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Law Reform (Frustrated
Contracts) Act 1943
6 & 7 George 6 Chapter 40
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Law Reform (Frustrated Contracts)
Act 1943
6 & 7 George 6 Chapter 40
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An Act to amend the law relating to the frustration of contracts.
[5th August 1943]
BE IT ENACTED
by the Queen's most Excellent Majesty, by and with the advice and consent
of the Lords Spiritual and Temporal, and Commons, in this present Parliament
assembled, and by the authority of the same, as follows:-
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Adjustment of rights and liabilities
of parties to frustrated contracts. |
1.
- (1) Where a contract governed by English law has become impossible of
performance or been otherwise frustrated, and the parties thereto have
for that reason been discharged from the further performance of the contract,
the following provisions of this section shall, subject to the provisions
of section two of this Act, have effect in relation thereto.
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(2) All sums paid or
payable to any party in pursuance of the contract before the time when
the parties were so discharged (in this Act referred to as 'the time of
discharge') shall, in the case of sums so paid, be recoverable from him
as money received by him for the use of the party by whom the sums were
paid, and, in the case of sums so payable, cease to be so payable: |
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Provided that, if the
party to whom the sums were so paid or payable incurred expenses before
the time of discharge in, or for the purpose of, the performance of the
contract, the court may, if it considers it just to do so having regard
to all the circumstances of the case, allow him to retain or, as the case
may be, recover the whole or any part of the sums so paid or payable,
not being an amount in excess of the expenses so incurred.
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(3) Where any party
to the contract has, by reason of anything done by any other party thereto
in, or for the purpose of, the performance of the contract, obtained a
valuable benefit (other than a payment of money to which the last foregoing
subsection applies) before the time of discharge there shall be recoverable
from him by the said other party such sum (if any), not exceeding the
value of the said benefit to the party obtaining it, as the court considers
just, having regard to all the circumstances of the case and, in particular,
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(a) the amount of any expenses incurred before the time of discharge
by the benefited party in, or for the purpose of, the performance of
the contract, including any sums paid or payable by him to any other
party in pursuance of the contract and retained or recoverable by that
party under the last foregoing subsection, and
(b) the effect, in relation to the said benefit, of the circumstances
giving rise to the frustration of the contract.
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(4) In estimating, for the purposes
of the foregoing provisions of this section, the amount of any expenses
incurred by any party to the contract, the court may, without prejudice
to the generality of the said provisions, include any sum as appears to
be reasonable in respect of overhead expenses and in respect of any work
or services performed personally by the said party.
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(5) In
considering whether any sum ought to be recovered or retained under the
foregoing provisions of this section by any party to the contract, the
court shall not take into account any sums which have, by reason of the
circumstances giving rise to the frustration of the contract, become payable
to that party under any contract of insurance unless there was an obligation
to insure imposed by an express term of the frustrated contract or by
or under any enactment.
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(6) Where
any person has assumed obligations under the contract in consideration
of the conferring of a benefit by any other party to the contract upon
any other person, whether a party to the contract or not, the court may,
if in all the circumstances of the case it considers it just to do so,
treat for the purposes of subsection (3) of this section any benefit so
conferred as a benefit obtained by the person who has assumed the obligations
as aforesaid.
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| Provision as to application
of this Act. |
2.
- (1) This Act shall apply to contracts, whether made before or after
the commencement of this Act, as respects which the time of discharge
is on or after the first day of July, nineteen hundred and forty-three,
but not to contracts as respects which the time of discharge is before
the said date.
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(2) This
Act shall apply to contracts to which the Crown is a party in like manner
as to contracts between subjects.
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(3) Where
any contract to which this Act applies contains any provision which, upon
the true construction of the contract, is intended to have effect in the
event of circumstances arising which operate, or would but for the said
provision operate, to frustrate the contract, or is intended to have effect
whether such circumstances arise or not, the court shall give effect to
the said provision and shall only give effect to the foregoing section
of this Act to such extent, if any, as appears to the court to be consistent
with the said provision.
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(4) Where
it appears to the court that a part of any contract to which this Act
applies can be properly severed from the remainder of the contract, being
a part wholly performed before the time of discharge, or so performed
except for the payment in respect of that part of the contract of sums
which are or can be ascertained under the contract, the court shall treat
that part of the contract as if it were a separate contract and had not
been frustrated and shall treat the foregoing section of this Act as only
applicable to the remainder of that contract.
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(5) This
Act shall not apply -
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(a) to any charterparty,
except a time charterparty or a charterparty by way of demise, or
to any contract (other than a charterparty) for the carriage of
goods by sea; or |
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(b) to any contract of insurance, save as is provided by subsection
(5) of the foregoing section; or |
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(c) to any contract to which [section 7 of the Sale of Goods Act 1979]
(which avoids contracts for the sale of specific goods which perish
before the risk has passed to the buyer) applies, or to any other
contract for the sale, or for the sale and delivery, of specific
goods, where the contract is frustrated by reason of the fact that
the goods have perished. |
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| Short title and interpretation. |
3.
- (1) This Act may be cited as the Law Reform (Frustrated Contracts) Act,
1943.
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(2) In
this Act the expression 'court' means, in relation to any matter, the
court or arbitrator by or before whom the matter falls to be determined.
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