LAW2102 · Contract B
Frustration of Contracts
Frustration discharges a contract automatically where a supervening event — not the fault of either party and not provided for — makes performance radically or fundamentally different from what was undertaken (Codelfa; Davis Contractors). The doctrine is narrow: mere hardship, expense or inconvenience is not enough. The chapter covers the recognised categories (destruction of subject matter, disappearance of the basis or of a state of affairs essential, illegality, delay), the limitations (self-induced, foreseeability, risk allocation, mere hardship), and the consequences — automatic discharge plus the Victorian ACLFTA adjustments. It is examined where a supervening event upsets performance, and it links to duress (a frustrated contract has ended, so a later 'threat to breach' it cannot be illegitimate pressure).
What this chapter covers
- 011. The doctrine — a supervening event makes performance radically/fundamentally different
- 022. The leading test — Codelfa ('radically different'); Davis Contractors
- 033. Categories — destruction of subject matter (Taylor v Caldwell); disappearance of the basis (Krell v Henry)
- 044. Categories — disappearance of a state of affairs essential; illegality; delay
- 055. Limitations — self-induced frustration; foreseeability; risk expressly/impliedly allocated; mere hardship is not frustration
- 066. Consequence — the contract is automatically discharged at the time of the frustrating event (prospective)
- 077. Victorian ACLFTA — adjusting money paid/payable and valuable benefits conferred before discharge
- 088. The frustration/duress link — a frustrated contract has ended, so a later threat to breach it is not illegitimate pressure
Frustration by destruction of the subject matter (Topic 13)
- 2 marksIssue. Is the contract frustrated, and what are the consequences?
- 3 marksRule. Frustration = a supervening, non-self-induced, unprovided-for event making performance radically/fundamentally different (Codelfa; Davis Contractors); destruction of the subject matter is a settled category (Taylor v Caldwell). Limitations: self-induced, foreseeability, risk allocation, mere hardship. Consequence: automatic discharge; in Victoria the ACLFTA adjusts money paid/payable and valuable benefits before discharge.
- 4 marksApplication. The Egret's destruction is the precise frustrating event — identify it precisely rather than a vaguer cause — and performance is now impossible, not merely harder, so it is radically different (Codelfa; destruction of subject matter, Taylor v Caldwell). It is not self-induced; if the storm was unforeseeable and the contract did not allocate the risk, frustration is made out.
- 3 marksConclusion. The contract is frustrated and discharged; both parties are excused future performance, and the ACLFTA governs recovery of pre-paid sums and valuable benefits conferred before discharge.
Key terms
- Frustration
- The automatic discharge of a contract where a supervening event, not the fault of either party and not provided for, makes performance radically or fundamentally different from what was undertaken (Codelfa; Davis Contractors). The doctrine is narrow and does not cover mere hardship or increased cost.
- Radically different test
- The threshold from Codelfa and Davis Contractors: performance must be radically or fundamentally different from what the parties contracted for ('non haec in foedera veni' — this is not what I promised to do). A change that merely makes performance harder or more expensive does not meet it.
- Destruction of subject matter
- A recognised frustration category: where the specific thing essential to performance is destroyed without fault, the contract is frustrated (Taylor v Caldwell — the burnt music hall). Other categories include disappearance of the basis of the contract (Krell v Henry), illegality and delay.
- Self-induced frustration
- A limitation on the doctrine: a party cannot rely on a frustrating event that resulted from its own act or choice. Self-induced 'frustration' is really a breach, and the party at fault cannot use it to escape the contract.
- Risk allocation / foreseeability
- Limitations on frustration: if the contract expressly or impliedly allocated the risk of the event, or the event was foreseeable and could have been provided for, the contract is generally not frustrated — the parties are taken to have accepted that risk.
- ACLFTA adjustments
- In Victoria, provisions of the Australian Consumer Law and Fair Trading Act 2012 (Vic) adjust the parties' positions after frustration — recovering money paid, relieving money payable, and allowing recovery for valuable benefits conferred before discharge.
Frustration of Contracts FAQ
What is frustration and how high is the bar?
Frustration discharges a contract where a supervening, non-self-induced, unprovided-for event makes performance radically or fundamentally different from what was undertaken (Codelfa; Davis Contractors). The bar is high: mere hardship, increased cost or inconvenience is not enough. The performance must be transformed into something essentially different, not just harder.
What are the recognised categories of frustration?
The categories taught include destruction of the subject matter (Taylor v Caldwell), disappearance of the basis or foundation of the contract (the coronation cases, Krell v Henry), disappearance of a state of affairs essential to performance, supervening illegality, and excessive delay. Identify which category the facts fall into, but always tie it back to the 'radically different' test.
What stops a contract from being frustrated?
Four main limitations: the event must not be self-induced (a party cannot rely on its own conduct); it must not have been foreseeable and providable-for; the contract must not have allocated the risk of the event; and mere hardship or increased cost does not frustrate. Run all four as a checklist — most frustration problems turn on one of them.
What happens to money and work already exchanged when a contract is frustrated?
Frustration discharges the contract automatically and prospectively at the time of the frustrating event. In Victoria, the Australian Consumer Law and Fair Trading Act 2012 (Vic) adjusts the financial position — recovering money already paid, relieving sums payable, and allowing recovery for valuable benefits conferred before discharge. Address these adjustments in your conclusion.
How does frustration interact with duress in a problem?
They can connect. If a contract has been frustrated, it has ended — so a later 'threat to breach' that contract cannot be illegitimate pressure, because there is no subsisting contract to breach, and a duress argument built on it falls away. The unit's exam feedback stresses identifying the frustrating event precisely; getting that right can dispose of a downstream duress issue.
Exam move
Approach frustration in three moves. First, name the precise supervening event and ask the Codelfa question — is performance now radically or fundamentally different, or merely harder? Second, slot it into a category (destruction of subject matter, disappearance of the basis, state of affairs essential, illegality, delay) to show it is a recognised case. Third, run the limitations checklist — self-induced? foreseeable? risk allocated? mere hardship? — because that is where most frustration arguments are won or lost. Finish on consequences: automatic prospective discharge plus the Victorian ACLFTA adjustments to money and benefits. Keep the frustration test-plus-categories-plus-limitations diagram in your kit, and watch for the duress link, where a frustrated contract knocks out a later 'threat to breach' argument.
