Common Mistake And Frustration

Front 1

What is common mistake?

Back 1

a situation that existed before the contract was formed, that made the parties enter into it as the result of a shared mistake.- the contract will be rendered void.

Front 2

What is frustration?

Back 2

Circumstances that occur after the contract came into existence, which make it incapable of being performed.

Front 3

What is required for common mistake, and why is it rarely found?

Back 3

-The mistake must be fundamental to the contract.
-The circumstances in which it will be found are very limited as rendering a contract void can have domino effect on a chain of contracts.
-The sanctity of contracts means that it is of paramount importance that they are observed where possible.

Front 4

What case displays an example of common mistake?

Back 4

Great Peace Shipping- if a contract is impossible to perform, it will be rendered void.

Front 5

What are the 3 possible frustrating events?

Back 5

1) If a contract becomes impossible to perform
2)If it becomes illegal to perform
3)Frustration of the common purpose of parties.

Front 6

What case shows an example of the frustration of the common purpose of parties?

Back 6

Krell v Henry-the common purpose was to watch the coronation procession, but as it was postponed, the court found that here was a frustration.

Front 7

What are the 3 limitations on frustration?

Back 7

1) a contract cannot be frustrated where frustration was self-induced
2) It cannot be frustrated if there is an express provision dealing with the event.
3) It cannot be frustrated if the supervening event could be foreseen.

Front 8

What is the effect of frustration?

Back 8

-The parties are excused from future performance, however obligations which occurred before the frustrating event are still binding.

Front 9

What 2 ways are the effects of frustration governed?

Back 9

At common law and by the Law Reform (frustrating contracts) Act 1943.

Front 10

What is the result of frustration?

Back 10

The contract is automatically discharged at common law, regardless of what the parties want.

Front 11

What is the current position on money paid prior to the frustrating event?

Back 11

a party can recover the money as long as they have received no part of the performance which they bargained for in exchange of the payment.

Front 12

What is the underlying purpose of the frustrated contracts act?

Back 12

the prevention on unjust enrichment.

Front 13

What are the 2 steps dealing with money paid prior to frustration under section 1(2)?

Back 13

1) the court identifies the benefit that the defendant has obtained at the claimant's expense.
2)judicial discretion- allows the court's to reduce recovery to take into account the losses sustained by the defendant, but it does not allow for the apportionment of losses, which are not matched by a corresponding enrichment.

Front 14

What 3 stages are there under section 1(3) regarding restitution for non-monetary benefits?

Back 14

1)It must be shown that the defendant has obtained a 'valuable benefit' from the claimant prior to the time of discharge of the contract.
2) The benefit must be valued
3) The court must determine what would be a 'just sum' to award the claimant, regarding all the circumstances of the case.

Front 15

What are some criticisms of the frustrated contracts act?

Back 15

Mckendrick- it leaves to much discretion to the trial judge.

Graham Virgo- Section 1(2) and (3) are somewhat schizophrenic provisions, embodying both the principles of restitution and the allocation of losses.

Mckenrick agues that apportioning the losses would be 'economically sounder' because each of the 2 parties would be able to bear half of the loss without serious consequences.

Front 16

Why is reform of the act unlikely?

Back 16

The law of frustration is of little practical importance- there have only been 2 commercial decisions interpreting the act in the last 50 years.