Frustration and Contract Law

14 03 2010

Jenna Doucet (2010).

Frustration and Contract Law

The argument of frustration in contract law can be a difficult precedent to establish. Not to be confused with a contractual mistake, frustration occurs when performance is made impossible or is fundamentally changed. Generally, when frustration occurs the party suffering loss is established on whom ever provided services before the frustrating event, or to the party having already paid a deposit or owing money before frustration date. Self-induced frustration on the other hand is considered a breach of contract (Yates, Bereznicki-Korol & Clarke, 2008).

The facts concerning the Teleflex Inc. v. I.M.P. Group Ltd case summary suggests that there was frustration involved in the contract between the two parties, however, monies should still have been payable to Teleflex Inc because the nature of the frustration was in fact self-induced. It was not anticipated by either party that the contract between I.M.P and the Brazilian government would fail to carry out. However, because both parties made provisions in the contract that suggested the possibility of suspension in the shipping of products and a termination clause was made readily available, it is safe to assume that both parties understood the risks that the contract may not be fulfilled. The acknowledgement and agreed-upon provisions made in the contract in relation to the risks involved, make claiming a failure to fulfill contractual duties on the basis of frustration inadmissible. Furthermore, because I.M.P Group and the Brazilian government never reached consensus and never signed any contracts, it could be deduced that I.M.P practiced poor judgement in securing a contract with Teleflex to receive aircraft products for a project that was still non-existent at the time. I.M.P could have prevented their frustration by either waiting until the agreement with the government was signed, or by including a provision in their agreement with Teleflex demanding work only be commenced upon I.M.P’s signing of the contract with the government. This type of self-induced frustration is treated as a breach of contract. It is also said, “ where the parties have anticipated the frustrating event or have provided for one the of the parties to bear the risk of such an eventuality, these contractual terms ( often called force majeure clauses) will prevail.” (Yates, Bereznicki-Korol & Clarke, 2008, p.285). Additionally, Teleflex acknowledged the stop-working letters and sent I.M.P a reminder of the original contract details on the agreement surrounding termination. I.M.P’s failure to respond or disagree with the terms, suggest that they were further confirming and acknowledging their contractual duties; to later claim frustration would be irrelevant. Furthermore, although I.M.P argued that there was never a delivery made, the fact that they had postponed the delivery date several times makes this irrelevant. As the judge in this case, I would request that proper accounting take place to ensure the monies claimed by Teleflex is a just reflection of the costs and profits lost as result from the breach of contract. Furthermore, I would hold Teleflex responsible over the mitigation of their loss, and would expect that they try to sell the completed products and subtract the profits made in that transaction from the profits lost in their contract with I.M.P or that they deliver to I.M.P the completed and or commenced products.

The case of Teleflex inc. v. I.M.P illustrates the complications that can arise in an argument for frustration. However, when it is found that a party has contributed or failed to prevent frustration or provisions were made to account for frustration, refusal to abide by the contracts terms is simply a breach of contract and remedies can be sought after.

References

Yates, A., Bereznicki-Korol, T. & Clarke, T. (2008). Business law in Canada (8th ed.). Canada: Pearson Education Canada.

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