Doctrine of Frustration: Causes and Effects under the Common Law and Civil Law System

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Doctrine of frustration:Causes and Effects Under Common Law and Civil Law System


The world has become the center stage for international business transactions and the speed and ease with which business deals are sealed is rather amazing. With this in mind business executives want to be certain that the obligations assumed under their contracts would be performed. This perhaps is the underlying premise of the international principle of pacta sunt servanda which recognizes the sanctity of contractual obligations. However, obligations assumed under a contract are primarily hinged on factors that are foreseeable at the time the contract is entered into. Where the contractual character of such obligations is changed due to unforeseen and unavoidable events, a party may be excused from the pacta sunt servanda principle epitomized and recognized as force majeure in most jurisdictions across the world. The aim of this paper is to examine the doctrine of force majeure under English law and under the Uniform Commercial Code of the United States. The paper will examine the doctrine of frustration at common law and the impracticability doctrine under the UCC against the background of executive decisions on choice of law and the legal consequences of the doctrine. The paper will find that the application of the doctrine in both jurisdictions is not radically dissimilar. Introduction:

The word impossible has not been used in the sense of physical or literal impossibility. The performance of an act may be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view, and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to do the act which he promised to do. Impossibility and frustration are often used as interchangeable expressions. The doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of section.

According to the doctrine of frustration,one party of the contract gets a concession.Long term concession contracts have existed at least since Roman times and doubtless long before that. The concept of a concession certainly predates the Magna Carta, which in a sense was about concessions (what God [or his representative the King] gives, he cannot unpredictably take away) and predates the English notion of "common law". Herod may have been Governor of Judea, but he had only the right of usufruct, the right of peaceful use and possession, the right to rule the land and reap the fruits of its labours. This is the essence of the notion of a "concession". In the Middle Ages, there were German and Dutch concessions on the Thames river in London. The European colonialists have every reason to be ashamed of their history of exploiting large swatches of Africa and Asia, under the guise of concessions.A number of the cases of the Permanent Court of Justice and International Court of Justice reveal in some detail the scope, in relations between sovereign states, of the parties' rights under a concession. I will not review these, because they have been overtaken in many ways by the treaties to which Tore has referred, and others, such as the Multilateral Agreement on Investments which are coming into force.The doctrine arises from some impossibility.Such impossibility must be physical or legal impossibility and not impossibility in reference to ability or circumstances. Commercial impossibility i.e. extreme or unforeseen cost or difficulty of performance is no excuse. In the absence of any capacity to perform contract, parties...
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