Author: Sarah Nadon – Law Student
Edited By: Ryan Carson
When a contract lacks a Force Majeure provision, the court sometimes defaults to the doctrine of frustration. However, frustration can be available if a contract includes a Force Majeure clause. The doctrine of frustration is flexible and can be applied to various types of contracts. In most provinces, there is legislation that governs frustrated contracts, however, none of them directly defines frustration.
A frustrated contract is a contract that, after its formation, without fault to either party, is incapable of being fulfilled due to an unforeseen event or series of events that was not expressed in the contract. Frustration occurs when:
The subject matter of the contract is destroyed to the point that repair will be extremely prolonged or impossible;
The intervening force significantly changes the nature of the contract;
The intervening force was not contemplated at the time the contract was made.
Either party can invoke frustration of contract; therefore, the party claiming frustration bears the onus of establishing the elements of frustration on a balance of probabilities. If a contract is indeed frustrated, then the obligations for both parties are cancelled without liability
The contract is terminated the day that the supervening event frustrates the contract. While parties are not at liberty to waive the supervening event to keep the contract alive, they are permitted to enter into a new contract keeping clauses from the old contract.
Since frustration of contract alleviates both parties of their obligations, there is no breach of contract; therefore, no damages can be awarded, and parties are back in the position they were at the time of the supervening event. If money is already paid in the form of a deposit, it may be recovered as long as it is not paid as part-performance.
Frustration can be applied in many contexts, and courts determine frustration of contract on a case by case basis as every contract is vastly different. If you believe that your contract has been frustrated due to a supervening event, speak to a lawyer about whether the doctrine of frustration applies to your circumstances.
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