower Aluminum (Nig.) Ltd. (1993) 5 NWLR pt. 295 pg. 526.” Per NDUKWE-ANYANWU, J.C.A. (P. 20, paras. C-G)

LOCUS CLASSICUS CASES ON FRUSTRATION
The case of TAYLOR V. CALDWELL (1863) 3 B&S 826 is a locus classicus case on frustration. In this case, the defendant hired a music hall from the plaintiff for a series of concerts. However, before the first concert took place, the music hall was destroyed by fire. The court held that the contract was frustrated, as the destruction of the music hall was beyond the control of the parties and had fundamentally altered the basis on which the contract was made. The parties were discharged from their contractual obligations, and the plaintiff was unable to claim damages for breach of contract.

However, Justice Blackburn does state that this will not always be the case, as he points out that in this case, it was “absolute and positive” that there were no express or implied terms of the contract that the obligations should carry on. Therefore this means that if such a contract had, had a term in it- be it express or implied- that even in the event of the accidental damage the obligations of the parties were to carry on, then they wouldn’t have been discharged. This is a key principle from the case because while it brings into existence the doctrine of frustration it puts a caveat on it. Justice Blackburn also sets out the example principle of when this type of situation can arise.

As the Courts point out these decisions will be made in situations where “the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.” This phrase gracefully sums up the position. He goes on to say that even if this hasn’t been expressly put into the contract the excuse is implied by law. This is where the crux of the matter lies, as he states that the parties only contracted on the basis of the continued existence of the chattel. Without the chattel being in existence it was not the intention of the parties to carry on the obligations of the contract.

The juristic basis for frustration
When the existence of a specific thing is essential to the performance of the contract, parties would have contemplated continued existence as the foundation of what is to be done when entering into a contract.
Therefore, there is an implied condition in a contract that parties will be excused when performance becomes impossible due to a thing perishing without fault from the contractor.

Blackburn J argues that the basis for the doctrine of frustration is based on implication according to the intention of the parties, this is known as the ‘implied term theory’.

Note that in this case the contract was found to be a license and not a lease, only in National Carriers v Panalpina was it laid down definitively that leases can be frustrated

A contrasting theory is that of Lord Radcliffe in DAVIS V FAREHAM UDC [1956] AC 696, who argues that frustration is not based on the parties’ intention, but a rule of law laid down by the court. In this case, the defendants had contracted with the claimants to build houses on a site. However, due to an unforeseen shortage of materials, the defendants were unable to complete the work within the agreed timeframe. The court held that the contract was frustrated, as the shortage of materials was beyond the control of the parties and had fundamentally altered the basis on which the contract was made. The parties were discharged from their contractual obligations, and the defendants were not required to pay damages for breach of contract.

The theoretical basis of frustration as espoused in this current case
If the parties had actually anticipated the supervening event, they would not say ‘all is over between us’ but would have introduced reservations or conditions dealing with compensation.
Frustration depends not on adding any implied terms but on the ‘true construction of the terms’ in light of the nature of the contract and surrounding circumstances, there is no need to determine what the parties thought or what reasonable men in their shoes would do to deal with the new situation.
The question is whether the contract which [the parties] did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end.
Frustration is the termination of the contract by the operation of law on the emergence of a fundamentally different situation.

Point to note
A delay could be of a character so different from anything contemplated that the contract was at an end
But in this case, the delay was not caused by any new and unforeseeable factor or event: the job proved to be more onerous but it never became a job of a different kind from that contemplated in the contract.

Lord Radcliffe while also talking about the theoretical basis of frustration (at p. 728 – 729)
The test of what the reasonable person would have agreed had they known of the supervening event is but the court deciding for itself.
“So perhaps it would be simpler to say that frustration occurs whenever the law realizes that default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract”
The court construes the contract in light of the then-existing circumstances and the events which have occurred to decide whether frustration applies

Current case (at p. 731)
Frustration does not apply for two reasons
The cause of the delay, the shortage of labor and materials, was reasonably foreseeable by the parties when they entered into the contract
The parties ought to have taken into account the risk of delay when entering into the contract, and the contractor’s tender ought to have made appropriate allowance for the obvious risks of delay, ‘it is a misuse of legal terms to call in frustration to get him out of his unfortunate predicament’

The Law Lords rejected the implied term theory, which until then was the prevailing theoretical basis of frustration, which asks whether reasonable men in the position of the parties would have agreed that the contract should end if the supervening event occurs. They criticized the fictitiousness of basing frustration on the hypothetical intention of the parties and that it applies by operation of law

The new approach is one of construction, where the court looks at the contract and determines whether the supervening event renders its performance to be radically different from what was agreed.

In the case of NATIONAL CARRIERS LTD V PANALPINA (NORTHERN) LTD [1981] AC 675, it was laid down that a lease agreement could as well be frustrated.

The key point to note
Lease contracts can be frustrated like ordinary contracts.
The judgments also discuss the theoretical basis of the contractual doctrine of frustration and approved of the construction theory of frustration laid down by Lord Radcliffe in Davis v Fareham UDC.

Facts
A 10-year lease for a warehouse was unusable for 10 months because of street closure, as a result, the tenant (D) withheld rent. The landlord (C) sued for the withheld rent, D argued that the lease had been frustrated. Counsel for C argued that leases cannot be frustrated since land is indestructible

Held (House of Lords)
While frustration is in principle applicable to lease contracts, the lease in the present case was not frustrated.

Per Lord Wilberforce
Can leases be frustrated?
The fact that the lease creates an estate in land does not prevent the doctrine of frustration from operating
Express terms of the lease can provide that it shall terminate upon specific events, thus there is nothing illogical in implying a term that it should be terminated on the happening of other events which in the contract leads to frustration
One desire use and possession of land for some purpose, thus the lease “is a subsidiary means to an end, not an aim or end of itself”, as the mutually contemplated purpose of a lease if frustrated will bring it to an end
The tenant failed as the loss of occupation for 10 months out of 10 years is not serious enough to amount to frustration

Per Lord Russell (Dissenting)
The doctrine of frustration does not apply to leases as land, as distinct from chattels, is indestructible
In a lease, the risk is on the tenant that the premises may be unsuitable for its purpose unless the landlord has provided some warranty
“If a principle of achieving justice be anywhere at the root of the principle of frustration, I ask myself why should justice require that a useless site be returned to the lessor rather than remain the property of the lessee?”

According to Lord Hailsham
Lord Hailsham discussed 5 competing theories for the basis of frustration at p. 687 – 688:
The implied condition theory as laid down by Blackburn J in Taylor v Caldwell, has the problem that even if the officious bystander had pointed out to parties the closure of the street, it is uncertain what the parties would have said
The total failure of consideration theory has the problem that most cases of frustration that have followed Taylor v Caldwell have occurred during a contract partly executed on both sides when no question of total failure of consideration can arise
The justice theory is that frustration is an exception to absolute contracts demanded by justice, but has the issue that while it expresses the purpose of the doctrine, it does not provide a true theoretical basis
The removal of foundation theory, which originated in Jackson v Union Marine leaves open the question of what the foundation of the contract is
The construction theory is the most satisfactory. It is formulated by Lord Radcliffe in Davis v Fareham UDC: “… frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.”

Lord Roskill
Lord Roskill agreed with Lord Hailsham in approving the construction theory of frustration:
“At one time without doubt the implied term theory found most favour, and there is high authority in its support. But weighty judicial opinion has since moved away from that view. What is sometimes called the construction theory has found greater favour.”: p. 717
The most satisfactory explanation of the doctrine is by Lord Radcliffe in Davis v Fareham UDC: ‘There must have been by reason of some supervening event some such fundamental change of circumstances as to enable the court to say: “this was not the bargain which these parties made and their bargain must be treated as at an end”‘: p. 717

This case confirms that a lease while creating a proprietary interest in land is also a contract and thus ordinary contractual principles apply.

NATURE OF FRUSTRATION
The nature of frustration is that it operates as a supervening event that fundamentally alters the basis on which the contract was made. Frustration is not the fault of either party, and it occurs beyond their control. The effect of frustration is to discharge the parties from their contractual obligations, thereby releasing them from any liability for breach of contract. Frustration operates to ensure that the parties are not held responsible for something that is beyond their control and that they are not required to perform the impossible.

Frustration is a legal doctrine that recognizes the inherent unpredictability of life and acknowledges that parties to a contract cannot be held responsible for events beyond their control. Frustration occurs when an event makes it impossible to perform the contract in the way the parties originally intended. This event must not have been foreseeable at the time the contract was made, and it must be outside the control of either party.

The Court of Appeal of Nigeria in the case of WEMA BANK PLC v. ALHAJI SOLA OLOKO (2014) AELR 3359 (CA) held concerning the nature of the doctrine of frustration thus:
“…frustration is the premature determination of a legal agreement between two parties. (NBC v. Standard (Nig) Ltd. Co. Ltd (2002) 8 NWLR (Pt.768) @ 124, Diamond Bank Ltd v. Prince Alfred Amobi (2007) 10 CLRN @ 99). The case of Taylor v. Caldell (1861-73) ALL ER 24 is cited as the root for the doctrine of frustration where Blackburn J held that:- “where from the nature of the contract, it appears that the parties must from the beginning have known that it could not be fulfilled unless, when the time for the fulfillment of the contract arrived, some particular specified thing continue to exist, so that when entering into the contract they must have contemplated such continue existence as the foundation of what was to be done, then, in the absence of any express or implied warranty that the thing shall exist, the contract is not to be construed as a positive contract but as subject to an implied condition that the parties shall be excuse in case, before breach, performance becomes impossible from the perishing of the thing without default of the contractor”. Thus, frustration can be defined as an abrupt end to a transaction between two parties owing to the occurrence of an intervening event or change of circumstance totally unforeseen by either party and striking at the root of a transaction. In such circumstances, the law recognizes that the premature determination of the transaction is without any default of either party and thereby renders a contractual obligation incapable of performance and conclusion/enforcement.” Per DONGBAN-MENSEM, J.C.A. (Pp. 16-17, paras. G-G)

The Test For Frustration
There are three main elements when assessing whether frustration applies to a contract:
Has the contract allocated the risk of the particular event occurring
Has there been a radical change in obligations
Was the radical change due to the fault of one of the parties?

Has The Contract Allocated The Risk Of The Particular Event Occurring?
Frustration can only operate where the parties have not allocated the risk of loss between themselves in the contract. In other words, where a party has agreed to bear the risk/loss of some sort.

If for example there is a contract for a meet and greet with a celebrity, if there was a term in the contract that stated ‘in the event of death of the celebrity, the seller will bear the risk and still pay the £50,000’, the risk has been allocated to the seller, and they have accepted the risk by entering into the contract, therefore they could not rely on the doctrine of frustration.

There is no requirement that the allocation of risk has to be exact or definite, just that there is at least some mechanism for dealing with particular changes in circumstances.

Has There Been A Radical Change In Obligations?
There are a variety of ways in which the obligations under a contract can change.
The Court of Appeal in the case of MR. P.D.O OKEREKE & ANOR v. ABA NORTH LOCAL GOVERNMENT AUTHORITY (2014) AELR 4936 (CA) held that
“Events that have been held to constitute frustration of contract “The events which have been listed by the court to constitute frustration are: (1) Subsequent legal changes or statu impossibility; (2) Outbreak of war; (3) Destruction of the subject matter of the contract or literal impossibility; (4) Government acquisition of the subject matter of the contract; (5) Cancellation by an unexpected event like where other party to a contract for personal service, dies or where either party is permanently incapacitated by ill-health, imprisonment etc from rendering the service he has undertaken. Davies Contractors Ltd. V. Fareham NDC (1956) AC 696; Akanmu v. Olugbode (2001) 13 WRN 132; NBCI v. Standard (Nig.) Eng. Co. Ltd. (2002) 8 NWLR (Pt. 768); G. 104. Obayuwana v. the Governor of Bendel State (1982) SC pg. 167, (1983) 4 nclr 96; Taylor v. Caldwel (1963) 3 B & Y S 826; J.P. Dawodu v. B. Anderson & Co. Ltd. (1925) 6 NRL pg. 106; Adu v. Makanjuola (1944) 10 WACA Pg. 168.” Per IGE, J.C.A. (P. 32, paras. B-G)

Previous case law has created distinct categories that provide for different presumptions and rules relating to the application of frustration. Therefore, this section will cover them each in turn. They are as follows:
Non-occurrence of an event
Increased expense
Destruction of subject matter
Illegality
Alteration of the manner of performance or impossibility by one party
An outbreak of war
Delay or interruption

Non-occurrence of an event
The first of our categories of frustration is where an event fails that at least one of the parties has assumed will occur. The operation of frustration in such circumstances is best understood concerning two of the most famous cases on frustration, known as the ‘coronation cases’, as they both relate to the coronation of King Edward.

Krell v Henry [1903] 2 KB 740
In this case, the defendant formed a contract with the claimant to hire a flat out on Pall Mall from the 26th of June to the 27th of June, the exact date of King Edward VII’s coronation service, which was due to pass through the street. The flat backed on to the street with a balcony, meaning this particular flat would have had an excellent view of the procession. The contract had no express reference to the coronation or the purpose the flat was hired for. The contract was only hired for the daytime, and would not be available overnight. King Edward fell ill, and the coronation procession was canceled. The claimant attempted to claim the hire price from the defendant, but they refused to pay on the grounds that the contract was frustrated due to the cancellation of the coronation.

It was held that both parties were aware that the coronation procession was the foundation of the contract, and the room had been hired only to view the procession, therefore the contract was frustrated for the non-occurrence of the event. The important factor of the case was that the claimant has advertised the hire of their room specifically for the viewing of the coronation. There was no other value to the room, as it could not be stayed in overnight, it was solely for the viewing of the coronation.

Herne Bay Steam Boat Co v Hutton [1903] 2 KB 683
In this case, as part of the coronation of King Edward (the same one as in Krell v Henry) a naval review was to take place. A contract was formed between the defendant and claimant for the hire of a steamship to take passengers for a day cruise around the fleet, and to view the naval review. As a result of King Edward’s illness, the naval review was canceled. The defendants then refused to hire the boat, arguing the contract was frustrated due to the non-occurrence of the naval review.

The same judges as those in Krell v Henry decided this case was not frustrated. The reasoning behind this was that the happening of the naval review was not the foundation of the contract. When the claimant hired their ship out, they did not hire it out for the sole purpose of somebody viewing the naval review. The happening of naval review was only the defendant’s motive for entering the contract; it was not both of the parties’ foundation. The hired boat could still be used to cruise the review and view the moored fleet. The hiring of the ship had nothing, in particular, to do with the naval review.

These cases can be difficult to reconcile, but hopefully, one can spot the key difference. In Krelll v Henry, the coronation was the foundation of both parties entering into the contract, they had both made the assumption that the coronation event would go ahead. However, in Herne Bay, only the defendant was concerned with the naval review, there were no assumptions from the claimant.

In his judgment in Krell v Henry, Vaughan Williams LJ set out a hypothetical example that should hopefully help one understand further. The example involves a taxi driver taking somebody to a famous horse race on derby day. The taxi driver would charge an increased fare for the journey due to the circumstances. If the race was canceled, the contract for the taxi ride would not be frustrated. Despite the higher price paid, and the purpose for which the individual booked the taxi not occurring, the taxi has no particular qualifications or specialism for the particular occasion; any other taxi driver would have been the same.

Considering the above example in light of the coronation cases, the fact the room was hired for the coronation procession in Krell v Henry was not enough, but the fact the room was only rented for the day, and had particular characteristics such as a balcony overlooking the procession which most other rooms would not have, made the foundation of the contract, and would therefore be able to be frustrated for non-occurrence of the event.

To recap, the three points from Krell v Henry which identify that the coronation was the foundation of the contract were:
The advertisement of the room expressly advertised a viewing of the coronation, not a regular letting of the room
The use of the room was only during the day, and not the night
The claimant was not in the business of renting his room out regularly, he had only done it on this particular occasion

These factors show that there was a joint assumption by the parties that the event would go ahead, and it was not just one of the parties making the assumption, which is one of the key requirements of frustration.

Increased expense in contract frustration
The courts have tended to rule that an increased expense for one party can never frustrate a contract. The leading case in this area is the already mentioned Davis Contractors Ltd v Fareham Urban District Council. As part of their claim, Davis Contractors cited the extra £17,000 cost they had incurred, which then resulted in them losing money on the contract, whereas they were expecting to make money. The court’s justification for not allowing an increased expense to frustrate a contract is that where one party enters a contract under the assumption they can make a profit, just because the assumption is incorrect does not mean the contract can be frustrated. The other party has not made this assumption. This also relates to the idea that the courts will not protect an individual from a bag bargain.

In Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93 it was suggested that an increased expense, no matter how onerous, could never frustrate a contract. Only one judge, Lord Reid, disagreed with this notion. He argued that in the case of extreme increases in expense, the contract should be frustrated. This is an interesting point, but under current English Law, a contract can never be frustrated for increases in expense, no matter how extreme. The justification being for this that increased expense is the business of one party alone.

Also, the Court of Appeal in Nigeria while answering the question of “Whether a contract becomes frustrated merely because of difficulty in execution” held in the case of MR. P.D.O OKEREKE & ANOR v. ABA NORTH LOCAL GOVERNMENT AUTHORITY (Supra) that
“A contract is not frustrated merely because its execution becomes more difficult or more expensive than either party originally anticipated and has to be carried out in a manner not envisaged at the time of its negotiation. Davis Contractors Ltd. V. Fareham N.D.C (1956) AC 695; Tsakineglon & Co. v. Noblee Thorh G.M.B.H. (1962) AC 93.” Per IGE, J.C.A. (Pp. 32-33, paras. G-A)

Destruction of subject matter
Similar to the non-occurrence of an event, a contract may be formed with a particular subject matter in mind. This section covers what will happen when the subject matter is destroyed.

We have already covered the key case in relation to the destruction of subject matter, Taylor v Caldwell (1863). As you will remember, in this case, a concert hall was hired out and subsequently destroyed in a fire. Generally speaking, where the subject matter of a contract has been destroyed due to no fault of either party, the contract will be frustrated.

Another example of this comes from Appleby v Myers (1867) LR 2 CP 65, where a contract was formed for the defendant to install machinery in the claimant’s factory. The premises and machines were destroyed before the completion of the contract, which resulted in frustration of the contract.

In these cases, the parties have both assumed that the subject matter will exist at the time of the contract. You ensure that this is the case and that the destroyed thing is the actual subject matter of the contract.

The Court of Appeal in Nigeria held in the case of B.F.N. LIMITED v. ALHAJI BALARABE IBRAHIM (1987) AELR 2022 (CA) that:
“At Common Law, where the performance of a contract becomes impossible after its formation due to certain causes, the contract is said to have been frustrated. One of such causes is the destruction of the subject matter of the contract, Lord Goddard, in the case of Tatem Ltd. v. Gomboa (1939) 1 K.B. 152 has this to say:- “If the formation of the contract goes either by the destruction of the subject matter or by reason of such long interruption or delay that the performance is really in effect a different contract and the parties have not provided what in that event is to happen, the performance of the contract is to be regarded as frustrated.”

Illegality
Illegality refers to where the parties form a contract, and subsequently, before or during the performance, the contract becomes illegal to perform. The general rule is that this will frustrate the contract if the effect on the contract is serious enough. If the effect is minimal and only partial, the doctrine of frustration will not apply.

It is important to remember that the rules of illegality, will apply where the contract is illegal at the time of formation. Frustration here only applies where the contract becomes illegal following its formation.

The most common example of illegality is where legislation is enacted which renders the contract illegal Denny, Mott and Dickson v James B. Fraser & Co Ltd [1944] AC 265.

Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
In this case, Fibrosa, who was based in Poland, created a contract for the purchase of some machinery from Fairbairn, who was based in England. £1,000 of the £4,800 was paid in July 1939. Subsequently, before all of the obligations under the contract were completed, Germany invaded Poland, and the war was declared. Fairbairn refused to pay the rest of the monies owed, citing the fact that the contract was now illegal as the outbreak of war made it illegal for British companies to trade with Poland. Essentially, Fairbairn argued that the contract had been frustrated due to the outbreak of war.

It was held that the contract was frustrated as a result of its illegality of the contract. As a further point, the courts held that the ‘loss lies where it falls’, meaning Fibrosa could not recover the £1,000 paid.

In some cases, the illegality of the contract is temporary. If the length of time is short enough, the contract may not be frustrated and the parties will simply have to wait out the period of time before continuing the contractual obligations. The courts consider the length of time the contract will operate, combined with the length of time of the illegality. In National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675, there was a contract that allowed access to a warehouse for ten years, and the council banned access to the warehouse for ten months. In light of the ten-year term, the ten months was not a significant enough period of time to amount to illegality.

Alteration of the manner of performance or impossibility by one party
Where an event results in a change in obligations or impossibility for one party, there will not be frustration with the contract. Remember – frustration must be an assumption both parties make, and it must result in impossibility for both parties.

In Blackburn Bobbin Co Ltd v Allen (TW) & Sons Ltd [1918] 1 KB 540, there was an agreement to sell some Finnish timber to a purchaser. Due to the outbreak of war, the seller could no longer obtain the timber from their supplier in Finland. The contract was not frustrated, as this was the seller’s issue alone, the purchaser of the timber was not concerned with where the seller got the timber from.

The important idea to remember is that how one party conducts their business is their problem, and they bear the risk of any business decisions they make that result in circumstances such as in Blackburn Bobbin. They took a risk by not already having the Finnish timber before forming a contract with the purchaser. How they conduct their business is their risk alone, and the other party should not be penalized for this.

An outbreak of war
As we have already seen, the outbreak of war can cause various contractual issues. Another good example is the outbreak of war between Britain and Egypt. The result of this outbreak was the blockage of the Suez Canal, which resulted in many breached international trade and shipping contracts. Again, these assumptions have only been made by one party, meaning the contracts cannot be frustrated for this reason.

Where both parties have assumed performance will be done in a specific way which is rendered impossible by the outbreak of war, this may amount to frustration. In Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93, a contract was held not to be frustrated due to the Suez Canal blockages. However, it was considered by the judges that if it was vital to the contract that the goods were delivered by the Suez Canal, perhaps due to time being of the essence and other routes taking too long, the contract may have been frustrated.
Delay or interruption
As mentioned concerning temporary illegality, there may be a delay or interruption that is impossible to avoid. The issue with such delays is that the parties cannot be certain how long the delay will last, it could be ten days, which would not frustrate the contract, but it could be ten years, which almost definitely would frustrate the contract.

The famous academic, Chitty, has suggested that for a delay to frustrate a contract, the delay ‘must be so abnormal, in its cause, its effects, or its expected duration, so that it falls outside what the parties could reasonably contemplate at the time of contracting’.

The courts will also consider these factors in deciding whether a contract may be frustrated for delay (The Sea Angel [2007] EWCA Civ 547)
How did the delay arise
Was the delay foreseeable
How does the contract distribute the risk in other similar circumstances

Was the radical change due to the fault of one of the parties?
If one party is at fault for the frustrating event, it is less likely that the contract will be frustrated. In the case of The Super Servant Two [1990] Lloyd’s Rep explained that a frustrating event should be uncontrollable and an extraneous change of situation. In other words, the frustrating event should be beyond the control of the parties.

Importantly, if one party is at fault for the frustrating event, although that party may not claim frustration, the innocent party can do so and will be able to claim damages for any loss that resulted from the contract.

The Eugenia, Ocean Tramp Tankers Corporation v V/O Sovfracht [1964] 2 QB 226
This is yet another case involving the Suez Canal closure! It was a contract for the chapter of a ship, and there was a condition that the ship should not be taken into any war zone unless the owner of the ship gave permission. The ship entered the Suez Canal, a war zone, which breached the contractual condition regarding no entry to war zones. It was argued the contract was frustrated due to the blockage of the canal.

The court held that the radical change in obligations was the fault of the charterers – the position they were in was due to their breach of contract. As well as a breach of contract, a negligent act that results in a frustrating event will amount to a fault. This was discussed by the judges in Taylor v Caldwell – if the burning down of the concert hall was a result of some negligence of the owners, the contract would not have been frustrated.

Going even further, DGM Commodities Corporation v Sea Metropolitan SA [2012] EWHC 1984 (Comm) confirmed that ‘fault’ has a very loose definition in this context. There does not need to be an element of breach of contract or negligence, it can just be a positive action from the party or an individual whom the party is responsible for (ie. An employee).

Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
This is the leading case of a fault in the doctrine of frustration. This case involved fishing boats that required licenses from the Minister of Fisheries. The defendant required five licenses for five boats but was only granted three. One of the boats was the plaintiff’s. The defendant chose to allocate the three licenses to three boats, leaving two boats without a license, one of which was the plaintiff’s. The defendant then claimed that the contract for the charter of the boat with the plaintiff was frustrated, as it was impossible for them to use it due to them being unable to acquire a license.

The court held that the defendant was at fault for the impossibility. They had been given a license that they could have allocated to the plaintiff’s boat but opted not to, therefore being at fault and they were unable to claim for the frustration of the contract.

LIMITATIONS TO THE DOCTRINE OF FRUSTRATION
The doctrine of frustration has certain limitations that prevent it from being applied in all situations. The first limitation is that the event or circumstance that caused the frustration must be beyond the control of the parties. If the event or circumstance was foreseeable at the time of the contract’s formation, the doctrine of frustration will not apply.

The second limitation is that the event or circumstance must not have been caused by the fault of either party. If the event or circumstance was caused by the fault of one of the parties, the doctrine of frustration will not apply.

The third limitation is that the event or circumstance must not have been expressly or impliedly provided for in the contract, the inclusion of the force majeure clause in the contract. If the contract expressly or impliedly provided for the event or circumstance, the doctrine of frustration will not apply.

The Supreme Court per Wali, J.S.C. in the case of Mazin Eng. Ltd. V Tower Aluminum (1993) 5 NWLR (Pt 295) 526 adopted Viscount Simon’s definition of frustration in Crickle-wood Property & Investment Trust Ltd. v. Leightons Investment Trust Ltd. 1716, which contained the following proposition.

Frustration of contract is the premature determination of an agreement between parties lawfully entered into and in course of operation at the time of its premature determination, owing to the occurrence of an intervening event or change of circumstances so fundamental as to be regarded by law both as striking at the root of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the agreement. There would therefore be no frustration in the following circumstances:

(i) Where the intervening circumstance is one which the law would not regard as so fundamental as to destroy the basis of the basis of the agreement;

(ii) Where the terms of the agreement show that the parties contemplated the possibility of such an intervening circumstance arising.

(iii) Where one of the parties had deliberately brought about the supervening event by his own choice.

According to the learned Justice of the Supreme Court, where a contract is frustrated, it operates to bring the contract to an end and further performance by the parties is excused, provided the frustrating event occurs before a breach of the contract by either party and is not brought about by the fault of either of them. Applying these principles to the facts of this case (Mazin Eng. Ltd. V Tower Aluminum), the court held that from the facts and circumstances surrounding the case, it was an implied term that the delivery of the corrugated roofing sheets within the time stipulated was subject to the approval of foreign exchange by the Central Bank to enable the respondent import the required components in time.

This was a condition precedent that the respondent had to meet if it was not to break regulations. As a result of the refusal or failure of the Central Bank to approve the application for foreign exchange, there was such a change of circumstances in the case that the contract looked at as a whole had to be considered as frustrated by reason of the subsequent events. This was thus a question of the impossibility of performance caused by a supervening event, namely, the refusal of the Central Bank to grant approval for the crucial foreign exchange.

As noted earlier, the abrupt termination of a contract by the action of one of the parties does not constitute frustration. At its very best it could be a breach of contract.

In Wardrop Nigeria Ltd. v. Engr. Tunji Ayeni (2005) 34 WRN 55, the respondent who was an engineering subcontractor with the appellant construction company, walked off the job when he felt that his fees were not been paid on time and in full. The finding of the High Court that the contract was brought to an end by frustration was rejected by the Court of Appeal. This was a case of breach of contract and not a frustration because one of the parties had deliberately brought about the supervening event by his own choice.

Summing it all up, while frustration is an important principle in contract law, there are also limitations to its application. One important limitation is that the event that leads to frustration must be truly unforeseeable. If the event could have been reasonably foreseen, the doctrine of frustration may not apply.

Another limitation is that the event must make performance impossible, rather than merely more difficult or expensive. If the contract can still be performed, but at a higher cost or with more effort, the doctrine of frustration may not apply.

Finally, there may be contractual provisions that allocate the risk of unforeseeable events between the parties. For example, a force majeure clause may specify what happens in the event of unforeseeable events, which may affect the application of the doctrine of frustration.
The Force Majeure Clause
While the doctrine of frustration has been an established part of English contract law for a significant amount of time, there have been relatively few recent frustration cases. The main reason for this is that commercial businesses have sought stronger contractual certainty including express termination rights in agreements by incorporating force majeure clauses in their contracts. Force majeure clauses generally excuse the performance of a particular contractual obligation on the happening of a certain event that is beyond the control of the party. The event is usually specified. While their effects are more limited than that of frustration, they have been deemed a more reliable method of termination and financial recovery.

The Court of Appeal in Globe Spinning Mills (Nig) Plc V. Reliance Textile Industries Ltd (2016) ALL FWR Part 988 defined force majeure as:
“a clause inserted in a contract which allows parties to rescind a contract upon the occurrence of certain specified events beyond the control of parties making performance unrealistic and impossible”.

The parties to a contract would have the freedom to agree as to what would amount to a force majeure for their contract and what the consequences of a contract-terminating event would be. In contrast to frustration, this allows parties to a contract to protect themselves more effectively. If a party would claim frustration, the courts, rather than the parties would possess the power to make important financial decisions. Additionally, a force majeure clause would determine risk allocation in terms of price and would avoid the possibility of uncertainty. Therefore a prudent business person would seek to incorporate a force majeure clause into their contract rather than rely on the doctrine of frustration.

EFFECTS OF FRUSTRATION IN THE LAW OF CONTRACT
The effects of frustration in the law of contract are significant. Frustration operates to discharge the parties from their contractual obligations, thereby releasing them from any liability for breach of contract. Once frustration occurs, the parties are no longer required to perform their contractual obligations, and any obligations that were previously owed are extinguished. Frustration also operates to prevent the parties from claiming damages for breach of contract, as the contract is discharged. However, frustration does not affect any obligations that arose before the event or circumstance that caused the frustration occurred.

The effect of frustration is to discharge the parties from their contractual obligations. Once frustration occurs, the contract is automatically terminated, and neither party is liable for any further performance. Any money or other consideration that has already been exchanged must be returned, subject to any contractual provisions that may apply. Frustration brings a contract to an end immediately and automatically: Maritime National Fish Ltd. V. Ocean Trawlers Ltd (1935) AC 624. However, there are two views to this as regarding the effect of frustration to a contract viz;

1. At Common Law
Once the court decides that a contract has been discharged by frustration, it must follow this up by a consideration of the legal consequences of this state of affairs, and decide who is to retain or return money or other property, who is to bear any loses, or how such losses are to be apportioned between the parties.

In the first place, a contract discharged by frustration must be distinguished from a contract that is voidable at the instance of the parties or a contract that is void ab initio. A frustrated contract is a valid contract that is brought to an end forthwith and automatically by the frustrating event. Consequently, at common law, each party must fulfill his contractual obligations in so far as they have fallen due before the frustrating event. Still, each is excused from performing those obligations that were due for performance after the frustrating event. Thus, all legal rights already accrued or money already paid which had become payable before the frustrating event occurred remain intact, while obligations falling due for performance after the event are discharged.

In Appely v. Myers, where it had been agreed that payment was to be made only after the plaintiff had completed the erection of the machinery, it was held that he could recover nothing for the work already done before the building and the machinery were destroyed by fire. Also in Krell v. Henry, it was held that the plaintiff could not recover the balance of the rent for the flat, which was 50 pounds, because it was not due to be paid until June 24, whereas the cancellation of the procession (the frustrating event) took place early on that very day. The plaintiff’s cause of action could not accrue until the end of that day. By contrast, in Chandler v. Webster, the plaintiff agreed to hire a room from the defendant to watch the coronation procession. The price of the hire was 141 pounds, payable immediately. The plaintiff paid 100 pounds of this sum, but the procession was canceled before he paid the balance of 41 pounds. He brought an action for the recovery of the 100 pounds that he had paid. It was held that although the contract had been frustrated by the cancellation of the procession, it could not be treated as having been rescinded ab initio. Any payment previously made or any right previously accrued under the agreement could not be disturbed. That being so, the right of the defendant to the 141 pounds had accrued before the frustrating event and he was, therefore, not only entitled to retain the 100 pounds already paid by the plaintiff but was further entitled to the unpaid balance of 41 pounds.

The court rejected the plaintiff’s argument that he was entitled to recover the 100 pounds in quasi-contract as money paid under a consideration that had totally failed. Since the contract was valid and subsisting up till the time it was frustrated, there was no total failure of consideration. In the words of Collins, M.R.: “If the effect were that the contract were wiped out altogether, no doubt the result would be that money paid under it would have to be repaid as on a failure of consideration. But that is not the effect of the doctrine; it only releases a party from further performance of the contract. Therefore the doctrine of failure of consideration does not apply.”

The harshness of Chandler v. Webster led to considerable criticism of it and it was not surprising that the House of Lords finally overruled it in Fibrosa Spolka Akcyjna v. Fairbairn, Lawson, Combe, Barbour Lid in 1942. On July 12, 1939, the respondents, an English company, agreed to manufacture and sell to the appellants, a Polish company, certain machinery for 4,800, of which one-third (1,200 pounds) was to be paid at once. Delivery was to be made, within three or four months of the settlement of the final details, at Gydnia, in Poland. Only 1,000 pounds was in fact paid in advance. On September 3, 1939, Britain declared war on Germany and on September 1st, Germany invaded and occupied Poland, including Gydnia. It thus became illegal and impossible for the English company to deliver the machinery to the Polish company.

The London agents of the Polish company brought this action to recover the 1,000 pounds paid in advance, contending that the contract had been frustrated by the German occupation of Gydnia, rendering the further performance of the contract impossible.

Under the rule in Chandler v. Webster, this money would have been irrecoverable as it had already been paid before the frustrating event. The House of Lords, however, allowed the plaintiffs to recover their 1,000 pounds, after demolishing the basis upon which Chandler v. Webster was decided, namely that there could be no total failure of consideration unless the contract was void ab initio. It was pointed out that an action for the recovery of money paid was not an action on the contract which had ceased to exist, but an action in quasi-contract to recover money paid on a consideration that had totally failed. The term consideration was to be understood not in the sense of consideration which is necessary to the formation of a contract, but rather in the sense of the performance of the contractual obligation. The claim, therefore, was one to recover the money to which the defendant had no further right because, there had been no performance on his part at all. In the circumstances, the law gives a remedy in quasi-contract to the party who has not got that for which he bargained. In the words of Viscount Simon, L.C. who read the main judgment:

In English law, an enforceable contract may be formed by an exchange of a promise for a promise, or by the exchange of a promise for an act I am excluding contracts under seal and thus, in the law relating to the formation of a contract, the promise to do a thing may often be the consideration, but when one is considering the law of failure of consideration and of the quasi-contractual right to recover money on that ground, it is generally speaking, not the promise which is referred to as the consideration, but the performance of the promise. The money was paid to secure performance and, if the performance fails, the inducement which brought about the payment is not fulfilled.

The decision in the Fibrosa case, while solving the harshness created by the rule in Chandler v. Webster, still left the law in an unsatisfactory state, for it created hardship for a supplier in the position of the respondents, who had gone to a considerable expense to manufacture the machine and were yet obliged to return the 1,000 pounds advance. Viscount Simon recognized this problem but stated that the common law had no machinery for the apportionment of losses. This was the province of the legislature.

2. Statutory Intervention: The Frustrated Contracts Laws
In order, therefore, to clear the problems still present in the common law with regard to the consequences of frustration, the Law Reform (Frustrated Contracts) Act, 1943, was enacted in Britain. In Nigeria, the substance of the British law was with minor modifications enacted in Western Nigeria in 1959, and by the federal government, in 1961. Where a contract is found to be frustrated, both parties are released from their obligations under the contract and neither party may sue for breach. The allocation of loss is decided by the Law Reform (Frustrated Contracts) Act 1943. This provides:

s.1(2) All money payable under the contract ceases to be payable and any money already paid may be recovered. Where expenses have been incurred this may be deducted from the amounts payable or paid. This is at the discretion of the court and is subject to what is just and equitable in the circumstances of the case. There is no provision allowing expenses to be recovered which exceed the amounts paid or payable.

S. 1(3) – Where a valuable benefit has been conferred this must be paid for.

Considering the effect of frustration of a contract where sums of money have been paid and received by a party for the performance of an obligation that has failed or has been rendered impossible. The law frowns on unjust enrichment, and it is trite law that where money has been paid and received by a contracting party for a consideration that has failed, the money ought to be returned, this was the holding of the court in the case of Onuigbo V. Azubuike; UBA Plc V. BTL Industries Ltd (2006) LPELR-3404 (SC). A complete failure of consideration occurs when one of the contracting parties fails to receive the benefit of valuable consideration, which springs from the root and is the essence of the contract See the cases of Akinade V. Nigerian Law School Lagos Campus Staff Co-Operative Thrift & Credit Society Limited (2015) LPELR-41705 (CA); Osayemeh V. NDIC & Anor (2009) LPELR-8846 (CA). However, where the contract has been partly performed, or payment and performance were agreed in milestones, then the money to be returned will be based on the value of the unperformed obligation.

CONCLUSION
Frustration is a legal concept that operates as a supervening event that fundamentally alters the basis on which a contract was made, making it impossible to perform or frustrating the purpose of the contract. Frustration can arise due to unforeseen events or circumstances that are beyond the control of the parties. The doctrine of frustration has certain limitations, including that the event or circumstance must be beyond the control of the parties, not caused by their fault, and not expressly or impliedly provided for in the contract. The effects of frustration in the law of contract are significant, including the discharge of the parties from their contractual obligations and the prevention of claims for damages for breach of contract. Locus classicus cases on frustration, such as Taylor v. Caldwell and Davis Contractors Ltd v. Fareham UDC, provide important insights into the application of the doctrine of frustration in the law of contract.

Frustration is an important principle in contract law that recognizes the inherent unpredictability of life and acknowledges that parties to a contract cannot be held responsible for events beyond their control. While frustration can be complex and difficult to apply, it is an important tool for dealing with unforeseeable events that make it impossible to perform a contract. Understanding the nature, types, examples, limitations, and effects of frustration is essential for anyone working in the field of contract law.
REFERENCES
Cases Cited
AIICO Insurance Plc V. Addax Petroleum Development Company Limited (2014) AELR 4895 (CA)
Taylor V. Caldwell (1863) 3 B&S 826
Davis V Fareham Udc [1956] AC 696
National Carriers Ltd V Panalpina (Northern) Ltd [1981] AC 675
Wema Bank Plc V. Alhaji Sola Oloko (2014) AELR 3359 (CA)
Mr. P.D.O Okereke & Anor V. Aba North Local Government Authority (2014) AELR 4936 (CA)
Krell v Henry [1903] 2 KB 740
Herne Bay Steam Boat Co v Hutton [1903] 2 KB 683
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93
Appleby v Myers (1867) LR 2 CP 65
Denny, Mott and Dickson v James B. Fraser & Co Ltd [1944] AC 265.
Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Blackburn Bobbin Co Ltd v Allen (TW) & Sons Ltd [1918] 1 KB 540
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93
Sea Angel [2007] EWCA Civ 547
The Super Servant Two [1990]
The Eugenia, Ocean Tramp Tankers Corporation v V/O Sovfracht [1964] 2 QB 226
DGM Commodities Corporation v Sea Metropolitan SA [2012] EWHC 1984 (Comm)
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
Mazin Eng. Ltd. V Tower Aluminum (1993) 5 NWLR (Pt 295) 526
Crickle-wood Property & Investment Trust Ltd. v. Leightons Investment Trust Ltd. 1716
Wardrop Nigeria Ltd. v. Engr. Tunji Ayeni (2005) 34 WRN 55
Maritime National Fish Ltd. V. Ocean Trawlers Ltd (1935) AC 624
Fibrosa Spolka Akcyjna v. Fairbairn, Lawson, Combe, Barbour Lid in 1942.
Globe Spinning Mills (Nig) Plc V. Reliance Textile Industries Ltd (2016) ALL FWR Part 988
Onuigbo V. Azubuike (Supra); UBA Plc V. BTL Industries Ltd (2006) LPELR-3404 (SC).
Akinade V. Nigerian Law School Lagos Campus Staff Co-Operative Thrift & Credit Society Limited (2015) LPELR-41705 (CA)
Osayemeh V. NDIC & anor (2009) LPELR-8846 (CA).

Books Consulted
Nigerian Law of Contract by Prof. I.E Sagay
Frustration Of Contract In Nigeria by Jackson, Etti & Edu

Link/Website Used

National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675


https://www.lawteacher.net/lectures/contract-law/discharge-of-obligations/frustration/

Adebayo Mubarak Adewumi
[email protected]
08102710219