Essay on Contract Law: Frustration

1635 Words Dec 31st, 2012 7 Pages
Martina owns two houses in Loughchester. In May, she entered into a contract with Loughchester University for it to rent the houses for the coming academic year for use as student accommodation. The University paid Martina £750 straight away, with the rent to be paid to Martina by the University monthly in arrears. Martina then engaged Roger Roofers Ltd to carry out repairs on the roofs of the houses, to be completed by 23 September, in time for the arrival of the students. She paid Roger Roofers £1,000, with the balance of £3,000 to be paid on completion of the work. Consider the effect on Martina's contracts of the following events.
(a) On 1 September, when Roger Roofers had completed work on the first house, but not started
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The Law Reform (Frustrated Contracts) Act 1943 was passed to provide a fair appointment of losses where a contract is discharged by frustration. The main provisions in the 1943 Act are s.1(2), which deals with recovery of money paid or payable prior to the frustrating event (Gamerco SA v ICM/Fair Warning Agency (1995)), and s.1(3), which deals with benefits given prior to that event. However, although in certain circumstances s 2(3) of the Act allows recovery for benefits conferred prior to the frustrating event, in BP Exploration v Hunt (1979), it was held that the frustrating event has had an effect of destroying the benefit, nothing will be recoverable under s.1(3).
Situation (a)
In the first situation, the two houses have been destroyed. According to the Implied Term Theory Test in Taylor v Caldwell (1863), the complete destruction of the specific objects necessary for performance of the contract will frustrate it. As regards the contract with the University, for many years it was thought that the doctrine of frustration could not apply to a lease for the reason that a lease created an interest in land and that interest in land was unaffected by the alleged frustrating event – Cricklewood Property Investment Trust v Leighton's Investment Trusts Ltd (1945). However, this view was rejected by the House of Lords in National Carriers Ltd v Panalpina (Northern) Ltd (1981), it was held that a lease could be frustrated if intended use of the land became

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