Frustration of Contract: A Case Study

This assignment examines the legal doctrine of frustration of contract using a case study involving a patron named Nicky and a company named PMSC. The scenario involves new safety regulations rendering the promised boat unusable, leading to potential contract termination under frustration principles. The assignment analyzes the application of frustration law, discusses the calculation of damages owed to Nicky, and concludes by summarizing the legal implications for both parties.

Running head: BUSINESS LAWS
Business Laws
Name of the student
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Author note

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Question 1
Issue
In the given project, we are going to discuss about the lawful standing of Riviera, related to QB4’s Tetra
bikes according to the various rights of consumers covered by the Australian Consumer Law (ASL).
Rule
ACL can be applied on various business related transactional work with a maximum value of $40000, in
the Australian continent. It is legally stated in the ‘Section 2’ of ‘Australian Competition and Consumer
Commission 2010(Cth)’. It is also applicable when a product is bought for domestic use only and costs
more than $40000.
It is approved by the Australian Consumer Laws that certain guarantees are to be provided on the said
product, which are decided according to the various features that are given in the product and are
conventionally asked of it by the authorities and consumers. If it is seen that the product has no stated
guarantees, then the consumer has the lawful right to seek help or make use of their rights as a
consumer.
It is expected that a product should always be of fine quality, or, at the very least, it should be decent in
both texture and appearance such that it can meet the expectations of people who have or might invest
on it and must perform as was requested by the masses and promised by the said producers. It is
essential that the seller keeps each of his promises mentioned while the launch, that are in the contract.
Any contract made by the sellers that does not carry any consumer warranties will be considered to be
void or non-existent. A seller cannot restrict the consumer guarantees by withdrawing its support from
the product repairing, exchange or simply not cooperating with the payment for any damage that was
done to the product produced by the seller. In cases like these it is expected of a consumer to reach out
for legal support.
The court had ruled that in order to sell a product properly, the seller must see that necessary
information is disclosed to the consumers while the occurrence of the transaction. In case if the seller is
untrue or happens to misrepresent information to the buyer, then it will be considered as breaking of
the guarantees of a consumer, entitling the consumer to an amount of compensation fit for the loss or
damage suffered, as in the case of ‘Campbell v Lane (No 2) [2013] QCATA 307’.
As stated by the court of law in the famous case of ‘Norman Enterprises Pty Ltd Leimo Australia v Deng
[2013] QCATA 047’, when a clause of execution is taken in a contract, it greatly diminishes the overall
liabilities of a seller, hence, if a seller were to avoid making a repayment, by including an exclusion
clause, it will restrict the guarantees of a consumer and may hinder the consumer rights.
Application
In the above case, it was provided to us that Riviera has especially requested the company QB4 to
provide safe and sound tetra bikes with no technical damage whatsoever, suitable for the children who
accompany her.
It was then seen that the said products didn’t just have faults in their design, but had other technical
issues as well, like, broken breaks and were simply not made for carrying children younger than 12. One
of the children named Kang, faced considerable injuries while he attempted to the ride the said vehicle.
It is clearly seen that QB4 didn’t provide their consumer with the suitable product that was requested by

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her, not just that, their incompetence has resulted to a child’s ill health and injuries. Hence, it can be
clearly stated that Riviera , under the consumer guarantees, can demand a suitable amount of coverage
for the injury that the child has suffered. Since the guarantees of a consumer are in play, it is not
possible for the company to introduce an execution clause which would clearly restrict their liabilities to
a vast degree. So, it can be said that the execution clause, which was added by the company to prevent
the addition of loss from damage done to consumers will be considered void, in the contractual
agreement.
Conclusion
As given in the Consumers Guarantees in the ACL, the consumer, Riviera, has the right to demand
compensation from the company QB4 to compensate the damage done to her.

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Question 2
Issue
In this case, there is to discuss whether the said contract can be discharged and then then claimed by
the PMSC? If the mentioned contract is by frustration, discharged, then can Nicky make her claim for the
involved damages?
Rule
In the case of ‘Taylor v Caldwell (1863)’, it was seen that a particular party had requested to take over a
property overnight, temporarily, for a an event but due to the damage it received from a fire that
occurred before the event was supposed to happen, it created frustration in the contract and it had to
be severed.
It can be said that ‘Frustration’ is a proposition that is made in only very limited circumstances. The
courts prefer a detailed examination of the claimed frustration as to whether the party had had already
known or seen through the fact or not, as in the case of ‘Akcyjna v. Fairbairn Lawson Combe Barbour
Ltd. [I9431A.C. 32]’.
It is provided in the common law that if a contract is frustrated, then it will be canceled and severed
then and there and no matter what, it cannot subject itself to any sort of discharge as no such rule
allows its occurrence. Any losses resulting from it, as per the case of ‘Cantiare San Rocco S.A. v Clyde
Shipbuilding & Engineering Co. Ltd. (1924) A.C. 226’, with accordance to the common law, fall where it
actually lies.
If a frustration is seen in a contract then it falls under the court’s supervision as to find out whether
there is special provision that would state otherwise and let the contract remain bound after the
damage.
The ‘Frustrated Contract Act 1978’ states an exception to the common law that says that frustration can
discharge a promise but to an extent where only the damages that were done before the frustration can
be fully claimed.
Application
In the case that is given to us, it is seen that a patron named Nicky had had gone to a contract with a
company named PMSC which had promised to provide them with a boat that they promised to be ‘one
of a kind’, that, she decided to use in order to take her children to view penguins.
It was then seen that just after the boat was taken out twice, new regulations demanded that the boat
made necessary alterations for the safety, so, it will not be operable for the next three months.
It seems that this case, neither of the two parties are responsible for the occurring of the above
scenario. It was neither of their fault that the provision came into action. But, it may seem that PMSC
can take actions and apply for the contract termination as per the rules of frustration. It is also seen that
since Nicky had paid $2000 for the trips and had only take 2 of them, she is entitled to a sum of $800
when subtracting $1200 from the already taken trips.
Conclusion
In the above case, the company can, by the doctrine of Frustration, terminate the contract. But, Nicky
has to be compensated with $800.

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References
Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [I9431A.C. 32
Campbell v Lane (No 2) [2013] QCATA 307
Cantiare San Rocco S.A. v Clyde Shipbuilding & Engineering Co. Ltd. (1924) A.C. 226.
Frustrated Contract Act 1978 NSW
Norman Enterprises Pty Ltd Leimo Australia v Deng [2013] QCATA 047
Schedule 2 of the Australian Competition and Consumer Commission 2010 (Cth).
Taylor v Caldwell (1863)