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In Davis Contractors v Fareham UDC 1956(379), the House of Lords modernised and clarified the boundaries of the doctrine of frustration, underscoring the importance of foreseeability to the frustration of contracts. Their Lordships cementified the rule that an event or a risk that was foreseeable at the time of contracting but not stipulated for in the contract could not give rise to frustration. It is presumed that the parties contemplated the risk and determined that the risk was adequately allocated through contractual terms. That was a case where the contractors undertook to build for the council 78 houses…
The House of Lords found for the council. The Court found that the relevant (pre-contractual)…
“…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.”…
Viscount Simmonds explained that “disappointed expectations [do not] lead to frustrated contracts [and that the doctrine] must be, kept within very narrow limits”. Lord Reid considered the jurisprudential basis for the doctrine of frustration, refusing…
“It appears to me that frustration depends, at least in most cases, not on adding any implied term, but on the true construction of the terms which are in the contract read in light of the nature of the contract and of the relevant surrounding circumstances when the contract was made. There is much authority for this view... On this view there is no need to consider what the parties thought or how they or reasonable men in their shoes would have dealt with the new situation if they had foreseen it. The question is whether the contract which they 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.”(381)…
Emphasising on the importance of foreseeability, Lord Reid noted:…
“In a contract of this kind the contractor undertakes to do the work for a definite sum and he takes the risk of the cost being greater or less than he expected. If delays occur through no one’s fault that may be in the contemplation of the contract, and there may be provision for extra time being given: to that extent the other party takes the risk of delay. But he does not take the risk of the cost being increased by such delay. It may be that delay could be of a character so different from anything contemplated that the contract was at an end, but in this case, in my opinion, the most that could be said is that the delay was greater in degree than was to be expected. It 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.”(382)…
Similarly, Lord Radcliffe noted as follows:…
“Two things seem to me to prevent the application of the principle of frustration to this case. One is that the cause of the delay was not any new state of …
Accordingly, if ever there was any doubt, the House of Lords established in this…
More recently, the Court of Appeal(385) considered…
In respect of the test for frustration, Rix LJ explained that when considering frustration…
“Among the factors which have to be considered are the terms of the contract itself, its matrix or context, the parties’ knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of contract, at any …
The learned judge emphasised that the doctrine is one designed to do justice and…
