Contract Law: Frustration

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Martina owns two houses in Loughchester. In May, she entered into a contract with Loughchester University for it to rent the houses for the coming academic year for use as student accommodation. The University paid Martina £750 straight away, with the rent to be paid to Martina by the University monthly in arrears. Martina then engaged Roger Roofers Ltd to carry out repairs on the roofs of the houses, to be completed by 23 September, in time for the arrival of the students. She paid Roger Roofers £1,000, with the balance of £3,000 to be paid on completion of the work. Consider the effect on Martina's contracts of the following events. (a) On 1 September, when Roger Roofers had completed work on the first house, but not started on the second, the second house was struck by lightning, causing a fire that destroyed both houses. (b) As in (a), but only the second house was destroyed. The first house escaped damage. (c) As a consequence of an unexpected restriction on student numbers imposed by the government, Loughchester University recruited fewer students for its courses than it had expected and had a surplus of accommodation. It told Martina on 20 September that it would not need to use her houses, and regarded their contract as at an end. It also requested the repayment of the £750 already paid.  ANSWER

The doctrine of frustration applies when there is a change of circumstances, after the conclusion of a contract; consequently rendering the contract impossible to perform or depriving the contract of its commercial purpose by the occurrence of an unexpected event not due to the act or default of either party. In the event of a contact being frustrated the contract is discharged at that date. Examples of some of the unforeseen events that have been acknowledged as giving rise to frustration are destruction of the subject matter (Taylor v Caldwell (1863)), government interference (BP Exploration v Hunt (1982)), supervening illegality (Denny, Mott and...
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