Frustration foremost?


COVID-19 has rapidly brought about many changes, worldwide. Some will lapse when the pandemic passes, but the progressive engagement of two aspects of business law - generally known, seldom fully understood, and strict alternatives - will far outlive the pestilence that has suddenly made them so very topical.


These are force majeure, as discussed in Communicable disease is alive and well, which is widely thought to be an independent legal doctrine but is not, and frustration, which is seldom considered as such, but is. Many who first tried the perceived amulet of force majeure now cite the Law Reform (Frustrated Contracts) Act 1943. Some ruefully comparing daily curtailment to WWII have been helped by this wartime statute.




Self-isolation, quarantine, illness, death and widespread general restrictions and closures have meant that a very great many contracts literally cannot be performed. Some have wording that precisely, or plausibly, covers the situation, but many do not.


Amid a wide variety of carriage of goods matters, we have recently been consulted on domestic and international sales, delivery obligations, pleasure craft fixtures, holiday bookings, diving contracts and many other leisure-oriented plans, where a deal has been concluded (and often a deposit or other advance paid) but for one reason or another the paying party is not going to get any part of the bargain.


Just as all such want redress, so providers seek escape, as very often they have no recourse. Where, mostly, no other route is available, frustration is back in vogue.




Like force majeure, however, frustration is not automatic. A party seeking its protection must show that it applies.


The crucial thing is a change in circumstances - the frustrating event - after the contract was made, and neither party’s fault, which either makes the contract impossible to perform or, in some cases, deprives it of its commercial purpose.


The second of these is harder to illustrate. One might readily see a frustrating event where a chartered craft blamelessly capsizes, or a holiday location cannot be reached due to government lockdown, but valid alternatives at increased cost to the provider will not thwart commercial rationale.




(a) the subject-matter of the contract is destroyed

Accidental destruction of a particular item or place that has been purchased or hired will often be a frustrating event.


The same applies where a specific individual dies or becomes incapacitated, though this is probably most common within the music industry and other performing arts.


(b) illegality

Here, performance was valid when the contract was made but has become illegal due to changed local, national or other governing law. Examples are restrictions on enemy nationals, specific or general trade embargoes and, most recently, sanctions.


Many commercial contracts, however, contain clauses intended to address such things. Detailed sanctions clauses, for instance, are commonplace.


Also, and perhaps especially for leisure and other domestic contracts, the issue may be whether the action is indeed illegal, as opposed to being generally proscribed or contrary to guidance that is widely followed. Residents might frown on continued use of a holiday home in their midst, but is it actually unlawful? What valid powers exist to prevent or punish?


(c) the contract cannot be performed in the specified way

This might be a particular instance of (a) above, where something purposively hired or bought because it is unique or has certain vital attributes - say, a particular car, yacht or location - is destroyed or otherwise becomes unavailable.


(d) the contract no longer has its commercial purpose

As briefly mentioned, this is a more difficult concept, and some of the cases usually cited pre-date the above Act by 40 years.


It is not concerned with economics, but with removal of the contractual motive. Here, it will generally be the receiving party who is urging that he can no longer have or experience the only thing he was going to be there for. One might at first think there could be few examples of this due to COVID-19.


However, recent cancellation of the Wimbledon tournament (for the first time since WWII) may bring about this very effect as regards many of the nearby houses and flats routinely rentedby players and spectators.



A contract is not frustrated where:


1. It can still be performed, but that is harder or costlier;


2. The impossibility is one party’s fault;


3. The frustrating event was foreseeable;


4. As hinted in our introduction, a force majeure clauseapplies.




Frustration discharges a contract, so neither side has to perform any more, and the parties’ rights and liabilities are adjusted under the above Act of 1943.

This is a very different outcome to other possible routes that a contract might take, such as renegotiation, novation and straightforward breach. However, whether this remedy is available will depend on the governing law of the contract, and to what extent that recognises frustration or something similar.


Performance of a large and likely greatly increasing number of contracts will certainly founder due to COVID-19. All parties should consider these principles, and some may want to seek urgent advice before taking any action.


If you would like to discuss anything raised in this article please contact Chris Potts on +(852) 9461 4377 or at or Peter Lau on +(852) 9683 7439 or at