Frustration
Cases
Couturier & Ors v Hastie & Anor
[1856] UKHL J3
Lord Cranworth
….
The cause was tried before Mr. Baron Martin, when his Lordship ruled, that the contract imported that at the time of the sale, the corn was in existence as such, and capable of delivery, and that as it had been sold and delivered by the captain before this contract was made, the Plaintiffs could not recover in the action. He therefore directed a verdict for the Defendants. The case was afterwards argued in the Court of Exchequer before the Lord Chief Baron, Mr. Baron Parke, and Mr. Baron Alderson, when the learned Judges differed in opinion, and a rule was drawn up directing that the verdict found for the Defendants should be set aside on all the pleas except the sixth, and that on that plea judgment should be entered for the Plaintiffs, non obstante veredicto. That the Defendants should be at liberty to treat the decision of the Court as the ruling at Nisi Prius, and to put it on the record and bring a. bill of exceptions (8 Exch. 40). This was done, and the Lord Chief Baron sealed the bill of exceptions, adding, however, a memorandum to the effect that he did so as the ruling of the Court, but that his own opinion was in opposition to such ruling.
The case was argued on the bill of exceptions in the Exchequer Chamber, before Justices Coleridge, Maule, Creswell, Wightman, Williams, Talfourd, and Crompton, who were unanimously of opinion that the judgment of the Court of Exchequer ought to be reversed (9 Exch. 102). The present writ of error was then brought.
The Judges were summoned, and Mr. Baron Alderson, Mr. Justice Wightman, Mr. Justice Creswell, Mr. Justice Erle, Mr. Justice Williams, Mr. Baron Martin, Mr. Justice Crompton, Mr. Justice Willes, and Mr. Baron Bramwell, attended.
Sir F. Thesiger and Mr. James Wilde for the Plaintiffs in Error: The purchase here was not of the cargo absolutely as a thing assumed to be in existence, but merely of the benefit of the expectation of its arrival, and of the securities against the contingency of its loss. The purchaser bought in fact the shipping documents, the rights and interests of the vendor. A contract of such a kind is valid, Paine v. Meller (6 Ves. 349); Cass v. Rudele (2 Vern. 280). The language of the contract implies all this. The representation that the corn was shipped free on board at Salonica, means that the cargo, was the property of, and at the risk of the shipper, Cowasjee v. Thompson (5 Moo. P.C. 165). The Court of Exchequer proceeded on the words of this contract, and gave the correct meaning to them. Mr. Baron Parke (8 Exch. 54) said, ” There is an express engagement that the cargo was of average quality when shipped, so that it is clear that the purchaser was to run the risk of all subsequent deterioration by sea damage or otherwise, for which he was to be indemnified by having the cargo fully insured; for the 27s. per quarter were to cover not merely the price, but all expenses of shipment, freight, and insurance.” In a contract for the sale of goods afloat, there are two periods which are important to be regarded, the time of sale and the time of arrival. If at the time of the sale there is anything on which the contract can attach it is valid, and the vendee bound, Barr v. Gibson (3 Mee. and Wels. 390). The goods are either shipped, as here, “free on board,” when it is clear that they are thenceforward at the risk of the vendee, or they are shipped “to arrive,” which saves the vendee from all risk till they are safely brought to port, Johnson v. Macdonald (9 Mee. and Wels. 600). The intention of the parties is understood to be declared by different terms of expression, and the judgment of the Exchequer Chamber here really violates that intention. The case of Strickland v. Turner (7 Exch. 208), which was referred to by the Lord Chief Baron (8 Exch. 49), is not in point, for there the annuity, which was the subject of the sale, had actually ceased to exist when the sale took place; there was nothing whatever on which the contract could attach; and the principles therefore on which all contracts of sale must proceed, as explained and illustrated by Pothier,[1] whose definitions of a sale are literally adopted by Mr. Chancellor Kent (2 Kent’s Com. 468), applied there, but they do not apply here, for here the parties were dealing with an expectation, namely, the expectation of the arrival of the cargo. As Lord Chief Baron Richards said, in Hitchcock v. Giddings (4 Price, 135), ” If a man will make a purchase of a chance, he must abide by the consequences.” Here, however, the chance was only that of the arrival of the cargo, and that chance was covered by the policy, for the cargo, itself, as stated in the contract, had been actually shipped. Had the cargo been damaged at the time of this contract, the loss thereby arising must have been borne by the purchaser. Suppose the corn had been landed at Tunis, and had remained in the warehouse there, it would have ceased to be a cargo in the strict and literal meaning of the word, but the purchaser would still have been bound by his contract.
The Court of Exchequer Chamber, admitting that the vendee might have recovered an average loss under the policy on this cargo, said that he could not have recovered if a total loss had occurred, and referred to, an admission to that effect supposed to have been made by the present Baron Martin when arguing Sutherland v. Pratt (11 Mee. and Wels. 296). That admission does not mean what is thus supposed; and after the case of Roux v. Salvador (3 Bing. N.C. 266), where there was a total loss, and the Plaintiff recovered on the policy, it is difficult to understand how such an opinion could be entertained. A technical objection arising on the form of the policy would not affect this question. The purchaser’s right on this policy would have been complete, Phillips (1 Phill. Ins. 438), Marshall (1 Marsh. Ins. 333), and March v. Pigott (5 Burr. 2802). By what has happened here, the purchaser has been saved the payment of freight, Vlierboom v. Chapman (13 Mee. and Wels. 230); and Owens v. Dunbar (12 Ir. Law. Rep. 304) shows that he would have been bound to accept the cargo. The contract here was, that the cargo was shipped “free on board.” To that extent the vendor was bound, but he was not bound by any farther and implied warranty, Dickson v. Zizinia (10 Corn. Ben. 602). Mr. Butt and Mr. Bovill for the Defendants in Error were not called on.
The Lord Chancellor: My Lords, this case has been very fully and ably argued on the part of the Plaintiffs in Error, but I understand from an intimation which I have received, that all the learned Judges who are present, including the learned Judge who was of a different opinion in the Court of Exchequer, before the case came to the Exchequer Chamber, are of opinion that the judgment of the Court of Exchequer Chamber sought to be reversed by this writ of error was a correct judgment, and they come to that opinion without the necessity of hearing the counsel for the Defendants in Error. If I am correct in this belief, I will not trouble the learned counsel for the Defendants in Error to address your Lordships, because I confess, though I should endeavour to, keep my mind suspended till the case had been fully argued, that my strong impression in the course of the argument has been, that the judgment of the Court of Exchequer Chamber is right. I should therefore simply propose to ask the learned Judges, whether they agree in thinking that that judgment was right.
Mr. Baron Alderson said: My Lords, Her Majesty’s Judges are unanimously of opinion that the judgment of the Exchequer Chamber was right, and that the judgment of the Court of Exchequer was wrong; and I am also of that opinion myself now, having been one of the Judges before whom the case came to be heard in the Court of Exchequer.
The Lord Chancellor: My Lords, that being so, I have no hesitation in advising your Lordships, and at once moving that the judgment of the Court below should be affirmed. It is hardly necessary, and it has not ordinarily been usual for your Lordships to go much into the merits of a judgment which is thus unanimously affirmed by the Judges who are called in to consider it, and to assist the House in forming its judgment. But I may state shortly that the whole question turns upon the construction of the contract which was entered into, between the parties. I do not mean to deny that many plausible and ingenious arguments have been pressed by both the learned counsel who have addressed your Lordships, showing that there might have been a meaning attached to that contract different from that which the words themselves impart. If this had depended not merely upon the construction of the contract but upon evidence, which, if I recollect rightly, was rejected at the trial, of what mercantile usage had been, I should not have been prepared to say that a long continued mercantile usage interpreting such contracts might not have been sufficient to warrant, or even to compel your Lordships to adopt a different construction. But in the absence of any such evidence, looking to the contract itself alone, it appears to me clearly that what the parties contemplated, those who bought and those who sold, was that there was an existing something to be sold and bought, and if sold and bought, then the benefit of insurance should go with it. I do not feel pressed by the latter argument, which has been brought forward very ably by Mr. Wilde, derived from the subject of insurance. I think the full benefit of the insurance was meant to go as well to losses and damage that occurred previously to the 15th of May, as to losses and damage that occurred subsequently, always assuming that something passed by the contract of the 15th of May. If the contract of the 15th of May had been an operating contract, and there had been a valid sale of a cargo at that time existing, I think the purchaser would have had the benefit of insurance in respect of all damage previously occurring. The contract plainly imports that there was something which was to, be sold at the time of the contract, and something to be purchased. No such thing existing, I think the Court of Exchequer Chamber has come to the only reasonable conclusion upon it, and consequently that there must be judgment given by your Lordships for the Defendants in Error.
Judgment for the Defendants in Error, with costs. Lords’ Journals, 27 June 1856.
Taylor & Anor v Caldwell & Anor
[1863] EWHC QB J1, 3 B & S 826
Blackburn J
There is a class of contracts in which a person binds himself to do something which requires to be performed by him in person; and such promises, e.g. promises to marry, or promises to serve for a certain time, are never in practice qualified by an express exception of the death of the party; and therefore in such cases the contract is in terms broken if the promisor dies before fulfilment. Yet it was very early determined that, if the performance is personal, the executors are not liable; Hyde v. The Dean of Windsor (Cro. Eliz. 552, 553). See 2 Wms. Exors. 1560, 5th ed., where a very apt illustration is given. “Thus,” says the learned author, “if an author undertakes to compose a work, and dies before completing it, his executors are discharged from this contract: for the undertaking is merely personal in its nature, and, by the intervention of the contractor’s death, has become impossible to be performed.”For this he cites a dictum of Lord Lyndhurst in Marshall v. Broadhurst (1 Tyr. 348, 349), and a case mentioned by Patteson J. in Wentworth v. Cock (10 A. & E. 42, 45-46). In Hall v. Wright (E. B. & E. 746, 749), Crompton J., in his judgment, puts another case. “Where a contract depends upon personal skill, and the act of God renders it impossible, as, for instance, in the case of a painter employed to paint a picture who is struck blind, it may be that the performance might be excused.”
It seems that in those cases the only ground on which the parties or their executors, can be excused from the consequences of the breach of the contract is, that from the nature of the contract there is an implied condition of the continued existence of the life of the contractor, and, perhaps in the case of the painter of his eyesight. In the instances just given, the person, the continued existence of whose life is necessary to the fulfilment of the contract, is himself the contractor, but that does not seem in itself to be necessary to the application of the principle; as is illustrated by the following example. In the ordinary form of an apprentice deed the apprentice binds himself in unqualified terms to “serve until the full end and term of seven years to be fully complete and ended,” during which term it is covenanted that the apprentice his master “faithfully shall serve,” and the father of the apprentice in equally unqualified terms binds himself for the performance by the apprentice of all and every covenant on his part. (See the form, 2 Chitty on Pleading, 370, 7th ed. by Greening.) It is undeniable that if the apprentice dies within the seven years, the covenant of the father that he shall perform his covenant to serve for seven years is not fulfilled, yet surely it cannot be that an action would lie against the father? Yet the only reason why it would not is that he is excused because of the apprentice’s death.
These are instances where the implied condition is of the life of a human being, but there are others in which the same implication is made as to the continued existence of a thing. For example, where a contract of sale is made amounting to a bargain and sale, transferring presently the property in specific chattels, which are to be delivered by the vendor at a future day; there, if the chattels, without the fault of the vendor, perish in the interval, the purchaser must pay the price and the vendor is excused from performing his contract to deliver, which has thus become impossible.
That this is the rule of the English law is established by the case of Rugg v. Minett (11 East, 210), where the article that perished before delivery was turpentine, and it was decided that the vendor was bound to refund the price of all those lots in which the property had not passed; but was entitled to retain without deduction the price of those lots in which the property had passed, though they were not delivered, and though in the conditions of sale, which are set out in the report, there was no express qualification of the promise to deliver on payment. It seems in that case rather to have been taken for granted than decided that the destruction of the thing sold before delivery excused the vendor from fulfilling his contract to deliver on payment.
This also is the rule in the Civil law, and it is worth noticing that Pothier, in his celebrated Traite du Contrat de Vente (see Part. 4, § 307, etc.; and Part. 2, ch. 1, sect. 1, art. 4, § 1), treats this as merely an example of the more general rule that every obligation de certo corpore is extinguished when the thing ceases to exist. See Blackburn on the Contract of Sale, p. 173.
The same principle seems to be involved in the decision of Sparrow v. Sowyate (W. Jones, 29), where, to an action of debt on an obligation by bail, conditioned for the payment of the debt or the render of the debtor, it was held a good plea that before any default in rendering him the principal debtor died. It is true that was the case of a bond with a condition, and a distinction is sometimes made in this respect between a condition and a contract. But this observation does not apply to Williams v. Lloyd (W. Jones, 179). In that case the count, which was in assumpsit, alleged that the plaintiff had delivered a horse to the defendant, who promised to redeliver it on request. Breach, that though requested to redeliver the horse he refused. Plea, that the horse was sick and died, and the plaintiff made the request after its death; and on demurrer it was held a good plea, as the bailee was discharged from his promise by the death of the horse without default or negligence on the part of the defendant. “Let it be admitted,” say the Court, “that he promised to deliver it on request, if the horse die before, that is become impossible by the act of God, so the party shall be discharged, as much as if an obligation were made conditioned to deliver the horse on request, and he died before it.” And Jones, adds the report, cited 22 Ass. 41, in which it was held that a ferryman who had promised to carry a horse safe across the ferry was held chargeable for the drowning of the animal only because he had overloaded the boat, and it was agreed, that notwithstanding the promise no action would have lain had there been no neglect or default on his part. It may, we think, be safely asserted to be now English law, that in all contracts of loan of chattels or bailments if the performance of the promise of the borrower or bailee to return the things lent or bailed, becomes impossible because it has perished, this impossibility (if not arising from the fault of the borrower or bailee from some risk which he has taken upon himself) excuses the borrower or bailee from the performance of his promise to redeliver the chattel. The great case of Coggs v. Bernard (1 Smith’s L. C. 171, 5th ed.; 2 L. Raym. 909) is now the leading case on the law of bailments, and Lord Holt, in that case, referred so much to the Civil law that it might perhaps be thought that this principle was there derived direct from the civilians, and was not generally applicable in English law except in the ease of bailments; but the case of Williams v. Lloyd (W. Jones, 179), above cited, shews that the same law had been already adopted by the English law as early as The Book of Assizes. The principle seems to us to be that, in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance. In none of these cases is the promise in words other than positive, nor is there any express stipulation that the destruction of the person or thing shall excuse the performance; but that excuse is by law implied, because from the nature of the contract it is apparent that the parties contracted on the basis of the continued existence of the particular person or chattel. In the present case, looking at the whole contract, we find that the parties contracted on the basis of the continued existence of the Music Hall at the time when the concerts were to be given; that being essential to their performance.
We think, therefore, that the Music Hall having ceased to exist, without fault of either party, both parties are excused, the plaintiffs from taking the gardens and paying the money, the defendants from performing their promise to give the use of the Hall and Gardens and other things. Consequently the rule must be absolute to enter the verdict for the defendants. Rule absolute.
McRae v Commonwealth Disposals Commission
[1951] HCA 79; (1951) 84 CLR 377
High Court of Australia
Dixon and Fullagar JJ1
19. The position so far, then, may be summed up as follows. It was not decided in Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent. Whatever might then have been held on the facts of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) , it is impossible in this case to imply any such term. The terms of the contract and the surrounding circumstances clearly exclude any such implication. The buyers relied upon, and acted upon, the assertion of the seller that there was a tanker in existence. It is not a case in which the parties can be seen to have proceeded on the basis of a common assumption of fact so as to justify the conclusion that the correctness of the assumption was intended by both parties to be a condition precedent to the creation of contractual obligations. The officers of the Commission made an assumption, but the plaintiffs did not make an assumption in the same sense. They knew nothing except what the Commission had told them. If they had been asked, they would certainly not have said: “Of course, if there is no tanker, there is no contract”. They would have said: “We shall have to go and take possession of the tanker. We simply accept the Commission’s assurance that there is a tanker and the Commission’s promise to give us that tanker.” The only proper construction of the contract is that it included a promise by the Commission that there was a tanker in the position specified. The Commission contracted that there was a tanker there. “The sale in this case of a ship implies a contract that the subject of the transfer did exist in the character of a ship” (Barr v. Gibson (1838) 3 M& W, at pp 399, 400 (150 ER, at pp 1200, 1201) ). If, on the other hand, the case of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); [1853] EngR 764; (1853) 9 Ex 102 (156 ER 43); (1856) 5 HLC 673 (10 ER 1065) and this case ought to be treated as cases raising a question of “mistake”, then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground. There was a contract, and the Commission contracted that a tanker existed in the position specified. Since there was no such tanker, there has been a breach of contract, and the plaintiffs are entitled to damages for that breach. (at p410)
20. Before proceeding to consider the measure of damages, one other matter should be briefly mentioned. The contract was made in Melbourne, and it would seem that its proper law is Victorian law. Section 11 of the Victorian Goods Act 1928 corresponds to s. 6 of the English Sale of Goods Act 1893, and provides that “where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made the contract is void”. This has been generally supposed to represent the legislature’s view of the effect of Couturier v. Hastie [1852] EngR 774; (1852) 8 Ex 40 (155 ER 1250); (1853) 9 Ex 102 (156 ER 43); [1856] EngR 713; (1856) 5 HLC 673 (10 ER 1065) . Whether it correctly represents the effect of the decision in that case or not, it seems clear that the section has no application to the facts of the present case. Here the goods never existed, and the seller ought to have known that they did not exist. (at p410)
21. The conclusion that there was an enforceable contract makes it unnecessary to consider the other two causes of action raised by the plaintiffs. As to each of these, the plaintiffs would have been, to say the least, faced with serious obstacles. We have already referred to the evidence bearing on the issue of fraud. And the claim based on negligence would have encountered the difficulties which were held by a majority of the Court of Appeal to be fatal to the plaintiff in Candler v. Crane Christmas & Co. (1951) 1 All ER 426 . (at p410)
Solle v Butcher
[1950] 1 KB 671
Denning LJ
“ It is quite plain that the parties were under a mistake. They thought that the flat was not tied down to a controlled rent, whereas in fact it was. In order to see whether the lease can be avoided for this mistake it is necessary to remember that mistake is of two kinds: first, mistake which renders the contract void, that is, a nullity from the beginning, which is the kind of mistake which was dealt with by the courts of common law; and, secondly, mistake which renders the contract not void, but voidable, that is, liable to be set aside on such terms as the court thinks fit, which is the kind of mistake which was dealt with by the courts of equity. Much of the difficulty which has attended this subject has arisen because, before the fusion of law and equity, the courts of common law, in order to do justice in the case in hand, extended this doctrine of mistake beyond its proper limits and held contracts to be void which were really only voidable, a process which was capable of being attended with much injustice to third persons who had bought goods or otherwise committed themselves on the faith that there was a contract. In the well-known case of Cundy v Lindsay, Cundy suffered such an injustice. He bought the handkerchiefs from the rogue, Blenkarn, before the Judicature Acts came into operation. Since the fusion of law and equity, there is no reason to continue this process, and it will be found that only those contracts are now held void in which the mistake was such as to prevent the formation of any contract at all.
Let me first consider mistakes which render a contract a nullity. All previous decisions on this subject must now be read in the light of Bell v Lever Bros Ld. The correct interpretation of that case, to my mind, is that, once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground. Neither party can rely or his own mistake to say it was a nullity from the beginning, no matter .that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake. A fortiori, if the other party did not know of the mistake, but shared it. The cases where goods have perished at the time of sale, or belong to the buyer, are really contracts which are not void for mistake but are void by reason of an implied condition precedent, because the contract proceeded on the basic assumption that it was possible of performance. So far as cases later than Bell v Lever Bros Ld are concerned, I do not think that Sowler v Potter can stand with King’s Norton Metal Co Ld v Edridge, which shows that the doctrine of French law as enunciated by Pothier is no part of English law. Nor do I think that the contract in Nicholson and Venn v Smith-Marriott,[6] was void from the beginning.
Applying these principles, it is clear that here there was a contract. The parties agreed in the same terms on the same subject-matter. It is true that the landlord was under a mistake which was to him fundamental: he would not for one moment have considered letting the flat for seven years if it meant that he could only charge 140l. a year for it. He made th fundamental mistake of believing that the rent he could charge was not tied down to a controlled rent; but, whether it was his own mistake or a mistake common to both him and the tenant, it is not a ground for saying that the lease was from the beginning a nullity. Any other view would lead to remarkable results, for it would mean that, in the many cases where the parties mistakenly think a house is outside the Rent Restriction Acts when it is really within them, the tenancy would be a nullity, and the tenant would have to go; with the result that the tenants would not dare to seek to have their rents reduced to the permitted amounts lest they should be turned out.
Let me next consider mistakes which render a contract voidable, that is, liable to be set aside on some equitable ground. Whilst presupposing that a contract was good at law, or at any rate not void, the court of equity would often relieve a party from the consequences of his own mistake, so long as it could do so without injustice to third parties. The court, it was said, had power to set aside the contract whenever it was of opinion that it was unconscientious for the other party to avail himself of the legal advantage which he had obtained: Torrance v Bolton per James L.J.
The court had, of course, to define what it considered to be unconscientious, but in this respect equity has shown a progressive development. It is now clear that a contract will be set aside if the mistake of the one party has been induced by a material misrepresentation of the other, even though it was not fraudulent or fundamental; or if one party, knowing that the other is mistaken about the terms of an offer, or the identity of the person by whom it is made, lets him remain under his delusion and concludes a contract on the mistaken terms instead of pointing out the mistake. That is, I venture to think, the ground on which the defendant in Smith v Hughes would be exempted nowadays, and on which, according to the view by Blackburn J of the facts, the contract in Lindsay v Cundy, was voidable and not void; and on which the leas in Sowler v Potter, was, in my opinion, voidable and not void.
A contract is also liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault. That principle was first applied to private rights as long ago as 1730 in Lansdown v Lansdown. There were four brothers, and the second and third of them died. The eldest brother entered on the lands of the deceased brothers, but the youngest brother claimed them. So the two rival brothers consulted a friend who was a local schoolmaster. The friend looked up a book which he then had with him called the Clerk’s Remembrancer and gave it as his opinion that the lands belonged to the youngest brother. He recommended the two of them to take further advice, which at first they intended to do, but they did not do so; and, acting on the friend’s opinion, the elder brother agreed to divide the estate with the younger brother, and executed deeds and bonds giving effect to the agreement. Lord Chancellor King declared that the documents were obtained by a mistake and by a misrepresentation of the law by the friend, and ordered them to be given up to be cancelled. He pointed out that the maxim ignorantia juris non excusat only means that ignorance cannot be pleaded in excuse of crimes. Eighteen years later, in the time of Lord Hardwicke, the same principle was applied in Bingham v Bingham.
If and in so far as those cases were compromises of disputed rights, they have been subjected to justifiable criticism, but, in cases where there is no element of compromise, but only of mistaken rights, the House of Lords in 1867 in the great case of Cooper v Phibbs, affirmed the doctrine there acted on as correct. In that case an uncle had told his nephew, not intending to misrepresent anything, but being in fact in error, that he (the uncle) was entitled to a fishery; and the nephew, after the uncle’s death, acting in the belief of the truth of what the uncle had told him, entered into an agreement to rent the fishery fl om the uncle’s daughters, whereas it actually belonged to the nephew himself. The mistake there as to the title to the fishery did not render the tenancy agreement a nullity. If it had done, the contract would have been void at law from the beginning and equity would have had to follow the law. There would have been no contract to set aside and no terms to impose. The House of Lords, however, held that the mistake was only such as to make it voidable, or, in Lord Westbury’s words, “liable to be set aside” on such terms as the court thought fit to impose; and it was so set aside.
The principle so established by Cooper v Phibbs has been repeatedly acted on: see, for instance, Earl Beauchamp v Winn,[11] and Huddersfield Banking Co Ld v Lister.[12] It is in no way impaired by Bell v Lever Bros Ld, which was treated in the House of Lords as a case at law depending on whether the contract was a nullity or not. If it had been considered on equitable grounds, the result might have been different. In any case, the principle of Cooper v Phibbs has been fully restored by Norwich Union Fire Insurance Society Ld v William H. Price Ld.[13]
Applying that principle to this case, the facts are that the plaintiff, the tenant, was a surveyor who was employed by the defendant, the landlord, not only to arrange finance for the purchase of the building and to negotiate with the rating authorities as to the new rateable values, but also to let the flats. He was the agent for letting, and he clearly formed the view that the building was not controlled. He told the valuation officer so. He advised the defendant what were the rents which could be charged. He read to the defendant an opinion of counsel relating to the matter, and told him that in his opinion he could charge 250l. and that there was no previous control. He said that the flats came outside the Act and that the defendant was “clear.” The defendant relied on what the plaintiff told him, and authorized the plaintiff to let at the rentals which he had suggested. The plaintiff not only let the four other flats to other people for a long period of years at the new rentals, but also took one himself for seven years at 250l. a year. Now he turns round and says, quite unashamedly, that he wants to take advantage of the mistake to get the flat at 140l. a year for seven years instead of the 250l. a year, which is not only the rent he agreed to pay but also the fair and economic rent; and it is also the rent permitted by the Acts on compliance with the necessary formalities. If the rules of equity have become so rigid that they cannot remedy such an injustice, it is time we had a new equity, to make good the omissions of the old. But, in my view, the established rules are amply sufficient for this case.
On the defendant’s evidence, which the judge preferred, I should have thought there was a good deal to be said for the view that the lease was induced by an innocent material misrepresentation by the plaintiff. It seems to me that the plaintiff was not merely expressing an opinion on the law: he was making an unambiguous statement as to private rights; and a misrepresentation as to private rights is equivalent to a misrepresentation of fact for this purpose: MacKenzie v Royal Bank of Canada. But it is unnecessary to come to a firm conclusion on this point, because, as Bucknill LJ has said, there was clearly a common mistake, or, as I would prefer to describe it, a common misapprehension, which was fundamental and in no way due to any fault of the defendant; and Cooper v Phibbs affords ample authority for saying that, by reason of the common misapprehension, this lease can be set aside on such terms as the court thinks fit.
The fact that the lease has been executed is no bar to this relief. No distinction can, in this respect, be taken between rescission for innocent misrepresentation and rescission for common misapprehension, for many of the common misapprehensions are due to innocent misrepresentation; and Cooper v. Phibbs66 shows that rescission is available even after an agreement of tenancy has been executed and partly performed. The observations in Seddon v North Eastern Salt Co Ld, have lost all authority since Scrutton L.J., threw doubt on them in Lever Bros Ld v Bell, and the Privy Council actually set aside an executed agreement in Mackenzie v Royal Bank of Canada. If and in so far as Angel v Jay decided that an executed lease could not be rescinded for an innocent misrepresentation, it was in my opinion, a wrong decision. It would mean that innocent people would be deprived of their right of rescission before they had any opportunity of knowing they had it. I am aware that in Wilde v Gibson, Lord Campbell said that an executed conveyance could be set aside only on the ground of actual fraud; but this must be taken to be confined to misrepresentations as to defects of title on the conveyance of land.
In the ordinary way, of course, rescission is only granted when the parties can be restored to substantially the same position as that in which they were before the contract was made; but, as Lord Blackburn said in Erlanger v New Sombrero Phosphate Co: “The practice has always been for a court of equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract.” That indeed was what was done in Cooper v Phibbs. Terms were imposed so as to do what was practically just. What terms then, should be imposed here? If the lease were set aside without any terms being imposed, it would mean that the plaintiff, the tenant, would have to go out and would have to pay a reasonable sum for his use and occupation. That would, however, not be just to the tenant.
The situation is similar to that of a case where a long lease is made at the full permitted rent in the common belief that notices of increase have previously been served, whereas in fact they have not. In that case, as in this, when the lease is set aside, terms must be imposed so as to see that the tenant is not unjustly evicted. When Sir John Romilly MR, was faced with a somewhat similar problem, he gave the tenant the option either to agree to pay the proper rent or to go out: see Garrard v Frankel; and when Bacon V-C. had a like problem before him he did the same, saying that “the object of the court is, as far as it can, to put the parties into the position in which they would have been in if the mistake had not happened”: see Paget v Marshall.[19] If the mistake here had not happened, a proper notice of increase would have been given and the lease would have been executed at the full permitted rent. I think that this court should follow these examples and should impose terms which will enable the tenant to choose either to stay on at the proper rent or to go out.
The terms will be complicated by reason of the Rent Restriction Acts, but it is not beyond the wit of man to devise them. Subject to any observations which the parties may desire to make, the terms which I suggest are these: the lease should only be set aside if the defendant is prepared to give an undertaking that he will permit the plaintiff to be a license of the premises pending the grant of a new lease. Then, whilst the plaintiff is a licensee, the defendant will in law be in possession of the premises, and will be able to serve on the plaintiff, as prospective tenant, a notice under s. 7, sub-s. 4, of the Act of 1938 increasing the rent to the full permitted amount. The defendant must further be prepared to give an undertaking that he will serve such a notice within three weeks from the drawing up of the order, and that he will, if written request is made by the plaintiff, within one month of the service of the notice, grant him a new lease at the full permitted amount of rent, not, however, exceeding 250l. a year, for a term expiring on September 29, 1954, subject in all other respects to the same covenants and conditions as in the rescinded lease. If there is any difference of opinion about the figures stated in the notice, that can, of course, be adjusted during the currency of the lease. If the plaintiff does not choose to accept the licence or the new lease, he must go out. He will not be entitled to the protection of the Rent Restriction Acts because, the lease being set aside, there will be no initial contractual tenancy from which a statutory tenancy can spring.
In my opinion, therefore, the appeal should be allowed. The declaration that the standard rent of the flat is 140l. a year should stand. An order should be made on the counterclaim that, on the defendant’s giving the undertakings which I have mentioned, the lease be set aside. An account should be had to determine the sum payable for use and occupation. The plaintiff’s claim for repayment of rent and for breach of covenant should be dismissed. In respect of his occupation after rescission and during the subsequent licence, the plaintiff will be liable to pay a reasonable sum for use and occupation. That sum should, prima facie, be assessed at the full amount permitted by the Acts, not, however, exceeding 250&L a year. Mesne profits as against a trespasser are assessed at the full amount permitted by the Acts, even though notices of increase have not been served, because that is the amount lost by the landlord. The same assessment should be made here, because the sums payable for use and occupation are not rent, and the statutory provisions about notices of increase do not apply to them. All necessary credits must, of course, be given in respect of past payments, and so forth.
Herman and Others v. Owners of S.S. “Vicia.”
[1942] IR 305
Hanna J.
What is frustration? In the case of Joseph Constantine S.S. Line, Ltd., v. Imperial Smelting Corporation Ltd. (1),various definitions are given of frustrationincidental to the main question involved in that casenamely, upon whom the burden of proof lies. In that case, the ship in question, the “Kingswood,” was chartered to agents of the respondents in a voyage with ores from Port Pirie in South Australia to Europe. Before she became an”arrived ship” at Port Pirie, there was a severe explosion in the neighbourhood of her auxiliary boiler, causing such damage that she could not perform her charter party. As the headnote says (2), that was “a destruction of the essential subject-matter of the contract so as to frustrate the commercial object of the adventure.” In that respect the case differs from the one under consideration. As there was no negligence or default found with either party, it was held to discharge all liability under the charter. At p. 29, Viscount Simon L.C. says that “when ‘frustration’ in the legal sense occurs, it does not merely provide one party with a defence in an action brought by the other. It kills the contract itself and discharges both parties automatically. The plaintiff sues for breach at a past date and the defendant pleads that at that date no contract existed.” He further says that frustration depends on the terms of the contract and the surrounding circumstances of each case, as some kinds of impossibility may not discharge the contract at all.
Lord Maughan says, at p. 31, that “frustration is based on the presumed common intention of the parties,” and he also states that the legal rights already accrued are unaffected.
At pp. 35, 36, Lord Wright, while recognising frustration by the destruction of the subject-matter, gives a wider conception of impossibility and says: “Another illustration is where the actual object still exists and is available, but the object of the contract as contemplated by both parties was its employment for a particular purpose, which has become impossible, as in the Coronation Gases. In these and similar cases, where there is not in the strict sense impossibility by some casual happening, there has been so vital a change in the circumstances as to defeat the contract. . . . The common object of the parties is frustrated. The contract has perished, quoad any rights or liabilities subsequent to the change.” He then cites passages from the judgment in Paradine v. Jane (1); and from the judgments in Hirji Mulji v. Cheong Yue S.S. Co. (2); Couturier v. Hastie (3);and Dahl v. Nelson, Donkin & Co. (4), and then he says:”I have quoted these statements of law to emphasise that the Court is exercising its powers, when it decides that a contract is frustrated, in order to achieve a result which is just and reasonable.”
The converse proposition is that it is not to be held to be frustrated unless it is just and reasonable.
Lord Porter, in the same case, seems to give a larger interpretation to frustration, where he says, at p. 40:”Frustration is the term now in common use in cases in which the performance of a contract becomes impossible because its subject-matter has ceased to be available for the purpose for which both parties intended it to be used.”He points out that in that case no question arises as to the extension of the doctrine to a case where the subject-matter of the contract is not itself destroyed but the underlying purpose alone has been frustrated.
On these principles I am of opinion that the evidence on the part of the owners is not sufficient to justify a finding of frustration of the seamen’s contracts. Adopting the words of Lord Wright, I decline to hold that it would be just and reasonable under the circumstances to decide that the seaman’s contracts had been frustrated. The vessel had gone from Lisbon to Tampa without a convoy and was not interfered with. She sailed for thirteen days alone in the Atlantic without a convoy and without a proper warrant. I can find no case similar in facts to this, where it has been alleged, or held to be, a frustration for the owners of the vessel, apart from any hostile act of an enemy, to be unwilling to send her to sea on account of the risks and perils of war, with possible interception or seizure. It seems to me that the vessel could have reasonably reached Cardiff to obtain bunkers as she had the undertaking of the British Ministry of Shipping to give her facilities to a port in the United Kingdom. As Lord Sumner described the rule in Hirji Mulji v. Cheong Yue S.S. Co. (2) at p. 510: “The rule as to frustration is to reconcile justice with the absolute contract. The seamen’s contract was in this case an absolute contract. If the contingency was known to the parties as something which might happen and they did not provide for it, the contract ought to stand.”
Upon this point of the implied term in the contract, in the case of Emanuel v. La Compagnie Fermière (1), Lord Esher says: “A term which was not actually contained in a written contract could not be implied unless the Court came to a clear conclusion that both parties must have intended that term to be implied. It was not enough that both parties should have contemplated that a certain state of circumstances would exist. The Court must be satisfied that the party against whom the implied term was to be enforced intended to bind himself that that state of circumstances should exist.” A similar principle is stated by Viscount Simon L.C. in the case of Luxor, Ltd. v. Cooper (2),and in Jacob Marcus & Co. v. Credit Lyonnais (3)Bowen L.J. said: “One of the incidents which the English law attaches to a contract is that . . . a person who expressly contracts absolutely to do a thing not naturally impossible, is not excused for non-performance because of being prevented by vis major.” And in the case of Larrinaga & Co. v. Sociétié Franco-Americaine des Phosphates (4),Lord Sumner said: “If the appellants’ own ships were under requisition, they could have fulfilled their contract with other ships, of which they might be able to obtain the disposition.” Applying that principle to this case the agents here might have made arrangements to take the seamen back to America in other vessels, but they did not do so and relied upon frustration.
This case is obviously different on the facts from any other, and the critical point is the British shipping warrant. I am not satisfied that all the four plaintiffs had information as to the British shipping warrant having expired, or that the Captain did not renew it. The Captain knew, and it would have been his duty to anticipate, that if he did not get it renewed to the United Kingdom while in Charleston, or Halifax, or Sydney, there might be some difficulty in Dublin, and, therefore, he should have included in the conditions of the contract the rights of the crew on the kind of frustration which actually occurred as well as frustration by “torpedo, mine or loss.” As he did not, I find as a fact that the alleged frustration in Dublin, if the British shipping warrant was necessary and the letter from the British Ministry of Shipping insufficient, was due to the neglect of the Captain who was responsible to the owners. If the full British warrant was not absolutely necessary and the letter from the British Ministry of Shipping sufficient, then there was no frustration in the Port of Dublin as it would have carried the vessel to Cardiff.
For these reasons I am of opinion, when the case is carefully analysed, that in the Port of Dublin there was no ground for concluding that there was impossibility of performance. There is no evidence that the British Ministry of Shipping definitely refused a new warrant and, in my judgment, Turner Brightman & Company’s concern was really to reduce expenses until arrangements had been made for the trading of the vessel. If the ship had gone to Cardiff she might have got, as previously, a cargo to Lisbon and a British warrant.
If there was frustration I think having regard to the full argument before me, I should investigate the question as to whether frustration, while it might in some cases cover a breach of a charter party, would in any case apply to the seamen’s contracts for repatriation.
Seamen’s contracts have always stood before the law in a peculiarly favourable position, as many
Davis Contractors v Fareham Urban DC
[1956] UKHL 3 [1956] AC 696, [1956] 2 All ER 145
Lord Reid
Frustration has often been said to depend on adding a term to the contract
by implication: for example, Lord Loreburn in Tamplin Steamship Co. Ltd.
v. Anglo Mexican Petroleum Products Co. Ltd. [1916] 2 A.C. 397 at p. 404,
after quoting language of Lord Blackburn, said: ” That seems to me another
” way of saying that from the nature of the contract it cannot be supposed
” the parties, as reasonable men, intended it to be binding on them under
” such altered conditions. Were the altered conditions such that, had they
” thought of them, they would have taken their chance of them, or such
” that as sensible men they would have said: ‘ If that happens, of course,
“‘ it is all over between us”? What, in fact, was the true meaning of the
” contract? Since the parties have not provided for the contingency, ought a
” court to say it is obvious they would have treated the thing as at an end? “.
I find great difficulty in accepting this as the correct approach because it
seems to me hard to account for certain decisions of this House in this way.
I cannot think that a reasonable man in the position of the seaman in Horlock
v. Beal [1916] 1 A.C. 486 would readily have agreed that the wages payable
to his wife should stop if his ship was caught in Germany at the outbreak
of war, and I doubt whether the charterers in the Bank Line case could
have been said to be unreasonable if they had refused to agree to a term
that the contract was to come to an end in the circumstances which occurred.
These are not the only cases where I think it would be difficult to say that a
reasonable man in the position of the party who opposes unsuccessfully
a finding of frustration would certainly have agreed to an implied term
bringing it about.
I may be allowed to note an example of the artificiality of the theory of
an an implied term given by Lord Sands in Scott & Sons v. Del Sel [1922]
S.C. 592 at p. 595: ” A tiger has escaped from a travelling menagerie. The
” milk girl fails to deliver the milk. Possibly the milkman may be exonerated
” from any breach of contract: but even so it would seem hardly reasonable
” to base that exoneration on the ground that ‘ tiger days excepted ‘ must be
” held as if written into the milk contract”.
I think that there is much force in Lord Wright’s criticism in Denny, Mott
& Dickson at p. 275: ” The parties did not anticipate fully and completely,
” if at all, or provide for what actually happened. It is not possible, to my
” mind, to say that, if they had thought of it, they would have said: ‘ Well, if
” ‘ that happens, all is over between us ‘. On the contrary, they would almost
” certainly, on the one side or the other, have sought to introduce reservations
” or qualifications or compensations “.
It appears to me that frustration depends, at least in most cases, not on
adding any implied term but on the true construction of the terms which are
in the contract read in light of the nature of the contract and of the relevant
surrounding circumstances when the contract was made. There is much
authority for this view. In British Movietonews Ltd. v. London & District
Cinemas, Ltd. [1952] A.C. 166 at p. 185 Lord Simon said: ” If, on the other
” hand, a consideration of the terms of the contract, in the light of the circum-
” stances existing when it was made, shews that they never agreed to be bound
” in a fundamentally different situation which has now unexpectedly emerged,
” the contract ceases to bind at that point—not because the court in its
” discretion thinks it just and reasonable to qualify the terms of the contract,
” but because on its true construction it does not apply in that situation “.
In Parkinson v. Commissioners of Works [1949] 2 K.B. 632 Asquith, LJ.
said (at p. 667): ” In each case a delay or interruption was fundamental
” enough to transmute the job the contractor had undertaken into a job of a
” different kind, which the contract did not contemplate and to which it
“could not apply, although there was nothing in the express language of
” either contract to limit its operation in this way “. I need not multiply
citations but I might note a reference by Lord Cairns so long ago as 1876 to
” additional or varied work so peculiar so unexpected and so different from
” what any person reckoned or calculated upon ” (Thorn v. The Mayor and
Commonalty of London, 1 App. Cas 120 at p. 127). On this view there is
no need to consider what the parties thought or how they or reasonable men
in their shoes would have dealt with the new situation if they had foreseen
it. The question is whether the contract which they did make is, on its
true construction, wide enough to apply to the new situation: if it is not
then it is at an end.
……
The Appellants’ case must rest on frustration, the termination of the con-
tract by operation of law on the emergence of a fundamentally different
situation. Using the language of Asquith, L.J. (as be then was) which I have
already quoted, the question is whether the causes of delay or the delays were
” fundamental enough to transmute the job the contractor had undertaken
” into a job of a different kind, which the contract did not contemplate and to
” which it could not apply “. In most cases the time when the new situation
emerges is clear, there has been some particular event which makes all the
difference. It may be that frustration can occur as a result of gradual change,
but if so the first question I would be inclined to ask would be when the
frustration occurred and when the contract came to an end. It has been
assumed in this case that it does not matter at what point during the progress
of the work the contract came to an end, and that, whatever the time may
have been, if the contract came to an end at some time the whole of the
work must be paid for on a quantum meruit basis. I do not pursue this
matter because the Respondents have admitted that if there was frustration
at any time the Appellants are entitled to the sum awarded. But even so,
I think one must see whether there was any tune at which the Appellants
could have said to the Respondents that the contract was at an end and that
if the work was to proceed there must be a new contract, and I cannot find
any time from first to last at which they would have been entitled to say
that the job had become a job of a different kind which the contract did not
contemplate. There is a difficulty about a party being entitled to go on
and finish the work without raising the question that a new agreement is
necessary and then maintain that frustration occurred at some time while
the work was in progress, but again I do not pursue that matter because it
does not arise in view of the course this case has taken.
In a contract of this kind the contractor undertakes to do the work for a
definite sum and he takes the risk of the cost being greater or less than
he expected. If delays occur through no one’s fault that may be in the con-
templation of the contract and there may be provision for extra time being
given: to that extent the other party takes the risk of delay. But he does
not take the risk of the cost being increased by such delay. It may be that
delay could be of a character so different from anything contemplated that
the contract was at an end, but in this case in my opinion the most that
could be said is that the delay was greater in degree than was to be expected.
It was not caused by any new and unforeseeable factor or event: the job
proved to be more onerous but it never became a job of a different kind
from that contemplated in the contract.
Bush v. Whitehaven Trustees appears to me to be a very special case and
it must be read in light of the development of the law in later cases. I agree
with your Lordships’ comments on it and I can get little assistance from it
for the decision of the present case. I agree that this appeal should be
dismissed.
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd
House of Lords [1942] UKHL 4, [1943] AC 32, [1942] 2 All ER 122
Lord Wright
Keywords
“My Lords, the claim in the action was to recover a prepayment of 1000l. made on account of the price under a contract which had been frustrated. The claim was for money paid for a consideration which had failed. It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution. The root idea was stated by three Lords of Appeal, Lord Shaw, Lord Sumner and Lord Carson, in R. E. Jones, Ld. v. Waring & Gillow, Ld, which dealt with a particular species of the category, namely, money paid under a mistake of fact. Lord Sumner referring to Kelly v Solari, where money had been paid by an insurance company under the mistaken impression that it was due to an executrix under a policy which had in fact been cancelled, said: “There was no real intention on the company’s part to enrich her.” Payment under a mistake of fact is only one head of this category of the law. Another class is where, as in this case, there is prepayment on account of money to be paid as consideration for the performance of a contract which in the event becomes abortive and is not performed, so that the money never becomes due. There was in such circumstances no intention to enrich the payee. This is the class of claims for the recovery of money paid for a consideration which has failed. Such causes of action have long been familiar and were assumed to be common-place by Holt CJ in Holmes v Hall in 1704. Holt C.J. was there concerned only about the proper form of action and took the cause of the action as beyond question. He said: “If A give money to B to pay to C upon C’s giving writings, etc., and C will not do it, indebit will lie for A against B for so much money received to his use. And many such actions have been maintained for earnests in bargains, when the bargainor would not perform, and for premiums for insurance, when the ship, etc., did not go the voyage.” The Chief Justice is there using earnest as meaning a prepayment on account of the price, not in the modern sense of an irrevocable payment to bind the bargain, and he is recognizing that the indebitatus assumpsit had by that time been accepted as the appropriate form of action in place of the procedure which had been used in earlier times to enforce these claims such as debt, account or case.
By 1760 actions for money had and received had increased in number and variety. Lord Mansfield C.J., in a familiar passage in Moses v Macferlan, sought to rationalize the action for money had and received, and illustrated it by some typical instances. “It lies,” he said, “for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition (express, or implied;) or extortion; or oppression; or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.” Lord Mansfield prefaced this pronouncement by observations 136 which are to be noted. “If the defendant be under an obligation from the ties of natural justice, to refund; the law implies a debt and gives this action [sc. indebitatus assumpsit] founded in the equity of the plaintiff’s case, as it were, upon a contract (‘quasi ex contractu’ as the Roman law expresses it).” Lord Mansfield does not say that the law implies a promise. The law implies a debt or obligation which is a different thing. In fact, he denies that there is a contract; the obligation is as efficacious as if it were upon a contract. The obligation is a creation of the law, just as much as an obligation in tort. The obligation belongs to a third class, distinct from either contract or tort, though it resembles contract rather than tort. This statement of Lord Mansfield has been the basis of the modern law of quasi-contract, notwithstanding the criticisms which have been launched against it. Like all large generalizations, it has needed and received qualifications in practice. There is, for *63 instance, the qualification that an action for money had and received does not lie for money paid under an erroneous judgment or for moneys paid under an illegal or excessive distress. The law has provided other remedies as being more convenient. The standard of what is against conscience in this context has become more or less canalized or defined, but in substance the juristic concept remains as Lord Mansfield left it.
The gist of the action is a debt or obligation implied, or, more accurately, imposed, by law in much the same way as the law enforces as a debt the obligation to pay a statutory or customary impost. This is important because some confusion seems to have arisen though perhaps only in recent times when the true nature of the forms of action have become obscured by want of user. If I may borrow from another context the elegant phrase of Viscount Simon L.C. in United Australia Ltd v Barclays Bank Ltd, there has sometimes been, as it seems to me, “a misreading of technical rules, now happily swept away.” The writ of indebitatus assumpsit involved at least two averments, the debt or obligation and the assumpsit. The former was the basis of the claim and was the real cause of action. The latter was merely fictitious and could not be traversed, but was necessary to enable the convenient and liberal form of action to be used in such cases. This fictitious assumpsit or promise was wiped out by the Common Law Procedure Act 1852. As Bullen and Leake (Precedents of Pleading, 3rd ed., p. 36) points out, this Act, by s. 3, provided that the plaintiff was no longer required to specify the particular form of action in which he sued, and by s. 49 that (inter alia) the statement of promises in indebitatus counts which there was no need to prove were to be omitted; “the action of indebitatus assumpsit,” the authors add, “is [that is by 1868] virtually become obsolete.” Lord Atkin in the United Australia case 138 , after instancing the case of the blackmailer, says: “The man has my money which I have not delivered to him with any real intention of passing to him the property. I sue him because he has the actual property taken.” He adds: “These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have now disappeared should not in these days be allowed to affect actual rights.” Yet the ghosts of the forms of action have been allowed at times to intrude in the ways of the living and impede vital functions of the law. Thus in Sinclair v Brougham, Lord Sumner stated that “all these causes of action [sc. for money had and received] are common species of the genus assumpsit. All now rest, and long have rested, upon a notional or imputed promise to repay.” This observation, which was not necessary for the decision of the case, obviously does not mean that there is an actual promise of the party. The phrase “notional or implied promise” is only a way of describing a debt or obligation arising by construction of law. The claim for money had and received always rested on a debt or obligation which the law implied or more accurately imposed, whether the procedure actually in vogue at any time was debt or account or case or indebitatus assumpsit. Even the fictitious assumpsit disappeared after the Act of 1852. I prefer Lord Sumner’s explanation of the cause of action in Jones’s case. This agrees with the words of Lord Atkin which I have just quoted, yet serious legal writers have seemed to say that these words of the great judge in Sinclair v Brougham closed the door to any theory of unjust enrichment in English law. I do not understand why or how. It would indeed be a reductio ad absurdum of the doctrine of precedents. In fact, the common law still employs the action for money had and received as a practical and useful, if not complete or ideally perfect, instrument to prevent unjust enrichment, aided by the various methods of technical equity which are also available, as they were found to be in Sinclair v Brougham.
Must, then, the court stay its hand in what would otherwise appear to be an ordinary case for the repayment of money paid in advance on account of the purchase price under a contract for the sale of goods merely because the contract has become impossible of performance and the consideration has failed for that reason? The defendant has the plaintiff’s money. There was no intention to enrich him in the events which happened. No doubt, when money is paid under a contract it can only be claimed back as for failure of consideration where the contract is terminated as to the future. Characteristic instances are where it is dissolved by frustration or impossibility or by the contract becoming abortive for any reason not involving fault on the part of the plaintiff where the consideration, if entire, has entirely failed, or where, if it is severable, it has entirely failed as to the severable residue, as in Rugg v Minett. The claim for repayment is not based on the contract which is dissolved on the frustration but on the fact that the defendant has received the money and has on the events which have supervened no right to keep it.”
Maritime National Fish Ltd v Ocean Trawlers Ltd
[1935] UKPC 1
. thought that the appellants when they renewed the charter in 1932 were well informed of the legislation and when they renewed the charter at a reduced rate and inserted no protecting clause in this regard, must be deemed to have taken the risk that a licence would not be granted. They also thought that if there was frustration of the adventure, it resulted from the deliberate act of the appellants in selecting the three trawlers for which they desired licences to be issued.
Their Lordships are of opinion that the latter ground is sufficient to determine this appeal. Great reliance was placed in the able argument of Mr. Smith for the appellants on the Bank Line v. Capel [1919] AC 435, and in particular on the judgment of Lord Sumner in that case. That case was in principle very different from this, because the vessel which was chartered in that case was actually taken from the control of the shipowners for a period such as to defeat the contemplated adventure: it was in consequence impossible during that time for the shipowners to place the vessel at the charterers’ disposal at all. In the present case the St. Cuthbert was not requisitioned: it remained in the respondents’ control, who were able and willing to place it at the appellants’ disposal: what happened was that the appellants could not employ the St. Cuthbert for trawling with an otter trawl. No doubt it was expressed in the charter party that the St. Cuthbert should be employed under the charter in the fishing industry only, but the respondents did not warrant the continued availability of the vessel for that employment nor was payment of hire made dependent on that condition. The St. Cuthbert was available for the appellants to make such use of her as they desired and were able to make. This case is more analogous to such a case as Krell v. Henry [1903] 2 K.B. 740, where the contract was for the hire of a window for a particular day: it was not expressed but it was mutually understood that the hirers wanted the window in order to view the Coronation procession: when the procession was postponed by reason of the unexpected illness of King Edward, it was held that the contract was avoided by that event: the person who was letting the window was ready and willing to place it at the hirer’s disposal on the agreed date; the hirer, however, could not use it for the purpose which he desired. It was held that the contract was dissolved, because the basis of the contract was that the procession should take place as contemplated. The correctness of that decision has been questioned, for instance, by Lord Finlay, L.C., in Larrinaga v. Societe Franco-Americaine des Phosphates, 29 Com. Cases 1 at p. 7: Lord Finlay observes :–
“It may be that the parties contracted in the expectation that a particular event would happen, each taking his chance, but that the actual happening of the event was not made- the basis .of the contract.”
The authority is certainly not one to be extended: it is particularly difficult to apply where as in the present case, the possibility of the event relied on as constituting a frustration of the adventure (here the failure to obtain a licence) was known to both parties when the contract was made, but the contract entered into was absolute in terms so far as concerned that known possibility. It may be asked whether in such cases there is any reason to throw the loss on those who have undertaken to place the thing or service for which the contract provides at the other parties’ disposal and are able and willing to do so. In Hirji Mulji v. Cheong Yue Steamship Co. [1926J A.C. 497, Lord Sumner at p. 510 speaks of frustration as “a device by which the rule as to absolute contracts are reconciled with a special exception which justice demands” In a case such as the present it may be questioned whether the Court should imply a condition resolutive of the contract (which is what is involved in frustration) when the parties might have inserted an express condition to that effect but did not do so, though the possibility that things might happen as they did, was present in their minds when they made the contract.
This was one of the grounds on which the Judges of the Supreme Court were prepared to decide this case. Their Lordships do not indicate any dissent from the reasoning of the Supreme Court on this point, but they did not consider it necessary to heal’ a full argument, or to express any final opinion about it, because in their judgment the case could be properly decided on the simple conclusion that it was the act and election of the appellants which prevented the St. Cuthbert from being licensed for fishing with an otter trawl. It is clear that the appellants were free to select any three of the five trawlers they were operating and could, had they willed, have selected the St. Cuthbert as one, in which event a licence would have been granted to her. It is immaterial to speculate why they preferred to put forward for licences the three trawlers which they actually selected. Nor is it material, as between the appellants and the respondents that the appellants were operating other trawlers to three of which they gave the preference. What matters is that they could have got a. licence for the St. Cuthbert if they had so minded. If the case be figured as one in which the St. Cuthbert was removed from the category of privileged trawlers, it was by the appellants’ hand that she was so removed, because it was their hand that guided the hand of the Minister in placing the licences where he did and thereby excluding the St. Cuthbert. The essence of ” frustration” is that it should not be due to the act or election of the party. There does not appear to be any authority which has been decided directly on this point. There is, however, a reference to the question in the speech of Lord Sumner in the Bank Line v. Capel (supra) at p. 452. What he says is
” One matter I mention only to get rid of it. When the shipowners were first applied to by the Admiralty for a ship they named three, of which the Quito was one, and intimated that she was the one they preferred to give up. I think it is now well settled that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a -self-induced frustration; indeed, such conduct might give the other party the option to treat the contract as repudiated. Nothing, however, was made of this in the courts below, and I will not now pursue it.”
A reference to the record in the House of Lords confirms Lord Sumner’s view that the Court below had not considered the point, nor had they evidence or material for its consideration. Indeed in the war time the Admiralty, when minded to requisition a vessel, were not likely to give effect to the preference of an owner, but rather to the suitability of the vessel for their needs or her immediate readiness and availability. However the point does directly arise in the facts now before the Board and their Lordships are of opinion that the loss of the St. Cuthbert’s licence can correctly be described, quoad the appellants as ” a self induced frustration.” Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. (supra) at p. 507 quotes from Lord Blackburn in Dahl v. Nelson 6 A.C. 38, who at p. 53 refers to a ” frustration ” as being a matter ” caused by something for which neither party was responsible”: and again (p. 508) he quotes Brett J.’s words which postulate as one of the conditions of frustration that ” it should be without any default of either party.” It would be easy but is not necessary. to multiply quotations to the same effect. If either of these tests is applied to this case, it cannot in their Lordships’ judgment be predicated that what is here claimed to be a frustration, that is, by reason of the withholding of the licence, was a matter for which the appellants were not responsible or which happened without any default on their part. In truth, it happened in consequence of their election. If it be assumed that the performance of the contract was dependent on a licence being granted, it was that election which prevented performance, and on that assumption it was the appellants’ own default which frustrated the adventure: the appellants cannot rely on their own default to excuse them from liability under the contract.
On this ground, without determining any other question, their Lordships are of opinion that the appeal should be dismissed with costs.
They will humbly so advise His Majesty.