FRUSTRATED CONTRACTS AND LEGAL FICTIONS

Publication Date01 Jan 1983
AuthorLeon E. Trakman
DOIhttp://doi.org/10.1111/j.1468-2230.1983.tb02506.x
FRUSTRATED CONTRACTS AND
LEGAL FICTIONS
Someone says
to
me:
Show the children a game.’
I
teach them
gaming with dice, and the other says,
I
didn’t mean that sort of
game.’ Must the exclusion of the game with dice have come
before his mind when he gave the order?
(Wittgenstein,
Philo-
sophical Investigations,
33, trans., (1953)).
INTRODUCTION
TKE
technique of implying terms into contracts to excuse performance
has been attacked and defended for over a century in the common law
system. This article, in criticising aspects of the implied term technique,
evaluates how common law courts have used this technique both as a
legal doctrine and by way of judicial discretion. The study considers how
judges have implied terms into commercial contracts in the interests of
doctrinal consistency and also in order to promote fairness between
business partners.
In implying terms into contracts, courts have often constructed the
intention
of the parties, while imputing this judicial construction to
the parties themselves. Judges have terminated commercial obligations,
not because the businessmen themselves expressly
so
agreed in their
contracts, but because the court considered such
a
right of non-
performance
to
be appropriate, necessary or just in the circumstances.
As
a result, freedom of contract has been overshadowed by a judicial
right
to add terms to existing agreements.
Central to this common law approach has been the growth of an
expanding range of excuse doctrines. Contractors have received
excuses from performance because judges assumed that they could not
reasonably have foreseen the occurrence and harmful effects of such
crises which disrupted performance. Businessmen have gained the right
to non-performance when contingencies, itis said, have defeated the
object,” frustrated the
purpose
or undermined the
foundation
of their business agreements.
The use of the implied term technique as a means
of
granting excuses
from performance by operation of law is questionable because it
allows the risk that courts will undermine contractual relations without
regard
to
the business practices of the parties
or
to
the usages of
businessmen engaged in similar commercial transactions.
THE
IMPLIED
TERM
METHODOLOGY
The range of situations in which the common law courts have excused
performance has grown rapidly.’ Non-performance is now permitted in
See in general McNair,
Frustration
of
Contracts by War
(1940)
56
L.Q.R.
173;
Wade,
“The
Principle
of
Impossibility in Contract
(1940)
56
L.Q.R.
519;
McElroy
and
Williams,
Iinpossibilify
of
Performance
(1941); Patterson,
Constructive Conditions in
Contracts
(1942)
42
Col.L.Rev. 903;
Frustration
of
Contract
(1951)
4
C.L.P. 283;
39
40
THE
MODERN
LAW REVIEW
[Vol.
46
the event of the death
or
illness of one party,a because of the destruction
of
or
damage
to
the
"
subject-matter
"
of
the ~ontract,~ where judicial,
executive and #administrative controls have intervened and inhibited the
fulfilment of promise~,~ and where labour disturbances or the hazards
of war have prlevented
or
restrained performance.6
Central to such excuses from performance is the belief that common
law courts are duty bound to imply relief from obligations into contracts
by operation
of
law. Reputedly, courts are obliged to add terms to
agreements because of contingencies whose occurrence was unforeseen
and whose effects were devastating upon performance.' However, no
single rationalisation underlies this belief. Common law courts differ in
their reasons
for,
and their methods of, implying terms into contracts.
They differ
in
their perception
of
the performance obligations of
contractors and they disagree over the limits of the court's right to
imply.
In
Tamplin
(F.A.)
Steamship
Co.
Ltd.
v.
Anglo-Mexican Petroleum
Products
Co.
Ltd8
the court considered itself bound to imply an excuse
from performance into a commercial contract where the
"
foundation
"
of the agreement had disappeared. According to Lord Loreburn, the
court did not dissolve the contract itself. The judge merely implied a
term which arose from the nature of the contract.
"
In
most of the cases it is said that there was an implied condition
Gow,
''
Some Observations on Impossibility in Contracts
"
(1954) 3
I.C.L.Q.
291
;
Aubrey,
"
Frustrntion Reconsidered-Some Comparative Aspects
"
(1963) 12
I.C.L.Q.
1165.
Traditional analyses of implied terms in relation to the non-performance of contractual
duties are presented,
inter
alia,
in Costigan,
"
Implied-in-fact Contracts and Mutual
Assent
"(1920)
33
Harv.L.Rev.
376;
Sturge,
"
The Doctrine of Implied Condition
"
(1925)
41
L.Q.R.
170;
Corbin,
"
Conditions in the Law of Contract"
(1919) 28
Yale L.J.
739;
and most pertinently, in
The Moorcock
(1889) 14
P.D.
64.
Illustrations
of
excuses from performance arising out of the incapacity of the promisor,
include
Harvey
Y'.
The Tivoli, Manchester Lrd,
(1907) 23
T.L.R.
592 (K.B.);
Condor
v.
The
Barron
KnightsLtd.
[I9661
1
W.L.R.
87.
Destruction by fire frustrated a contract for the rental of a music-hall in the classic
case of
Taylor
v.
Caldwell
(1863)
3
B.
&
S.
826.
See further
Asfar
&
Co.
v.
Blundell
[I8961
1
.B.
123
(C.A
).
9
In particular, see
Hare
v.
Murphy Brothers Ltd.
[I9741
3
All E.R.
940;
Metropolitan
Warer
Boardv.
Dick, Kerr
&
Co.
Ltd.
(19181
A.C.
119;
Morgan
v.
Manser
[I9481
I
K.B.
184.
Strikes andl lockouts as grounds for non-performance are considered in
Davis
Contractors Ltd.
v.
Fareham U.D.C.
[I9561
A.C.
696.
See too, Williams,
"
Note: Clauses
Excusing Performance in Case of Strikes
or
Causes Beyond Control
"
(1921)
6
C0rn.L.Q.
189.
6
See Hall,
'I
The Effect of War on Contracts
"
(1918) 18
Col.L.Rev.
325;
Scrutton,
"The War and the Law
"
(1918) 34
L.Q.R.
116;
Page,
"
Impossibility of Performance
Due to War"
(1926)
3
Wis.L.Rev.
210;
Webber,
Eflect
of
War
on
Contract
(1946);
McNair,
Legal fifecrs
of
War
(1944).
7
In both civil and common law systems alike, excuses from performance have evolved
out of the lack of foresight and the inability ofcontractors to
"
prevent
"
or,
more recently,
to
'I
impede," the disruptive eff:p of intrusions upon performance. For such comparative
analyses, consider: Drachsler, Frustration of Contract: Comparative Law Aspects of
Remedies in Cases of Supervening Illegality
"
(1957)
3
N.Y,.,L.F.
50;
Smit,
"
Frustration
of
Contract: A Comparative Attempt at Consideration
(1958) 58
Col.L.Rev.
287;
Schmitthoff,
"
Frustration of International Contracts in English and Comparative
Law," in
Some Problems
of
Nonperforntance and Force Majetire
in
International Contracts
of
Sale
(Helsinki Conference,
1961),
note
1
above. See too David,
"
Frustration of Con-
tracts in French Law
"
(1946) 28
J.Comp.Leg.
&
Int. Law
1
I
;
von Mehren,
The CivilLaw
System
(1957),
p.
710.
(19151
3
K.B. 668; [I9161 2
A.C.
397.

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