PART 2 OF THE WEBFILE
PART B
Jern-Fei Ng - Essex Court Chambers
Force Majeure & Frustration
Force majeure &
Frustration
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JERN-FEI NG
ESSEX COURT CHAMBERS
jfng@essexcourt.net
Burden of
proof
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Burden of proof
• Burden of proof is on party relying on frustration
• Burden of proof is on party relying on force
majeure:
– the situation falls within the ambit of the
relevant clause and that his non-performance
was due to circumstances beyond his control
– that he had taken all reasonable steps to avoid
the operation of the force majeure event or
mitigate the results therefrom
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Channel Island Ferries Ltd v Sealink UK Ltd
[1988] 1 Lloyd’s Rep 323, 327 (per Parker LJ)
“It is important in my view to bear in mind:
(1) that it is for the party relying on a force majeure clause
to bring himself squarely within that clause;
(2) that in most cases that can only be done by showing
either legal or physical impossibility…
(4) a party must not only bring himself within the clause
but must show that he has taken all reasonable steps to
avoid its operation, or mitigate its results…”
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Frustration
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Davis Contractors Ltd v Fareham Urban
District Council [1956] AC 696, 729
• Circumstances in which performance
would be radically different from that
which was undertaken by the contract
• Not hardship or inconvenience
or
material loss itself which calls the
principle of frustration into play
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National Carriers Ltd v Panalpina
(Northern) Ltd [1981] AC 675, 700
• Supervening event without default of
either party
• Which so significantly changes the
nature of outstanding contractual
rights and/or obligations
• From what the parties could
reasonably have contemplated at time
of execution of contract
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ECONOMIC
HARDSHIP/
INCONVENIENCE
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ECONOMIC HARDSHIP/
INCONVENIENCE
• Palmco Shipping Inc v Continental Ore Corp (The
Captain George K) [1970] 2 Lloyd’s Rep 21, 32
• Treitel at p.937: “In England, dicta to the effect
that a contract may be discharged if its performance
becomes ‘impracticable’ are occasionally found in the
cases. But the weight of English authority rejects this
view.”
• Anson’s Law of Contract at pp.481-482
• Benjamin’s Sale of Goods
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Thames Valley Power Ltd v Total
Gas & Power Ltd
[2006] 1 Lloyd’s Rep 441
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Thames Valley Power Ltd v Total Gas &
Power Ltd [2006] 1 Lloyd’s Rep 441
• Ultimately a matter of construction.
• However, as a matter of principle,
courts will not allow a party to be
excused from performance on
grounds that performance has become
more expensive.
• “The fact that it is much more expensive,
even very greatly more expensive for [Total]
to do so, does not mean that it cannot do so.”
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Thames Valley Power Ltd v Total Gas &
Power Ltd [2006] 1 Lloyd’s Rep 441
• Performance not excused merely because it
has become“commercially unacceptable” or
“commercially impracticable”.
• This is so even if performance has become
“very greatly more expensive”.
• Consistent with a line of cases, both on
force majeure clauses and on frustration, e.g.
Tennants (Lancashire) Ltd v CS Wilson & Co
Ltd [1917] AC 495, 510 (per Lord
Loreburn).
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“Hardship” clauses?
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“HARDSHIP” CLAUSES
• Superior Overseas Development Corp
v British Gas Corp [1982] 1 Lloyd’s
Rep 262
• Wates Ltd v GLC (1983) 25 BLR 1
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CTI Group Inc v Transclear SA (The Mary
Nour) [2008] 2 Lloyd’s Rep 256
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The Mary Nour
• “23. [I]n the absence of some exceptional
supervening event … a contract will not be
frustrated simply by a failure on the part of
the ultimate supplier to make goods
available for delivery…”
• “…implicit in a contract of this kind that
the seller will either supply the goods
himself or (more likely) will make
arrangements, directly or indirectly, for the
goods to be supplied by others.”
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The Mary Nour
• “In other words, he undertakes a personal
obligation to procure the delivery of
contractual goods and thereby takes the
risk of his supplier’s failure to perform…”
• 27. [T]he fact that a supplier chooses not
to make goods available for shipment, thus
rendering performance by the seller
impossible, is not of itself sufficient to
frustrate a contract of this kind.”
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Specified
charter routes
The Eugenia [1963]
2 Lloyd’s Rep 155, 174
“If, by the express or implied terms of a charterparty, the parties have agreed that a particular
route, and that route only, is to be followed, then,
if the vessel is, in the commercial sense,
prevented from using that route, it may not be
necessary for the court to consider whether any
other route was commercially practicable. The
contractual obligation can be performed only by a
particular route which the parties have defined
and agreed.”
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Substitution of
Charters
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Substitution of Charters
• Niarchos v Shell Tankers (The World Sky)
[1961] 2 Lloyd’s Rep 496
• Terkol Rederierne v Petroleo Brasileiro SA (The
Badagry) [1985] 1 Lloyd’s Rep 395
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CONCLUSION
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