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 FRUSTRATION- IMPOSSIBILITY OF PERFORMANCE

Introduction -​ Frustration operates in situations where it is established that due

to subsequent change in circumstances, the contract is
rendered legally or physically impossible to perform by an
event not due to the act or default of either party
-​ Hence, the parties to the contract are discharged from further

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performance of the contract (no breach)

s. 57(2)

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-​ A contract to do an act which, after the contract is made,

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becomes impossible, or by reason of some event which the
promisor could not prevent, unlawful, becomes void when the

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act becomes impossible or unlawful.
-​ A contract can be frustrated and discharged without breach or

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default of either party

*HA Berney v A
-​ Ct held that the ‘invasion of Malaya by the Japanese’
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Tronoh Mines frustrated the performance of the contract and therefore there
was “no breach” of contract by the Defendants
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ELEMENTS OF *Guan Aik Moh v Selangor Properties Ltd

FURSTRATION 1.​ No provision has been made in the contract for such event
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2.​ The parties are not responsible or self-induced frustration

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3.​ Must be radically different from that which was undertaken by

the contract.
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* Please make sure to say the contract is impossible to perform before

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stating all these 3 elements

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Act becomes Illustration (b), s. 57

impossible to -​ A and B contract to marry each other. Before the time fixed for
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perform the marriage, A goes mad. The contract becomes void

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Illust (d)
-​ A contract to take in cargo for B at a foreign port. A’s gov
afterwards declares “war against the country in which the port
is situated”. The contract becomes void when war is declared.
 Illust (e)
-​ A contract to act at a theatre for 6 months in consideration of a
sum paid in advance by B. On several occasions “A is too ill to
act”. The contract to act on those occasions becomes void.

*Pacific Forest -​ If the act becomes difficult to perform - no frustration.

Industries Sdn Bhd -​ “ if a party has no money to pay his debt, it cannot be
v Lin Wen-Chih considered impossible to perform as it is not frustration. Neither

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can he plead frustration because the terms of the contract make
it difficult to interpret..”

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Event Happens Illust (d) s. 57

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after formation of -​ Event was subsequent to the formation of the contract
contract -​ Not necessary that the event is unforeseen or unexpected or

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not contemplated by the parties; as long as they have “made
no provision” in their contract for such future event

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HOWEVER, s. 57(3) & illust c
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-​ provides that there will be no frustration where the promisor
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had prior knowledge of the impossibility

Provisions in the -​ Where the parties have provided for the situation that has
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contract intended arisen, then the provisions in the contract applies - no

to have effect frustration
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*Chan Buck Kia v -​ Gov of Indonesia detained the ship when it sailed into an
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Naga Shipping Indonesian port until the end of charter period

-​ Plaintiff (ship owner) claimed from the defendant (hirers) the
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hire charges.
-​ Defendant pleaded frustration
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-​ A time charter party contained a provision that “If for any

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reason whatsoever the vessel shall be detained at any port by an

authority having dominion over the port, the charterer shall
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continue to pay the charter hire.”

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-​ Held: The provision was intended to have effect in the

circumstances that had arisen in this case; full effect should be
given to it.
-​ The defendant must pay the hire charges for the whole period of
the time charter party.
Instances of 1.​ Outbreak of war
frustration -​ HA berney v Tronoh Mines
2.​ Destruction of the subject matter
-​ Taylor v Caldwell
-​ Appleby v Myers
3.​ Non-occurrence of a particular event
-​ Krell v Henry
-​ Herne Bay Steamboat Co v Hutton

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4.​ Death or incapacity for personal service
-​ Sathiaval v Shell Malaysia Trading Sdn Bhd

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5.​ Statutory Prohibition
-​ Metropolitan Water Board v Dick Kerr

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6.​ Inability of promisor to obtain licence

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-​ Yong Ung Kai v Enting
7.​ Grant of an injunction

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-​ Standard Chartered Bank v Kuala Lumpur Sdn Bhd
-​ Kuala Lumpur Landmark Sdn Bhd v Standard
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Chartered Bank
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8.​ Seizure or compulsory Acquisition by the GOV
-​ Public Finance v Ehwan Bin Saring

Outbreak of War -​ Japanese invasion

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*HA Berny v -​ Cannot perform contract

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Tronoh Mines
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Destruction of the -​ Df agreed to let to the ptf the use of his music hall & garden for
subject matter the purpose of entertainment
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*Taylor v Caldwell -​ Before the day of the performance arrived, a fire destroyed the
music hall
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-​ The def, through no fault of his own, was unable to perform the
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contract
-​ Held: The contract was frustrated
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-​ Parties had contracted on the basis of the continued existence of

the music hall at the time when the concerts were to be given,
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that being essential to their performance

-​ The music hall having ceased to exist without the fault of
either party, both parties are excused.

Destruction of the -​ P undertook to erect machinery upon the D’s premises, the
subject matter work to be paid for upon completion
*Appleby v Myers -​ When the work was almost completed both the premises and
the machinery already erected were destroyed by fire
-​ Held: The contract was frustrated;however, the plaintiff could
recover nothing for the work done since the obligation to pay
didn’t arise until completion.

Non-occurrence of -​ Henry hired a room from Kreel for two days in order to view
a particular event the coronation procession of Edward VII, but the contract itself

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*Krell v Henry made no reference to that intended use
-​ King’s illness caused a postponement of the procession
-​ Def refused to pay for the room

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-​ Held: The contract was frustrated. Henry was excused from

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paying the rent for the room. The holding of the procession on
the dates planned was regarded as the foundation of the

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contract.

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Death or incapacity -​ Employee’s inability to continue with his employment with the
for personal service employer due to 2 year detention of the employee by the police
*Sathiaval v Shell A
under the emergency ordinance rendered the employment
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Malaysia Trading contract frustrated.
Sdn Bhd
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Statutory -​ Where a performance of the contract is prohibited by a statutory

prohibition order
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*Metropolitan -​ Respondent in 1914 agreed to construct for appellants a

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Water Board v reservoir within 6 years. In Feb 1916, minister of munitions

Dick Kerr ordered the respondent to cease work and to disperse and sell
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the plant.

Inability of -​ Where the nature of the contract necessitated getting a licence

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promisor to obtain for its performance

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licence -​ Def entered into an agreement with the ptf to sell to ptf the right
*Yong Ung Kai v to cut and take out certain timber
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Enting -​ A licence from the forest dept was required

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-​ The agreement did no refer to the necessity of obtaining a

licence
-​ Def did his best to get a licence but the dept refused to grant
one
-​ Pft sued for breach of contract
-​ Held: Refusal to grant a licence made the contract legally
impossible to perform.
Grant of an -​ Issue: whether the injunction restraining both ptf and df from
injunction acting on the redemption agreement had rendered it impossible
*Standard of performance with the t&c of the agreement
Chartered Bank v -​ Held: the injunction on the Monsia suit did not frustrate the
Kuala Lumpur Sdn agreement.
Bhd

Seizure or -​ Respondent purchased a motorcar via hire-purchase agreement

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compulsory -​ 6 weeks after the execution of the agreement, the Customs dept
Acquisition by the seized and forfeited the motorcar for an alleged offence
GOV -​ Held: seizure by the dept made it impossible for the appellants

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*Public Finance to assign & make over all its rights, benefit & interest in the

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Bhd v Ehwan bin vehicle
Saring -​ Appellants have defective title, hire-purchase agreement

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become void under s. 57 (2).

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Instances of no 1.​ Events causing carriage of goods by sea more expensive
Frustration -​ Tsakirolou v Noblee Throl
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2.​ Shortage of labour and materials in building contracts
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-​ Davis Contractors ltd v Fareham UDC
3.​ Occurrence of bad weather
-​ Kwan Sun ming v Chak Chee Hing
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4.​ Difficulty in interpreting the terms of the contract

-​ Pacific Forest Industries Sdn Bhd v Lin Wen-Chih
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Events causing -​ A case concerned a sale of groundnuts , c.i.f* (a contract that

carriage of goods includes cost, insurance and freight charges), from Port Sudan
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by sea more to Hamburg

expensive -​ The parties envisaged shipping through the Suez Canal, but the
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*Tsakiroglou v canal was closed after the contract was concluded.

Noblee Thorl -​ Held: The contract was not frustrated as the ship could go
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round via the Cape of Good Hope (no terms state that it must
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only use suez)

-​ The greater cost of the freight, born by the c.i,f seller was not so
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great as to render this a fundamentally different adventure.

Shortage of labour -​ App agreed to build 78 houses within 8 months for the resp for
and materials in a fixed sum of $94k
building contracts -​ Owing to unexpected shortage of skilled labour and certain
*Davis Contractors materials, the contract took 22 months instead of 8 months to
Ltd v Fareham complete and cost $115k
UDC -​ App contended that there was frustration of the contract and
claimed quantum meruit for the actual cost incurred
-​ Held: no frustration. The fact that the contract became more
onerous or expensive to the app did not discharge the
agreement.

Occurrence of bad -​ This was an action for damages for breach of contract or
weather alternatively damages for negligence arising out of a contract to

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*Kwan Sun Ming v tow 303 logs from Kampong Abai to Sandakan
Chak Chee Hing -​ The defence was that the 253 logs were lost in a storm so
violent as to amount to an “act of god” and the defendant

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should be excused from all liability for damages.

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-​ Held: The learned judge held that although there was a storm it
was not a storm violent enough to be regarded as an ‘act of

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god’ and gave judgement against the defendant and awarded
the plaintiff damages based on the cost at which the logs were

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purchased.

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-​ There was no justification for interfering with the finding of the
learned trial judge on the question whether the storm amounted
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to an ‘act of god’ because his finding was based on all the
evidence given in this case.
Important point
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-​ The event must be one that could not have been foreseen and
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could not be guarded against

-​ A contract of this nature must expected and would have to be
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guarded against
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Occurrence of bad -​ The plaintiff and the defendant had entered into a verbal
weather contract whereby the defendant agreed to tow the plaintiff’s
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*Khoo Than Sui v logs from sungei sugut to his log pond at sandakan
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Chan Chiau Hee -​ The defendant towed a total of 82 logs but only 11 logs were
delivered
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-​ The plaintiff claimed damages for the loss

-​ Defences - a) act of god b) frustration
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-​ It was alleged that the logs were lost in a storm at sea

-​ Held: The storm which was encountered was not violent
enough to be regarded as an act of God
-​ In a towing contract of his nature a storm must be expected and
would have to be guarded against and therefore the defence of
frustration must fail
Difficulty in -​ There was a dispute as to the price that was to be fixed for the
interpreting the sale of the timber products
terms of the -​ The price agreed was at ‘ a price consistent with the prevailing
contract market price’
*Pacific Forest -​ Held: The agreement was not frustrated as there was no
Industries v Lin impossibility of interpreting the parties’ intentions. It may be
Wen-Chih difficult, but not impossible or incapable.

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Test for frustration Radical Change from obligation
-​ The court will not hold the parties to further performance of the
contract if in the light of the changed circumstances there

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would be a radical change in their obligations under the

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contract
-​ Something that is a new state of things and could not

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reasonably foreseen

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*Davis Contractors -​ A building, which was supposed to take 8 months to complete,
v Fareham UDC took 22 months to complete because shortage of skilled labour
and materialsA
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-​ Held: The delay was not any new state of things which the
parties could not reasonably be thought to have foreseen
-​ The thing undertaken would, if performed, be a different thing
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from that contracted for.

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*Ramli v Gov of -​ A group of 86 vocational school teachers who were successful

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Malaysia in their application for teacher training

-​ Once completed will be accepted as teachers under UTS scale
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-​ By the time they completed their course of training the TS scal

had been abolished and the Abdul Aziz sheme come into force
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(new scheme)
-​ Appellant argued they should be paid under UTS scheme
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-​ Respondent argued frustration because the scheme was

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discontinued
-​ Held: Where there is a change of circumstances but the
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changed of circumstances do not render a fundamental or

radical change in the obligation originally undertaken to make
the contract something radically different from that originally
undertaken, the contract does not become impossible and it is
not discharged by frustration (basically same with davis case)
-​ The contract was not frustrated because it was capable of being
 perform with an improved salary scale.

Self-induced -​ When a person deliberately renders performance impossible

frustration -​ Thus, in cases where the promisor himself is responsible for the
frusrting event, such self-induced frustration does not discharge
a party from his contractual obligations
-​ He will be liable for breach of contract if he does not perform
his obligation under the contract

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*Maritime National -​ Maritime chartered from ocean a vessel which could only
Fish v Ocean operate with an otter trawl

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Trawlers -​ Both parties realised that it was an offence to use such a trawl

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without a gov licence
-​ Maritime was granted three such licences, but chose to use

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them in respect of three other vessels, thus the vessel could not
be used

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-​ The charterparty had not been frustrated. Consequently
Maritime was liable to pay the charter fee.
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-​ Maritime freely elected not to licence Ocean’s vessel,
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consequently their inability to use it was a direct result of their
own deliberate act
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*Yee Seng -​ The appellant was the sub-lessee of certain lands in Kerteh
Plantations Sdn GAnu
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Bhd v Kerajaan -​ In the years 1984 and 1986, the government of the state of
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Terengganu Ganu acquired some of the land

-​ The appellant took out an action challenging the acquisition
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-​ State legal adviser represented the defendant

-​ An agreement was reached between them.
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-​ However, difficulty arose when the state authority, decided to

reject the appellant’s application for the alienation of the land
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referred to in the consent order

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-​ Respondent said they were not bound because the decision was
a supervening event over which the respondents had no control.
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As such the consent order was frustrated.

-​ Held: no frustration for self-induced
-​ The decision by authority was a deliberate act of
non-compliance of the consent order by a party to the first
action.
Consequences of -​ The contract becomes void
frustration -​ s. 57(2) terminated as to the future not ab initio
-​ s. 66 remedy of restitution

*Public Finance v -​ The agreement becomes void and the appellants were obliged to
Ehwan bin Saring return the RM 57,00 to the respondent under s. 66

Consequences of -​ s. 15(2) & (3) civil law act 1956

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frustration -​ Q: what happens to the sums paid before the time of
frustration?
-​ A: Recoverable

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-​ Q: what if the party has incurred expense in the performance of

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the contract before the tme of discharge?
-​ A: may retain whole or part but not exceeding cost incurred

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-​ Q: sums payable before the time of frustration?
-​ A: ceases to be payable

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*National Land -​ P and D agreed to sel certain immovable property but subject to
Finance v Sharidal A
the approval of the foreign investment committee (FIC)
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Sdn Bhd -​ FIC refused to approve but suggested a different model
-​ Held: Agreement is void when the FIC refused to approve the
sale
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-​ The appellants must refunded under s. 15(2) CLA

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Consequences of -​ s. 15(3) CLA - compensation for partial performance

frustration -​ Applicable where one party has obtained valuable benefit
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other than payment of money before the time of frustration

other than payment of money (because money is under s. 15(2))
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-​ Q: how to assess ?
-​ A: The value of the benefit after the frustrating event.
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Common law position

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Intro -​ Common law used to adopt a doctrine of absolute obligation to

perform a contract
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*Paradine v Jane -​ Refused to pay rent because of English civil war

-​ Held: still liable

-​ This unsatisfactory state of the law led to the english courts

gradually employing an implied term device/test/theory
declaring such contracts void
 -​ Then come the case of Taylor v Caldwell & Fibrosa Spolka
Akcynjna v Fairbairn Lawson to overcome such hardship.

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