King's Law Journal

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Covid-19 and the Problem of Frustrated Contracts

Catharine MacMillan

To cite this article: Catharine MacMillan (2021) Covid-19 and the Problem of Frustrated
Contracts, King's Law Journal, 32:1, 60-70, DOI: 10.1080/09615768.2021.1885328
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King’s Law Journal, 2021
Vol. 32, No. 1, 60–70, https://doi.org/10.1080/09615768.2021.1885328

Covid-19 and the Problem of Frustrated Contracts

Catharine MacMillan *

Covid-19 has created an unexpected global pandemic which has brought

unprecedented and wide ranging restrictions from governments around the
world. One result of these events has been profound disruptions to individual
contracts. This article considers the nature and history of the doctrine of
frustration in English law. The lack of certainty in ascertaining whether or not an
event is a frustrating one is examined. A consideration of the particular problems
innumerable parties will face in attempting to decide whether or not their
contract has been discharged by frustration as a result of Covid-19 and the
regulations designed to curtail the virus are made. The article concludes with an
overview of the Law Reform (Frustrated Contracts) Act 1943.
Contract Law, Frustration, Law Reform (Frustrated Contracts) Act 1943, Covid-19

Disease has long been recognised as having the capacity to work profound change upon
law.1 While it may take some time to realise the extent to which private law is changed
as a result of the Covid-19 pandemic an area of considerable immediate concern is
whether or not individual contracts have been discharged by frustration.
Frustration is one of the less satisfactory doctrines of English contract law.
English law has a very great adherence to sanctity of contract, even in the face of
very changed circumstances. While frustration will operate to discharge parties
from further performance this occurs infrequently. It is to be hoped that the litiga-
tion that follows the countless disruptions created by Covid-19, or more appropri-
ately, the governmental and individual responses to the pandemic, will provide
greater clarity to this area of law.

* The Dickson Poon School of Law, King’s College London, London, UK. Email: catharine.macmillan@
kcl.ac.uk
1 See for example Robert Palmer, English Law in the Age of the Black Death 1348–1381 (University of North
Carolina Press 2001).

© 2021 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution
License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distri-
bution, and reproduction in any medium, provided the original work is properly cited.
 King’s Law Journal 61

This article considers the particular problems innumerable litigants will face in
attempting to decide whether or not their contract has been discharged by frustration
in the changed circumstances that the pandemic created in 2020.

FRUSTRATION

The juristic basis of frustration remains uncertain,2 and the doctrine has a seemingly
inconsistent application. This is somewhat surprising as the doctrine was largely devel-
oped in the twentieth century. While it is often said that Lord Blackburn created the
doctrine in Taylor v Caldwell,3 an examination of the case casts doubt that he intended
anything so broad.4 The doctrine of frustration was largely created in response to two
dissimilar twentieth century events which sparked waves of litigation.
The first were the ‘coronation cases’ which arose following the cancellations of the
processions and naval review which were to have marked the coronation of Edward VII
in June 1902. These events were cancelled along with the coronation when the king
unexpectedly fell ill. In the ensuing wave of litigation, individuals began to rely upon
Taylor v Caldwell, notably Lord Blackburn’s device of an implied term discharging
the parties from further performance of a contract made impossible by a supervening
event outside the control of the parties.5 This somewhat odd development in English
law might have remained an anomalous paragraph in English contract law but for
the events of the Great War. The Great War was a much more protracted and extensive
event, and it caused a prolonged second wave of frustration litigation as individuals
sought to establish their contractual position in the face of novel and extensive govern-
ment requisitions, controls and wartime conditions. Parties relied upon Taylor v Cald-
well, now with the support of the coronation cases, to discharge radically changed
contracts from further performance. A principal reason for the unsatisfactory nature
of frustration is that the doctrine was created and largely shaped as a series of responses
to the manifold challenges presented to private parties by the Great War.6
Private parties, particularly commercial ones, were contractually prepared for the
Second World War and there was comparatively little litigation. Parliament, though,
passed the Law Reform (Frustrated Contracts) Act 1943, a short piece of legislation
intended to ameliorate the often-harsh remedial results which attended a contract
2 Chitty on Contracts, 33rd ed, vol I, ed Hugh Beale, 23–007.
3 (1863) 3 B & S 826; 122 ER 309.
4 Catharine MacMillan, ‘Taylor v Caldwell (1867)’ in Charles Mitchell and Paul Mitchell (eds), Landmark
Cases in the Law of Contract (Hart 2008).
5 There are numerous coronation cases, the best known are: Krell v Henry [1903] 2 KB 740; Herne Bay
Steamboat Co v Hutton [1903] 2 KB 683, and Chandler v Webster [1904] 1 KB 493. See generally R.G.
McElroy and Glanville Williams, ‘Coronation Cases –I’ (1941) 4 MLR 241 and ‘Coronation Cases –II’
5 MLR 1.
6 Catharine MacMillan, ‘English Contract Law and the Great War: The Development of a Doctrine of
Frustration’ (2014) 2 Comparative Legal History 278.
62 Covid-19 and the Problem of Frustrated Contracts

discharged through frustration. While there have been refinements of the doctrine7 and
illuminating instances of its application in later years,8 there has been little concerted
attempt to assess the purpose or efficacy of the doctrine by either the legislature or the
judiciary in England and Wales. Covid-19 is, thus, the sort of event which triggers a
mass of litigation requiring a further consideration and refinement of the doctrine of
frustration
It is standard practice for most contracting parties to attempt to provide in their
contract what will occur should a supervening event make further performance
impossible or more onerous. The inclusion of these force majeure clauses,9 or hard-
ship and intervener clauses,10 remove the significance of the doctrine of frustration
in these contracts as the consequences of an unforeseen event will be determined by
the contract itself. While it is by no means clear that a pandemic is a standard
element in such clauses, it is to be expected both that there will be litigation on
this point and that such clauses will now include pandemics in their coverage.
This article does not examine the nature and application of these clauses but it is
to be noted that the effect of the common presence of force majeure or hardship
clauses is to effectively reduce greatly the opportunity for courts to develop a
more coherent doctrine of frustration. Covid-19 is a (happily) rare instance of a
largely unforeseen, and thus contractually unprovided for, event and it is thus to
be expected that the pandemic will generate litigation and further development of
contractual frustration as a doctrine.

TEST OF FRUSTRATION

Where frustration operates it does so to automatically as a matter of law to end the con-
tract and discharge the parties from further liability under it. As Bingham LJ observed,
the drastic nature of this result is such that ‘the doctrine is not to be lightly invoked,
must be kept within very narrow limits and ought not to be extended’.11 The House
of Lords decisively rejected the suggestion that where parties are faced with an uncon-
templated turn of events, a court will read the contract in a qualified sense and interpret
the obligations to do what is ‘just and reasonable’ in the circumstances.12
7 See for example: Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696; National Car-
riers Ltd v Panalpina (Northern) Ltd [1981] AC 675; J. Lauritzen A.S. v Wijsmuller B.V. (The “Super
Servant Two”) [1990] 1 Lloyd’s Rep 1.
8 Edwinton Commercial Corporation v Tsavliris Russ (Worldwide Salvage & Towage) Ltd (The “Sea Angel”)
[2007] EWCA Civ 547.
9 See generally Ewan McKendrick (ed), Force Majeure and Frustration of Contract (2nd edn, Lloyd’s of
London Press 1995).
10 See generally Clive Schmitthoff, ‘Hardship and Intervener Clauses’ [1980] JBL 82 and Adrian A Monta-
gue, ‘Hardship Clauses’ (1985) 13 Int Bus Lawyer 135.
11 Super Servant Two (n 7) 8.
12 British Movietonews Ltd v London and District Cinemas Ltd [1952] AC 166, 185.
 King’s Law Journal 63

The stringent application of the doctrine can be seen in both the narrow formulation
of factors necessary to find frustration and also in the application of these factors to par-
ticular instances. Lord Simon provides a formulation of the modern test of factors necess-
ary to establish frustration in National Carriers Ltd v Panalpina (Northern) Ltd:

Frustration of a contract takes place when there supervenes an event (without default of
either party and for which the contract makes no sufficient provision) which so signifi-
cantly changes the nature (not merely the expense or onerousness) of the outstanding
contractual rights and/or obligations from what the parties could reasonably have con-
templated at the time of its execution that it would be unjust to hold them to the literal
sense of its stipulations in the new circumstances; in such case the law declares both
parties to be discharged from further performance.13

More recently, Rix LJ has observed that in determining whether or not a contract has
been frustrated courts should adopt a ‘multi-factorial’ approach which takes into con-
sideration a number of factors including:

[T]he terms of the contract itself, its matrix or context, the parties’ knowledge, expec-
tations, assumptions and contemplations, in particular as to risk, as at the time of con-
tract, at any rate so far as these can be ascribed mutually and objectively, and then the
nature of the supervening event, and the parties’ reasonable and objectively ascertainable
calculations as to the possibilities of future performance in the new circumstances.14

From these two passages there are three critical elements in the consideration of
whether or not a Covid-19 related event has frustrated a contract. First, the event
must arise without the fault or election of either party.15 Second, there must be such
a change in the significance of the obligation undertaken that ‘it would, if performed,
be a different thing from that contracted for’, 16 something ‘radically different’.17 Third,
the multi-factorial approach raises the question of whether or not a foreseen event can
be a frustrating event. Each will be considered in turn below.
While it is obvious, in one sense, that if either or both parties were at fault with
regard to the occurrence said to be a frustrating event the contract would be discharged,
if at all, by breach, English law has adopted an expansive approach to fault in relation to
frustration. There can be no reliance on a ‘self-induced’ frustration:18 wherever the
party seeking to rely upon the event as a frustrating one ‘had the means and opportunity
to prevent but nevertheless caused or permitted to come about’19 the event will not be a
frustrating one. In the leading case, a party operating five fishing vessels was allocated
three licences and it was held that their choice in not licensing one of the chartered

13 [1981] AC 675, 700.

14 The Sea Angel (n 8) [111].
15 See also Super Servant Two (n 7).
16 Davis Contractors v Fareham (n 7) 729 (Lord Radcliffe).
17 The Sea Angel (n 8) [111].
18 Bank Line Ltd v Arthur Capel & Co [1919] AC 435, 452.
19 Super Servant Two (n 7), 11 (Bingham LJ).
64 Covid-19 and the Problem of Frustrated Contracts

vessels was not a frustrating event ending that charter.20 Any element of choice or elec-
tion by a party removes the event from the ambit of frustration. Even where the element
of election would lead a party to breach another contract courts have found that there
was no frustration.21 In many instances, parties affected by Covid-19 restrictions are
able to perform some contracts and not others. As the law stands, where a party actively
makes such a choice those contracts not performed are unlikely to be discharged by
frustration.
An even greater restriction on the potential frustration of a contract lies in the
requirement that the change brought about by the event must render the obligation
radically different from that which was contracted for. There is little precision in the
formulation of this requirement, largely because the radical difference depends upon
what, at an objective basis, is thought to be the essence of the obligation. That the deter-
mination can be difficult, if not capricious, is seen in a pair of coronation cases which
the Court of Appeal determined contemporaneously, Krell v Henry22 and Herne Bay
Steamboat Co v Hutton.23 While neither contract specified the essence of the obligation,
in the former case the Court held that the coronation procession of the King was the
foundation of the contract, while in the latter case the naval review by the King was not.
A final critical question arises as to whether or not a foreseeable event can be a frus-
trating event.24 Obviously, if the contract allocates the risk of an event, in express or
implied terms, it cannot be a frustrating one. Where parties have made provision for
a type of challenge to contractual performance, such as rising prices, it is unlikely
that the occurrence of this event frustrates the contract even where the event occurs
as a result of an unforeseeable pandemic.25 English courts attach significance to the
fact that contracting parties were aware of the circumstances which would lead to the
later claim of frustration26 and there are obiter dicta to the effect that a foreseen or con-
templated event should not be a frustrating one.27 There are, though, express statements
that a foreseen or foreseeable event can be a frustrating event: ‘the only thing that is
essential is that the parties should have made no provision for it in their contract’.28
It is suggested that Marcus Smith J sets out the preferable approach in Canary Wharf

20 Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524.

21 Super Servant Two (n 7).
22 [1903] 2 KB 740.
23 [1903] 2 KB 683.
24 Treitel notes considerable conflict in the authorities: Guenter Treitel, Frustration and Force Majeure (3rd
edn, Sweet & Maxwell 2014) 13–005.
25 Wates Ltd v Greater London Council (1984) 25 BLR 1; Dayah v Partners of Bushloe Street Surgery [2020]
EWHC 1375.
26 As Lord Wright opined in Maritime National Fish v Ocean Trawlers (n 20), ‘when the parties entered into
the new agreement . . . they were well aware of certain legislation’: at 525.
27 Cricklewood Investments Trust Ltd v Leighton’s Investment Trust Ltd [1945] AC 221, 228; Hirji Mulji v
Cheong Yue SS Co [1926] AC497, 507; Gamerco SA v ICM/Fair Warning (Agency) Ltd [1995] 1 WLR
1126, 1231.
28 Ocean Tramp Tankers Corporation v V/O Sovfracht (The Eugenia) [1964] 226, 239 (Lord Denning MR);
W.J. Tatem Ltd v Gamboa [1939] 1 KB 132, 138.
 King’s Law Journal 65

v European Medicines Agency in which he stated foreseeability was simply a factor for
consideration.29 In this approach foreseeability of a frustrating event is relevant to
the extent ‘it informs the parties’ knowledge, expectations, assumptions and contempla-
tions, in particular as to risk’.30 If the event is sufficiently foreseeable that it should have
informed the way in which the parties contracted, especially as to the allocation of risk,
then a court will be inclined to consider that the parties have contracted taking this
factor into account. If this is so, frustration is unlikely.
In relation to Covid-19 we are now aware that a major epidemic was long overdue
and that SARS, MERS and Ebola were all early warnings of a more profound health
crisis. And yet the response of governments around the world in curtailing and prevent-
ing human activities has been both sudden and unprecedented. The sweeping nature of
the public health legislation and the ensuing waves of secondary regulations directed at
combating the pandemic are extraordinary,31 reaching into every aspect of personal and
public life. This extraordinary response removes any element of foreseeability; for con-
tracts it is ‘something [which] can be foreseen as a theoretical possibility, but where
neither party can be criticized for failing to take it into account’.32 It is suggested,
however, that in cases of contracts made in the United Kingdom after 23 March
2020, when the Prime Minister told people to stay at home, will be ones where it will
be hard both to establish that the event was supervening and, also, that it was not fore-
seeable in a way in which contractual provision should have been made. Much will
depend, though, on the precise circumstances, particularly in light of the extraordinary
governmental response to the pandemic.

INSTANCES OF FRUSTRATION

Because English law developed contractual frustration in an evolutionary manner in the

twentieth century, much can be learned about frustration through the application of the
doctrine to particular circumstances. This article will consider the two instances of frus-
tration most prevalent in the current pandemic: illegality and frustration of purpose.33
It is important to note, though, that in many circumstances where it may be established
that a contract has been frustrated that other relief will be available to a disappointed
party, often with considerable procedural advantages. This is especially true of
29 [2019] EWHC 335.
30 Ibid [211].
31 Beginning with the Health Protection (Coronavirus, Restrictions) (England) Regulations SI 2020 No. 350
which came into force on 26 March 2020.
32 Canary Wharf v EMA (n29) [211] (Marcus Smith, J).
33 Frustration claims for personal services contracts are unlikely as the effect of the virus are most serious
amongst the elderly, amongst whom there will be far fewer personal services contracts. The law is reason-
ably clear on the point: death frustrates a personal services contract (Hall v Wright (1858) EB & E 746);
disability through illness similarly discharges the contract where the performance is impossible or radi-
cally different (Condor v The Barron Knights [1966] 1 WLR 87).
66 Covid-19 and the Problem of Frustrated Contracts

consumer protection developed through European Union law. Two such examples are
the right of a passenger to obtain compensation for a cancelled flight,34 and the custo-
mer who terminates their package holiday in the event of certain unavoidable and extra-
ordinary circumstances.35

Supervening Illegality

Where a contract has become illegal to perform because of a supervening illegality courts
will find that frustration has discharged the parties from future obligations.36 Contracts
where performance has become illegal because of coronavirus legislation, generally lock-
down laws, will be frustrated at common law since Parliament has made no attempt to
set out the consequences for contracts which have so become illegal. In such circum-
stances of frustration the court is concerned not only with the effect of the supervening
illegality on the individual parties but also on the public interest in seeing the law
observed.37 So great is the value in upholding the public interest that it will usually
prevail over the private interests of the parties.38 The sweeping and unprecedented
nature of English lockdown laws will mean that an enormous number of contracts
stand to be discharged through frustration arising from a supervening illegality.39
In relation to Covid-19 a number of complicating considerations arise. The first is
that the contract will not be discharged simply because the legislation has made a full
and exact performance in some way illegal. A particular challenge, therefore, is pre-
sented to long term contracts for which some of the period of performance has
become illegal and yet future performance may well occur. Courts have, in other
instances of alleged frustration, held that where a substantial portion of such contracts
could or might be performed the contract will not be discharged for frustration.40 In the
Great War cases it was difficult, during the war, for courts to ascertain the entirety of the
disruption to the contract.41 In this pandemic, courts will face difficulties in adjudicat-
ing on some frustration cases before the pandemic ends. Where, however, a substantial
performance of the contract has become illegal for a sustained period of time in relation
to the entirety of the contract, frustration should discharge the contract. This has the
effect of giving some certainty to the parties and, simultaneously, in upholding the
public policy values underlying frustration due to illegality.
34 Regulation (EC) No 261/2004 establishing common rules on compensation and assistance to passengers.
35 Package Travel and Linked Travel Arrangements Regulations 2018/634, reg. 12. Reg. 13 is of similar effect
where the organizer cancels the package holiday.
36 Brewster v Kitchel (1679) Holt K B 175; 90 ER 995.
37 Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association (Bermuda) Ltd
[2010] EWHC 2661 (Comm) [100].
38 Treitel (n 24) 8–002.
39 Keith Ewing, ‘Covid-19: Government by Decree’ (2020) 31 King’s Law Journal 1.
40 Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724.
41 F.A. Tamplin Steamship Company, Ltd v Anglo-Mexican Petroleum Products Company, Ltd [1916] 2 AC
397.
 King’s Law Journal 67

A second challenge in relation to Covid-19 is that further performance of a contract

may conflict not with legislation but with government guidance. This guidance may
exceed the actual legislative prohibition,42 and could be reinforced in some instances
by overzealous police action in enforcing this guidance.43 Conditions in which ‘infor-
mal processes have been widely perceived to create formal obligations’44 create not only
public law issues but also issues concerned with private rights. If individuals, in follow-
ing what are thought to be formal obligations do not perform their contracts, is this
performance discharged by frustration? It could be argued that given the narrow
ambit in which frustration is found to operate that a court would not seek to include
such situations within illegality. This would be a harsh position for it would undermine
the very purpose at interest here, namely, the public policy value in upholding the law.
In emergency situations it may have to suffice that apparently formal obligations are
sufficient as legality. It also seems invidious to expect individuals to either understand
the public and criminal law better than the authorities or to challenge authorities as to
the basis for their actions.45
A third challenge arises where the supervening illegality arises by reason of contrac-
tual performance in a foreign jurisdiction where the performance is now illegal by
reason of supervening legislation. It might be argued that the public policy interests
in upholding the law are not present where the law is of a foreign nation. However
there is authority that a supervening foreign illegality is capable of discharging an
English contract.46 While the authority proceeds on the basis of the now rejected
implied term theory of frustration, the result is defensible on the ground that it is unde-
sirable to disregard the law of another nation. This is strengthened when the law is
designed to combat a virus which knows no borders. In short, those public policy
grounds underlying the acceptance of a supervening domestic illegality should also
be present in a supervening foreign illegality.47

Frustration of Purpose

In some cases a supervening illegality will not make the contract illegal to perform but
will make a related performance impracticable, undesirable or purposeless. By way of
42 Ewing (n 39) 18.
43 Ibid 21.
44 Ibid 22.
45 Although Lord Toulson was concerned with a very different aspect of illegality in Patel v Mirza [2016]
UKSC 42 his reasoning that the public interest was best served by a principled and transparent assess-
ment of considerations, at [120], is applicable here.
46 Societe Co-Operative Suisse des Cereales et Matieres Fourrageres v La Plata Cereal Company, SA (1947) 80
LlL Rep 530, 542. See also Ralli Bros v Compania Naviera Sota y Aznar [1920] 2 KB 287.
47 Further justification can be found in the public policy in considerations of international comity: Magdeev
v Tsvetkov [2020] EWHC 887 (Comm), [307]-[312]. See also Day’s convincing interpretation of Ralli
Bros, that the case ‘reflects the common law’s deep-seated respect for the territorial sovereignty of
other states’: William Day, ‘Contracts, Illegality and Comity: Ralli Bros Revisited’ (2020) 79 CLJ 64, 65.
68 Covid-19 and the Problem of Frustrated Contracts

example, in March 2020 businesses selling food for consumption on the premises were
required to close;48 a food distribution company with a contract to sell food to such a
restaurant did not find itself with a contract rendered illegal but the related illegality
made the performance impracticable. Similarly, performance may be impracticable
or undesirable because of the changed environment created by lockdown laws or
public fear of the virus.
Frustration of purpose and impracticality present particular challenges in English
contract law.49 In these situations further performance is not impossible but it is less
desirable, no longer wanted or far more expensive to provide. Frustration of purpose
entered English law with the coronation cases, notably Krell v Henry. The case is a
marked departure from the then seldom applied decision in Taylor v Caldwell, upon
which it was based. In Taylor v Caldwell, Lord Blackburn held that where performance
depended on the ‘continued existence of a given person or thing’ and performance
became impossible because of ‘the perishing of the person or thing’ the contract was
discharged.50 The extension made in Krell v Henry was to discharge a contract where
the foundation of the contract was on ‘the assumption of the existence of a particular
state of things’,51 namely the happening of a particular event, the coronation procession
(for which neither party was responsible). Contemporaries viewed the extension as
unwarranted.52 An enduring problem is in identifying the fundamental purpose of
the contract for this identification is critical to the determination of whether or not
this purpose has become impossible.
In order for there to be a frustration of purpose, this purpose must be common to
both parties.53 A central difficulty is that in the frustration of purpose cases, perform-
ance is still physically possible but undesirable to one party in particular. This is usually
not sufficient to constitute ‘a thing radically different from that which was undertaken
by the contract’ such that ‘it was not this that I promised to do’.54 The result is that
courts almost invariably find that the contract has not been frustrated.55 Treitel con-
cluded that there are rarely any successful claims that frustration of purpose has dis-
charged the contract in England.56 Indeed, one way of reconciling those Great War
cases in which the court found the contract to be discharged and those where it was
not was whether the contract had been directly affected by government actions or
only by adverse general wartime conditions.57

48 Health Protection (Coronavirus, Restrictions) (England) Regulations SI 2020 No 350.

49 Note Treitel’s distinction between the two concepts: (n 24) 7–001.
50 (1863) 3 B & S 826, 839; 122 ER 309, 314.
51 749 per Vaughan Williams LJ.
52 The Law Journal, July 5, 1902, 347–48; August 2, 1902, 395; January 31, 1903, 53–54.
53 Herne Bay Steam Boat Company v Hutton (n 5) 689.
54 Davis Contractors v Fareham (n 7) 728 (Lord Radcliffe).
55 See for example, Amalgamated Investment & Property Co Ltd v John Walker & Sons Ltd [1977] 1 WLR 164.
56 Treitel (n 24) 7–035.
57 MacMillan, ‘English Contract Law and the Great War’ (n 6) 297–98.
 King’s Law Journal 69

The German doctrine of Störung der Geschäftsgrundlage (interference with the basis
of the transaction) to a frustration of purpose is preferable.58 The after-effects of the
Great War in Germany, most notably hyperinflation, had enormous adverse effects
upon contracts. As a response, German courts developed a doctrine of Geschäftsgrund-
lage which allowed contractual stipulations to be set aside in extraordinary circum-
stances. The modern doctrine includes both a subjective meaning, where one or both
parties have as the basis of their contract a notion about future circumstances and
upon which the parties intentions were founded, and an objective meaning whereby
all objective circumstances and surrounding conditions form part of the contract.59
If there has been a significant change in circumstances since the contract’s for-
mation such that the parties would not have entered into the contract or would have
entered into it on different terms had the changes been foreseen a party has the
power to demand adaptations to the contract. A court has the power to make such
adaptations; if this is not possible, the contract can be revoked. The judicial adoption
of such a doctrine in English law would face considerable challenge. Frustration oper-
ates, if at all, to discharge a contract rather than provide an opportunity to rewrite or
reform the contract.60 Such an adoption must be made in England and Wales by
legislation.

CONSEQUENCES OF FRUSTRATION

In the event that parties establish that their contract has been frustrated in the pan-
demic, the remedial consequences may not be satisfactory. For most contracts the reme-
dial consequences of frustration are determined by the Law Reform (Frustrated
Contracts) Act 1943. A small number of contracts are outside the 1943 Act,61 and
the remedial consequences are determined, in an unsatisfactory manner, at common
law.62 Parties may make their own contractual provision in the event of frustration.63
In a consumer contract such provision must pass the fairness test under s.62 of the Con-
sumer Rights Act 2015.64
The 1943 Act has been criticised as poorly drafted and providing little improvement
to the common law.65 The 1943 Act envisions two sorts of loss and unjust enrichment
58 § 313 Bürgerliches Gesetzbuch.
59 German Civil Code Volume I, Gerhard Dannemann and Reiner Schulze (eds, C H Beck 2020) 505–06.
60 British Movietonews v London and District Cinemas (n 13).
61 s. 2(5).
62 The common law position is in Catharine MacMillan, ‘Remedies for Common Mistake and Frustration’
in David Campbell and Roger Halson (eds), Research Handbook on Remedies in Private Law (Edward
Elgar, 2019) 225–26.
63 S.2(3).
64 Hugh Beale and Christian Twigg-Flesner, ‘Covid-19 and frustration in English law, in ed Sergio Garcia
Long, Derecho de los Desastres: Covid-19 (Pontificia Unviersidad Católica del Perú, 2020) <https://papers.
ssrn.com/sol3/papers.cfm?abstract_id=3698693>
65 D Harris, D Campbell and R Halson, Remedies in Contract and Tort (2nd edn, Butterworths 2002) 252.
70 Covid-19 and the Problem of Frustrated Contracts

arising from frustration, monetary benefits paid or payable and the conferment of a
valuable benefit, and seeks to prevent these forms of unjust enrichment. Subsection 1
(2) provides that such sums shall be recoverable if paid and in the case of sums
payable, cease to be payable. There is little case law interpreting the application of
this provision.66 Subsection 1(3) is concerned with the conferment of a valuable
benefit as a result of the performance undertaken before the contract was discharged.
One major case, BP Exploration (Libya) v Hunt67 provides guidance on how to apply
the section.
It is important to remember that the 1943 Act was not only legislation enacted in
wartime to try, unnecessarily as it turned out, to deal with what was thought to be a
significant number of impending frustration cases but also developed some decades
before English law developed effective responses to unjust enrichment. There are a
number of critical weaknesses with the 1943 Act. The greatest of these is that the reme-
dial consequences are determined in accordance with the terms of the particular con-
tract. It is odd, and quite possibly unjust, to attempt to provide remedial consequences
in accordance with the timing of obligations in a contract entered into without consid-
ering that the contract would be discharged before its natural completion. The second
weakness is that the 1943 Act fails to include non-monetary payments in kind.
Should there be significant numbers of frustration cases arising from Covid-19, we
can expect a greater interpretation and application of the 1943 Act but it is unlikely that
these fundamental omissions can be overcome without further legislation. Otherwise, as
this short article indicates, Covid-19 frustration cases fall within some of the most dif-
ficult areas of an already unsatisfactory doctrine. It is to be hoped that, should there be
litigation, the law in this area will be improved to provide parties with greater certainty
and justice.

ORCID

Catharine MacMillan http://orcid.org/0000-0002-5584-9269

66 The leading case in a small field is Gamerco SA v I.C.M./Fair Warning (n 27).

67 1 WLR 783, substantially affirmed [1981] 1 WLR 236 (CA), [1983] 2 AC 352 (HL).