#7183 - Vitiating Factors Super Summaries

Concept	Key Cases	Issue	Principle	Ratio	Comments
Frustration “Destruction of the subject matter”	Taylor v Caldwell – the music hall case	Was the contract frustrated	A contract is frustrated where: From the nature of the contract the parties would know it couldn’t be completed unless a thing continued to exist and they contemplated its continuing existence as the foundation of what was to be done Then the contract is a contract subject to an implied condition that the parties shell be excused if performance is impossible from the thing’s perishing	The basis of the contract was the continued existence of the music hall The Music hall ceased to exist without the fault of either party – they are both excused from their obligations	The starting point of all contracts is pacta sunt servanda but the loss lies where it falls Compare to Herne Bay – ship hired to view the royal navy revue. Even if the contract expressly stipulates a purpose – this is not enough for the inference of a conditional contract. Could be that it included a cruise ‘round the fleet’ Note Davis Contractors – huge shortage in labour and materials didn’t make the contract fundamentally different Also note illegality – this frustrates the contract as it happened in Fibrosa and the Sewer Canal Cases Foreseeability may lead to the inference that it would be provided for and thus the parties would bear the risk of its occurrence. e.g. Labour and materials not being available in Fareham UDC was ‘before their eyes and could have been the subject of special contractual stipulation’
“Disappearance of the basis of the contract”	Krell v Henry – a coronation case	Was the contract frustrated?	The steps are: What is the substance or foundation of the contract (from terms/inference of surrounding circs) Was performance prevented? Was the event that prevented performance of such a character it cannot reasonably be said to have been in the contemplation at the date of the contract	The coronation procession was the foundation of the contract Its non-happening was an event not reasonably supposed to have been in the contemplation of the parties when the contract was made?
	**Brisbane City Council v Group Projects**– Crown ninjas land		Adding to Lord Radcliffe’s statement in Davis Contractors – there should be a change in the significance of the obligations (not determinative) Preferred Lord Reid’s approach – did acquisition give rise to a fundamentally different situation?	The advantages sought after by the contract were not commercial in nature The obligations were not rendered impossible since most of the work was required to be taken off land BUT the acquisition deprived GP of all the “desire” to proceed with the work Crown acquisition gave rise to a fundamentally different situation than that contemplated when the contract was entered into – the contract should be regarded as coming to an end on acqusition
	Codelfa

“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 to do”

- Lord Radcliffe Davis Contractors Ltd v Fareham UDC [1956] AC 696, 729

Frustrated Contracts

The Act came as a result of the Fibrosa case
- War declared therefore performance illegal
Purpose of the acts was to divide up costs and damages in the event of frustration
- s7 – One is discharged in the future from performing any obligation under the contract
- But supposing one has performed and this performance has been provided to the other party (entirely or partly – it just matters that they received it
  - s10 – complete performance. Prima facie requires total payment
  - s11 – part performance which has been received
    - First, one must pay the “rateable” (e.g. 10% for 10% amount for what is received.
      - Unless the cost of producing this partial performance is more than the rateable proportion. In this case the performer has to split the difference between what’s been paid and what it cost.
- s12 – If money is paid early or at all, it is returned
- s13 – When one incurs costs and gets nothing for it
  - The general rule was that half the costs were recovered but if there is a value in what you have done, (then assuming it is sold market value), then credit of half the value of what you partly made is given back
- s15 is the main section of the act that gives the court jurisdiction to divide money in its complete discretion method by which the court may allocate costs
  - If other sections are manifestly inadequate, inappropriate, would cause manifest injustice or would be excessively difficult the court will adjust “as it considers proper”

s7 s10 or 11 s12 s13 s15

Concept	Key Cases	Issue	Principle	Ratio	Comments
Common Mistake – Res Extincta	McRae v CDC	Was the contract vitiated by mistake?	The case is one of construction, not of mistake – but even if it was a case of mistake; one cannot rely upon their own negligence	The Commonwealth were guilty of the grossest negligence – they had no reasonable grounds for the belief the tanker existed and they deliberately induced the belief that it did But since it was a case of construction – this case was not one of an implied condition precedent – there was no common assumption to justify this conclusion While the commission officers made an assumption the plaintiffs didn’t. They would have believed that they could accept the Commission’s assurance that there was a tanker	A mistake cannot exist if it is the fault of either party e.g. Fraud as per Derry v Peek (statement said which is false and known to be false or maker is reckless as to its falsehood) contract is voidable Compare to Courtier v Hastie – the corn case – mistaken belief in the existence of something voids the contract
Note also cases of Res Sua – Mistake as to ownership. Cooper v Phibbs – someone leases a fishery and the other is unaware that he already owns the lease due to a series of entitlement wills “nemo dat quod non habet” – no one can give what he does not have
Mistake as to quality or subject matter Essentially different	Bell v Lever Bros – compensation for termination but there were breaches	Was there a mistake as to quality? Was there a common mistake	A contract is voidable for mistake if it is a mistake as to some quality which makes the thing without the quality essentially different from the thing as it was believed to be A contract is voidable for mistake if it contains a term that a particular assumption is a condition of the contract	An agreement to terminate a definite contract is not void if it turns out it had already been broken and could have been terminated otherwise The contract which is released is the same – regardless of whether it is broken or terminated If the parties comply with the essentials of formation they are bound and must rely on the stipulations of the contract for protection The identity of the subject matter was not destroyed by mutual mistake
	Solle v Butcher – the flat, legal price increases (equity)		The only type of mistake rendering a contract void at CLAW is a mistake as to prevent formation of the contract at all In equity a contract may be set aside if there is a fundamental misapprehension as to a parties relative rights	Terms can be implied into the contract to ensure a just result in rescission – the lease should be set aside if the defendant is prepared to permit the plaintiff to be a licensee While he is a licensee a notice should be served permitted the increase to the said amount
	Great Peace Shipping – ship distance case		To restore coherence to the law: there is no jurisdiction to grant rescission for common mistake in equity where it is valid and enforceable at common law	Evidence of not wanting to cancel unless an alternative was present was a telling indication that proximity didn’t make it essentially different from what they envisaged The proximity didn’t mean it was impossible (else they would have held on to the contract)	Criticized Denning LJ’s chimera in Solle v Butcher
	*Svansio* – hotel built on other land		Cases of common mistake are rare and unlikely to go beyond cases of total failure of consideration (may go to partial failure)	There was no more than a partial failure of consideration – the contract was never void and at most liable to be set aside in equity on grounds of failure to show good title

Concept	Key Cases	Issue	Principle	Ratio	Comments
Mistake – parties not in agreement	Smith v Hughes – the old oats case		Where one chooses to act on their own judgement when he has full opportunity of inspecting – caveat emptor applies Parties are not not ad idem simply because one party has a motive operating on themselves to induce himself to buy with one of the essential conditions of the contract	Cockburn J Both parties agreed to the sale of a particular parcel of oats The defendant believed them to be old and was thus induced to agree to buy them – but he omitted to make age a condition of the contract Though the two minds weren’t ad idem as to age – they were as to sale and purchase	Roffles v Wichelhause – classic case ‘ex peerless’ – which one? A reasonable person wouldn’t know Both Cockburn and Blackburn use the analogy to buying a horse believed to be sound without a warranty...

Mistake – parties not in agreement

Smith v Hughes – the old oats case

Where one chooses to act on their own judgement when he has full opportunity of inspecting – caveat emptor applies
Parties are not not ad idem simply because one party has a motive operating on themselves to induce himself to buy with one of the essential conditions of the contract

Cockburn J

Both parties agreed to the sale of a particular parcel of oats
The defendant believed them to be old and was thus induced to agree to buy them – but he omitted to make age a condition of the contract
Though the two minds weren’t ad idem as to age – they were as to sale and purchase

Roffles v Wichelhause – classic case ‘ex peerless’ – which one? A reasonable person wouldn’t know

Both Cockburn and Blackburn use the analogy to buying a horse believed to be sound without a warranty...

#7183 - Vitiating Factors Super Summaries - Contracts 2

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