Contracts Frustrated by COVID-19

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As a result of the ongoing coronavirus pandemic issues may have, or will arise regarding the performance of contracts you may have entered into. Following the recent measures issued by the government a number of events or services have been unexpectedly cancelled. As a result of this a party may find it impossible to fulfil their obligation under the contract.

As a general rule, if performance of a contract becomes more difficult or even impossible, the party who fails to perform is liable in damages. Frustration is an exception to this rule.

In the case of Krell v Henry [1903] a situation occurred when King Edward VII fell ill with appendicitis two days before the celebrations that were to take place following his coronation. Many people had entered into contracts in advance of the celebrations, by hiring rooms to watch the procession, or boats to watch the accompanying naval review. The events were originally scheduled to take place in June of 1902, but had to be postponed until August 1902 (sound familiar to you at all?). When the celebrations were postponed, they argued that the contracts had been frustrated, and that they should not be liable for the sums they had agreed to pay. This and other cases later became known as the Coronation Cases.

What is Frustration?

Frustration is where the terms of a contract are brought to an end on the basis it is impossible to carry them out.

If a contract has been frustrated it is automatically discharged and the parties are no longer subject to their future obligations. The contract is brought to an end immediately and it is neither party’s fault. This means neither party can claim compensation even if the other party has not carried out their obligations under the contract.

When determining whether a contract has been frustrated the Courts will need to examine all the circumstance of the particular case in hand. In general terms, there are a number of conditions that must be met to determine if a contract has become frustrated.

At Adams Harrison we can advise you on contractual disputes, to include whether the contract has become frustrated, particularly in light of the current circumstances brought about by the coronavirus pandemic. Contact one of our offices to discuss how you can provide us with a copy of the contract you require advice about.