Termination and Frustration

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Lecture 10

• Termination and Frustration

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Requirements for election

1. Unequivocal words or conduct
2. Communication to the promisor

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Election to continue

1. Unequivocal words/conduct indicating choice to
   continue
2. Must know of the facts giving rise to the right
   to terminate

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Estoppel as restriction

1. Representation made to other party
2. Other party relied on it
3. Unconscionable to go back on it

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Effect of termination

• all parties are discharged
• all substantive terms become unenforceable
  procedural terms, such as an agreement to seek
  mediation, are enforceable
• all future obligations are unenforceable
• all unconditionally accrued rights remain on foot
  (eg damages for breach)

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Concept

• Frustration occurs whenever the law recognises
  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.
• - Lord Radcliffe, Davis Contractors Ltd v Fareham
  UDC 1956 AC 696 at 729

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Effect of Frustration

1. Contract stops automatically at point where
   frustration occurred
2. Future obligations unenforceabe
3. Uncondtionally accrued rights remain on foot
4. Right to damages survives if breach occurs prior
   to frustration

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Total Failure of Consideration

• There is failure of consideration if a promisor
  does not receive the performance (agreed return)
  which was promised as the price of (in return
  for) a money payment made by the promisor.
• Carter, Peden and Tolhurst, Cases and Materials
  on Contract Law in Australia at 789.

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