Contract Law: Doctrine of Frustration and Exclusion Clauses Analysis

This assignment solution delves into two critical aspects of UK contract law: the doctrine of frustration and exclusion clauses. The doctrine of frustration addresses situations where unforeseen events render contractual performance impossible, examining its legal effects and applicability, includin...Read More

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QUESTION1-
Contract law is a branch of law which governs the legal agreements which arises as a
result of promises between the said parties. Generally, any agreement which is made enforceable
in the court of law is said to be the contract. The intention of the court behind making of such
law is to ensure that the parties who approaches the court are acting in the bona fide manner and
the resulting agreement will be ascertained as a legal obligation on the side of parties which is at
fault. In order to constitute a valid contract there are certain essentials which needs to be
fulfilled. Which are first being the offer, then acceptance of the same offer and then there must
stand some valid consideration to it. When parties enter into the contract, it lies certain
contractual obligation on the parties for the performance of the same. But, many a times there
stands the instances where even after fulfilling all the essentials of contract the performance of it
becomes impossible because of some unpredictable conditions. And this is the situation where
comes the role of doctrine of frustration as the contract stands frustrated.
Doctrine of frustration, is a concept which at earlier stage was used a tool for mitigating
the burden of absolute contracts where performance of the contract becomes impossible because
of some supervening events, for which loss is allotted and neither of the party stands responsible
for it. According to English law, a contract, after its legal formation, can be discharged on the
reason of frustration having valid cause of commercial or physical incapability in performing the
said act. As per the general rule, the doctrine of frustration is an exception to the rule of
compensation which needs to be done by the party who breaches the contract. The concept in
itself is not defined in the given legislations but it came as a result of judicial precedents. The
frustration of any contract can become due to any events which are out of the control of the
parties, or are of unforeseen nature or are of such nature which are in itself is impossible to occur
or fulfil.
Further with respect to the test of frustration, the concept was first developed in the case
of Davis Contractors Ltd v. Fareham, where lord Radcliffe, said that the concept of frustration
happens when it is established that the said obligation of either of the party has become
impossible or incapable of being performed as greed in the form of contract, because of some

existing circumstances. Also in performing such obligations it can also be a chance that the thing
or act which has been undertaken earlier, if performed will result in a different form as that of the
originally agreed. The house of lords also contended that the test of frustration is not a subjective
option to the intention of the party’s reason being the occurring of discharge of said contract
happens with the occurring of frustration of event. Also, it is required on the part of both the
parties that at the time of entering into any agreement, take into consideration the actual
happening of the possibility of the event in the future. But the occurrence of some new
circumstances does not falls within the ambit of the earlier said contentions.
Moreover, the house of lord in the case of J. Lauritzen AS V. Wijsmuller BV, laid down
certain propositions which are the key features, as the basic essence of the doctrine of frustration
which are as follows-
 the said doctrine works as a tool to discharge the parties from coming liability which
resulted as a non-performance of the contract,
 the event of frustration must have taken place without any sort of involvement of parties
to it,
 also, the event must not be the act of the parties to which they relied, that is there must
exist some external effects to it.,
 the act of frustration must lead a contract to end,
 and the frustration must mitigate the credibility of the common law demand on actual
performance of absolute promises.
The doctrine of frustration also lies certain legal effects to it. The general view of English
common law is that the doctrine does not functions totally but also without the election of the
said parties. In simple sense this means that the responsibilities of either of the parties are fully
released in so far as the execution if their duties has not breached when the contract was made
frustrated. Moreover, the courts under common law does not allow the parties to contract to
modify and continue the new stances for the purpose of future performance. The explanation
behind the said approach was not made favourable, is reason being that it can result in dubiety
with respect to the earlier agreed contracts, their terms and conditions and will also give rise to
the unrequired situations for the parties. Ultimately, the declaration which has been referred as a
complete discharge of obligation of the parties are being qualified as a statement that frustration
only works as a ground for future obligations which means that only for those which have

accrued only after the date of its discharge. Moreover, the Act of law reform of 1943, states the
legal consequences which result after the act of frustration with respect to the recovery of
payments.
In order to understand the applicability of doctrine of frustration, it is very much required to have
the knowledge about situations which acts as frustrating events. The very first being the case of
Destruction of subject matter. Here when the subject matter of the contract, which is the agreed
thing or item at the time of contract, is destroyed in itself having no involvement of either of the
parties to it. Then the said performance can be set aside as a part of an impossibility to perform.
In deciding such case the agreed contract of the parties play a very important role in considering
the fact whether there stands the frustration or not. Also, when the agreement is with respect to
the performance of some specific goods or services, then the agreement stands avoided and
similarly, when there stands no such specific performance, it will be governed by the rules of the
common law. The contract is not said to be frustrated in the case where some generic goods are
destroyed as with the same there lies some possibility to perform the same.
Also, the event of supervening illegality, also constitutes as a form of frustration. If there stands
the situation where some new legislation has been passed which affects the existing contract of
the parties questioning the legality on the purpose of contract. Then such contracts will come
under the ambit of frustration. For instance, some events such as war, in some situations can lead
certain trading and actions as illegal. The said principles are applied in equal manner in the
situations where the contractual obligations become illegal in foreign states, if this is where they
are to occur.
INCAPACITY OF DEATH: The contract or an agreement may get frustrated when the person or
the group of people have become unavailable under the contract and thus mainly occurs when
there is performance of the personal services and just not for the general commercial services
like the building work which may be performed by many number of people. In the case of David
v. Robinson, there was a piano player being involved who have become ill just before the concert
for which he was being contracted to be paid in response to its performance. The contract was
then held to be frustrated due to its unavailability or incapacity to perform.
QUESTION 2:
Exclusion clause is not an important element but a vital tool of Contract law UK. It
allocates the contractual risk among the parties and allows for its use when the clauses mentioned

are not followed between the parties. Thus the clause of Exclusion is a term of Contract law
which tries to limit a party's liability or tries to exclude it from the same. It cuts down the
liabilities of a party by limiting the scope of performance of the duties mentioned in the contract.
It can also be said as a remedial measure to restore remedies for a party when someone commits
breach of contract. This clause is mentioned in the Section 13 of Unfair Contract Terms Act
1977. It makes the enforcement of certain clauses restrictive in nature. It in a way operates to
limit the person from getting rights or remedies in the event of loss and damages. This type of
clause is included to provide benefit to one party of the contract. The case of Adam in the given
scenario forms a part of the Exclusion clause which is used in contract laws. The company from
which he buys the products serve a notice on the wall clearly stating that for any defects the
company is not liable. Thus the study of this clause is essential to understand the points on which
if any Adam can sue the company.
There are three types of Exclusion clauses to explain the contractual term. They are True
Exclusion Clause, Limitation clause and Time Limitation clause. Here, the first one is used in the
case of Breach of Contract to recognize breach and excuse its liability, the second one places
limitation on the claiming of certain amount in the contractual breach, the third one implies that
there will be only a certain period of time when the losses can be claimed by a party or the time
when an action can be taken in the contract. Thus this clause of exclusion is a way for
apportioning risk in the contract for the parties involved.
Exclusion clause is included by the party in a Contract when they want to speed up the
procedure of the contract and reduce the cost of it. They also incorporate it to allocate the risks of
the contracts. This has relevance when the contract is formed between businesses.
There are three ways to include the exclusion clause in the agreement of Contract:
1. Through a signature- it is the most general rule of incorporation where a person signs the
contract and becomes bounded by its terms and facts including the exemption and
limitation clauses which limit the liabilities. So be it any type of contract it becomes
binding with the signature of the parties on it. Because it is believed that the terms are
accepted by the party when they sign it.
2. Through previous course of dealings- when the parties have dealt with each other in the
past under the same terms and conditions it is believed that the same terms and clauses
will be incorporated by the parties this time as well. So it generally implies that even if

the person has not read or signed anything still he will be included and the business will
be operated based on the previous dealings. But two things are essential for this that the
course of dealing should be consistent and regular.
3. Through sufficient notice of existence of the clause- here the parties are brought to notice
regarding the clauses included and applied in statements of the contractual terms. Even if
the parties haven't read or signed and they are given a notice then also the clause will
apply with sufficient notice.
The Q&B DIY store stated to its customers by a notice that they have no liability for any death,
injury or loss from the use of the products of the store. The law incorporates that a contract is
formed when a notice is served to the people which was clearly the case here but there are also
conditions when this clause won’t work in favour of the company which is explained further.
The Exclusion clause is interpreted by courts to understand the liabilities involved in it.
Their interpretation is referred to as Construction. They are understood to be operational only
when they are included in the contract between the parties.
Application of the Exclusion Clause- it is mostly and generally believed that if a party is
committing contractual breach then it gets obligated to pay for the losses and damages so the
innocent party can be compensated by the other party involved. But this can be avoided by a
variety of ways, one such is inclusion of Exclusion or exemption clause in the contract. It limits
or reduces the amount of damage that is needed to be paid to the injured party. These clauses are
very much interpreted by the judiciary all the time. But still there are argument against the
inclusion of such an exclusion clause in the contract assuming it to be invalid due to a variety of
reasons which are:
 Experts believe that there is unreasonableness in the nature of this exclusion clause thus it
should not be included.
 it is also termed as invalid on the point that it was not incorporated in the actual contract
and was just included on the basis of previous dealings or due to the serving of notice to
the parties.
 It also become invalid due to unclear terms of the clause and its ambiguous and unnatural
nature regarding the normal contractual terms.

 And the most important point of declaring this exclusion clause as invalid is the point that
it does not cover damages because of which the parties who actually have losses and
damages suffer in the process due to the very fact that the losses cannot be claimed due to
limitation and exclusion of liabilities.
Thus it is important that whenever a party relies on any type of contract it should clearly read the
statements of terms and facts that are included in the contract.
But there are also certain terms and situations when a liability cannot be excluded or
limited. They are:
 when negligently any death occurs or if any personal injury is caused to the party.
Negligence can only be entertained when it satisfies the terms of the contract.
 If a party is customer, then breach of contract cannot be used to exclude or limit liabilities
on the non-performance of contract unless there is exemption clause in the contract
satisfying a situation.
 Any defect in good cannot give rise to negligence in the performance and cannot restrict
the liabilities of the manufacturer when they are distributed for the private or commercial
use.
 Any statement or clause which restricts or limits liability for misrepresentation cannot be
effective unless there is a clause which defines the reasonability of this point.
It is clear that unless on the there are grounds of reasonableness that liabilities cannot be
excluded on limited.
These points clearly state that the exclusion clause is not applicable in case of death or injury and
here in the case Adam suffers breathing problems due to the use of the product of the company
and thus he can sue the company to get compensation for the loss and damages. The company
itself admitted its breach of contract which is again an important point on which a case can be
filed against the company by Adam. Thus it is important to understand that be it any clause but
life is a bigger aspect when dealing with any type of law. The exclusion clause is only valid
when it is just and reasonable and does not affect the health of any party badly. Even negligence
is not entertained if it is not the proper condition of the validity of exclusion clause. Thus this
case of Adam and Q&B store is a proper case of company's liability in terms of exclusion clause
in the Contract law of UK.

REFERENCES
Books and Journals
Hesselink M, 'Democratic Contract Law' (2018) 11 European Review of Contract Law
Cherednychenko O, 'Fundamental Rights and Contract Law' (2016) 2 European Review of
Contract Law
Grundmann S, 'The Future Of Contract Law' (2011) 7 European Review of Contract Law
Beale H, and Tallon D, Contract Law (Hart Pub 2017)
Brömmelmeyer C, 'Principles Of European Insurance Contract Law' (2011) 7 European Review
of Contract Law Contract Law (Cambridge University Press Textbooks 2016)
Rutgers J, 'Free Movements And Contract Law' (2018) 4 European Review of Contract Law
Lewinsohn J, 'Contract Distinguished From Quasi Contract' (2014) 2 California Law Review
Riesenhuber K, 'A Competitive Approach To EU Contract Law' (2019) 7 European Review of
Contract Law
Mekki M, 'Reform Of Contract Law And Business World' (2017) 13 European Review of
Contract Law