The doctrine of frustration deals with situations where circumstances change after a contract has been made and this makes performance impossible, or at least significantly different from what was intended. The following aspects need discussion:

The nature of the doctrine. Is the doctrine based on an implied term in the contract, or simply on a rule of law?

424What sort of events will lead to the frustration of a contract? Examples include:

destruction of the subject matter – this is the clearest example of frustration;

where personal performance is important, the illness of one party may frustrate the agreement;

where the contract presumes the occurrence of an event, its cancellation may be treated as frustration;

if the contract becomes illegal, or a government intervenes to prohibit it.

Limitations on the doctrine. It will not apply where:

the contract simply becomes more difficult or expensive to perform;

the ‘frustration’ is attributable to the actions of one of the parties;

the parties have provided for the circumstances in the contract itself.

Effects of the doctrine under the common law:

the contract is terminated automatically; but

all rights and liabilities that have already arisen remain in force; except that

if there is a total failure of consideration, money paid may be recovered.

The Law Reform (Frustrated Contracts) Act 1943. This Act amends the common law, so that:

money paid prior to frustration can generally be recovered;

benefits conferred, which survive the frustrating event, can be compensated for.