All England Law Reports/1951/Volume 2 /British Movietonews Ltd v London and District Cinemas Ltd - [1951] 2 All ER

617

[1951] 2 All ER 617

British Movietonews Ltd v London and District Cinemas Ltd

HOUSE OF LORDS

VISCOUNT SIMON, LORD SIMONDS, LORD MORTON OF HENRYTON, LORD TUCKER

25, 26, 27, 28 JUNE, 26 JULY 1951

Contract – Frustration – Change of circumstances – Power of court to qualify literal words of contract – Agreement to
remain in force during continuance of statutory order – Order continued by different statute and for different reasons.

On 25 July 1941, film distributors contracted with exhibitors to supply “newsreels” for showing at a cinematograph
theatre for a minimum of twenty-six weeks, the agreement (the “principal agreement”) being thereafter terminable at
four weeks' notice by either party and by the exhibitors on four weeks' notice at any time during the currency thereof
after the first month. In March, 1943, the supply of film to the distributors was cut by one-third under the
Cinematograph Film (Control) Order, 1943, and consequent thereon the distributors and exhibitors entered into a
supplemental agreement which provided that: “1. During the continuance of the Cinematograph Film (Control) Order,
1943, the following special conditions shall also apply to the principal agreement:—(a) The principal agreement shall
remain in full force and effect until such time as the said order is cancelled and thereafter for any unexpired period
stipulated in the principal agreement … “ On 24 May 1948, although the order of 1943 had not been cancelled, the
exhibitors purported to give four weeks' notice to terminate the agreements. The order of 1943 had been made under
the Defence (General) Regulations, 1939, reg 55 (which was made under the Emergency Powers (Defence) Act,
1939), because it appeared to be necessary for maintaining during the war essential supplies of raw film. On 24
February 1946, the Act of 1939 expired, and was replaced by the Supplies and Services (Transitional Powers) Act,
1945, but the order of 1943 was continued in force under that Act to maintain and control essential supplies of film
owing to the economic situation which had arisen after the war and to secure their equitable distribution.

Held – (i) the words “during the continuance of the Cinematograph Film (Control) Order, 1943,” could not, as a matter
of construction, be restricted to mean “until the date when the order ceases to be in force by virtue of the Emergency
Powers (Defence) Act, 1939;” there was no such change of circumstances in 1946 or change of law operating on the
circumstances as to give rise to the operation of the doctrine of frustration; and, therefore, the exhibitors were not
entitled to give the notice of 24 May 1948.

Observations on the true limits of the doctrine of frustration.

Decision of the Court Of Appeal ([1950] 2 All ER 390), reversed.

Notes

As to Excuses for Non-Performance of a Contract, see Halsbury, Hailsham Edn, Vol 7, pp 212–220, paras 296–298;
and for Cases, see Digest, Vol 12, pp 383, 384, Nos 3159–3166.

Cases referred to in judgment

Shirlaw v Southern Foundries (1926), Ltd [1939] 2 All ER 113, [1939] 2 KB 206, 108 LJKB 747, 160 LT 353, Digest
Supp.

Baily v De Crespigny (1869), LR 4 QB 180, 38 LJQB 98, 19 LT 681, 33 JP 164, 12 Digest 373, 3099.

Joseph Constantine SS Line Ltd v Imperial Smelting Corpn Ltd [1941] 2 All ER 165, [1942] AC 154, 110 LJKB 433,
165 LT 27, 2nd Digest Supp.
[1951] 2 All ER 617 at 618

Denny Mott & Dickson Ltd v Fraser (James B) & Co Ltd [1944] 1 All ER 678, [1944] AC 265, 113 LJPC 37, 171 LT
345, 2nd Digest Supp.

Sir Lindsay Parkinson & Co Ltd v Works & Public Building Comrs [1950] 1 All ER 208, [1949] 2 KB 632, 2nd Digest
Supp.

Bush v Whitehaven Town & Harbour Trustees (1888), 52 JP 392, 2 Hudson's BC, 4th ed, 118, 12 Digest 385, 3167.

Jackson v Union Marine Insurance Co Ltd (1874), LR 10 CP 125, 44 LJCP 27, 31 LT 789, 12 Digest 386, 3175.

John Lee & Son (Grantham) Ltd v Railway Executive [1949] 2 All ER 581, 2nd Digest Supp.

Dennis Reed Ltd v Goody [1950] 1 All ER 919, [1950] 2 KB 277.

Bennett, Walden & Co v Wood [1950] 2 All ER 134.

Bank Line Ltd v Capel (A) & Co [1919] AC 435, 88 LJKB 211, 120 LT 129, 12 Digest 391, 3198.

F A Tamplin SS Co Ltd v Anglo-Mexican Petroleum Products Co Ltd [1916] 2 AC 397, 85 LJKB 1389, sub nom Re F A
Tamplin SS Co Ltd & Anglo-Mexican Petroleum Products Co Ltd 115 LT 315, 12 Digest 390, 3194.

Hirji Mulji v Cheong Yue SS Co [1926] AC 497, 95 LJPC 121, 134 LT 737, Digest Supp.

Appeal

Appeal by the plaintiffs, British Movietonews Ltd from an order of the Court of Appeal, dated 21 June
1950, reported [1950] 2 All ER 390, reversing an order of Slade J dated 17 February 1950.

Slade J found that the defendants were liable to pay to the plaintiffs under two agreements dated
respectively 25 July 1941, and 3 May 1943, the weekly sum of ten guineas in respect of the rental of news
films until the expiration of the Cinematograph Film (Control) Order, 1943 (SR & O, 1943, No 430).

Diplock KC and T G Roche for British Movietonews, Ltd.

Sir Roland Burrows KC, Pearson KC and K D Potter for London and District Cinemas Ltd.

Their Lordships took time for consideration.

26 July 1951. The following opinions were delivered.

VISCOUNT SIMON.

My Lords, by a letter dated 24 May 1948, addressed by the respondent company to the appellant company, the former
gave notice to terminate as from 30 June 1948, the then existing contract between them. This contract was contained
in a principal agreement dated 25 July 1941, as modified by a supplemental agreement dated 3 May 1943. The
appellant company refused to accept the notice of termination, claiming that it was not such as the contract authorised
and that the respondent company were still bound. The respondent company persisted in their view and the appellant
company, by writ issued on 4 February 1949, sued the respondent company for a declaration that the agreement
remained in full force and effect and for consequential relief. The question involved in this appeal is thus not difficult to
state, but in answering the question there has emerged a difference of opinion between Slade J who tried the action
and decided in favour of the appellant company, and the Court of Appeal (Bucknill and Denning LJJ and Roxburgh J),
which, in a judgment prepared by Denning LJ allowed the appeal of the respondent company. It now becomes
necessary to decide which party in the litigation is right. Moreover, the judgment delivered in the Court of Appeal
includes an expression of some general views as to the nature and extent of the judicial function in deciding the rights
and obligations of parties under an executory contract which will require careful and candid consideration from the
House.

The respondent company is an “exhibitor” of news films and the appellant company is a “renter,” ie, a supplier, of such
films. A news film takes some
[1951] 2 All ER 617 at 619

eight minutes to show and is normally exhibited in the cinema where it first appears for three days, after which it is
passed on for showing elsewhere for similar periods. Owing to the necessity of the news it contains being up to date,
the total life of a given news film is approximately only two and a half weeks. In consequence of this limited life,
although the film for a newsreel is so much shorter than the length of film required for ordinary pictures, the total
amount of raw film used up to supply a succession of news films in the various cinemas is much larger than the
amount required in the same period for the main exhibits which have a longer currency.

By the principal agreement, the appellant company, as renter, by its agents Twentieth Century Fox Film Co Ltd
(thereafter called the “distributor”) agreed to furnish to the respondent company, as exhibitor, for exhibition at the
respondent company's cinema in Aylesbury, commencing on 4 August 1941, two news films a week for the price of ten
guineas weekly. The printed form used to embody the contract contains the provision:

“Minimum period of agreement—26 (twenty-six) weeks and thereafter determinable by four weeks'
notice.”

Below this is a typed insertion as follows:

“Notwithstanding the minimum period of this contract it is agreed that same may be terminated by the
exhibitor by giving one month's notice, any time after the expiration of the first month.”

Below this, again in the print, is the provision:

“The exhibitor has the right at any time after the expiry of the minimum period to give to the renter or the
distributor four weeks' notice in writing to determine this arrangement.”

Since it is necessary to treat the typescript insertion as prevailing over the printed provision which it contradicts, the
result is that, under the principal agreement, the exhibitor had the option to determine the contract after a minimum
period of eight weeks (assuming that “month” means a lunar month of four weeks), while the renter could not take
steps to determine it until twenty-six weeks had expired, after which he might give four weeks' notice to end it. Once,
however, that the first twenty-six weeks had expired, ie, as from 2 February 1942, the two parties were in the same
position so far as the right to terminate the agreement by giving notice is concerned. Thereafter, it would continue until
one party or the other gave four weeks' notice to bring it to an end.

Performance under the principal agreement ran on without either side giving notice to terminate it and on 3 May 1943,
the parties entered into the supplemental agreement, the terms of which raise the problem which has to be solved.
This supplemental agreement contains the recital that “by the Cinematograph Film (Control) Order, 1943 [SR & O
1943, No 430], it has become necessary to restrict the consumption of raw film stock.” Then come three clauses which
must be set out, as follows:

“1. During the continuance of the Cinematograph Film (Control) Order, 1943, the following special
conditions shall also apply to the principal agreement:—(a) The principal agreement shall remain in full
force and effect until such time as the said order is cancelled and thereafter for any unexpired period
stipulated in the principal agreement. (b) One copy of a newsreel will if necessary be used to serve two
exhibitors during the same period and this shall if necessary be deemed to include newsreels supplied
by other renters not parties hereto. (c) If the newsreel to be supplied hereunder shall be required to
serve two theatres during the same period the exhibitor shall comply with any notice in writing whereby
he is required to deliver or receive the newsreel to and from another theatre which the renter shall
specify. All arrangements governing the crossing over of the

[1951] 2 All ER 617 at 620

newsreel between performances at the two theatres and any costs incidental thereto shall be the
responsibility of the exhibitor or exhibitors concerned and no claim shall arise against the renter by virtue
of any failure in the aforesaid cross-over arrangements. (d) The stipulated rental payable under the
principal agreement shall continue to be paid irrespective of ownership of the film which is supplied to
the exhibitor and notwithstanding that the same may not be that stipulated for in the principal agreement
or not actually supplied by the renter party hereto. (e) The rental stipulated in the contract may be
increased from time to time by such amount as may be authorised by a committee composed of
representatives of the News Reel Association and the [Cinematograph Exhibitors Association] to cover:
(i) increased cost of film stock and/or (ii) increased expenses incurred by the renter due to the operation
of force majeure.

2. All disputes arising out of the interpretation or operation of these special conditions shall be referred to
the said joint committee of the News Reel Association and the C.E. A. whose decision shall be final and
binding on both parties.

3. All the conditions of the principal agreement shall remain in full force and effect in so far as the same
are not excluded modified or varied hereby.”

The respondent company advance two arguments. They first contend that the modification in the principal agreement
effected by the supplemental agreement does not touch their original right to end the whole arrangement by four
weeks' notice at any time. This contention has not prevailed in either of the courts below, and I cannot accept it. Clause
1(a) provides in effect that the principal agreement is to remain in full force and effect till the Cinematograph Film
(Control) Order is cancelled and “thereafter” until four weeks' notice is given to terminate it, and this appears to me to
rule out the exhibitor's previous right of determination at any time and to substitute a new minimum period for both
parties alike. So long as the order of 1943 continues, neither side can give notice to terminate.

The respondent company next contend—and this raises the real difficulty—that “the Cinematograph Film (Control)
Order, 1943,” in the sense in which that expression is used in the supplemental agreement, was no longer “continuing”
when they gave their notice to terminate, but that it had already been “cancelled” within the meaning of cl 1(a) of that
agreement on 24 February 1946. To appreciate this contention, and to decide whether it should prevail, it is necessary
to set out the history of the order and of the authority which from time to time has given to it statutory force.

The Emergency Powers (Defence) Act, 1939, was passed shortly before the outbreak of war, viz, on 24 August 1939.
The long title of the Act describes it as:

“An Act to confer on His Majesty certain powers which it is expedient that His Majesty should be enabled
to exercise in the present emergency; and to make further provision for purposes connected with the
 defence of the realm.”

By s 1, it authorised His Majesty by Order in Council to make such defence regulations

“as appear to him to be necessary or expedient for securing the public safety, the defence of the realm,
the maintenance of public order and the efficient prosecution of any war in which His Majesty may be
engaged, and for maintaining supplies and services essential to the life of the community.”

Section 11 of the Act provided that it should continue in force for one year only unless, at a time while the Act was in
force, an address was presented to His Majesty by each House of Parliament praying that the Act should be continued
in force
[1951] 2 All ER 617 at 621

for a further period of one year, in which case the Act would continue in force for that further period. Before any
addresses were presented, the Act of 1939 was amended by the Emergency Powers (Defence) Act 1940, which
increased the initial duration of the Act of 1939 from one to two years. Thereafter it was continued in force, by the
presentation of successive addresses each year, until 24 August 1945. By the Emergency Powers (Defence) Act,
1945, the duration of the Act of 1939 was extended by a further six months, ie, to 24 February 1946, when it finally
expired.

In the meantime, on 10 December 1945, a further Act had been passed with the short title of the Supplies and Services
(Transitional Powers) Act, 1945. The long title of this Act described it as:

“An Act to provide for the application of certain defence regulations for purposes connected with the
maintenance control and regulation of supplies and services, for enabling defence regulations to be
made for the control of prices and charges, for the continuation of defence regulations so applied or
made during a limited period notwithstanding the expiry of the Emergency Powers (Defence) Acts, 1939
to 1945”, etc.

Section 1 of this Act provided that if it appeared necessary of expedient to His Majesty that any defence regulation to
which that section applied should have effect for the purpose of so maintaining, controlling and regulating supplies and
services as (inter alia) to secure a sufficiency of those essential to the well-being of the community, or their equitable
distribution, or their availability at fair prices, then His Majesty might by Order in Council direct that that regulation
should have effect by virtue of this Act

“whether or not it is for the time being necessary or expedient for the purposes specified in sub-s. (1) of
s. 1 of the Emergency Powers (Defence) Act, 1939.”

This Act further provided that where an Order in Council made under it directed that any “defence regulation” should
continue, then

“all orders and other instruments made under the regulation and in force at the date when the Order in
Council comes into operation shall continue in force … “

The period of duration of the Supplies and Services Act was five years from its passage, with a provision for its
continuation in force for a further period of one year if Parliament adopted the necessary addresses.

Defence Regulation 55 was one of the regulations originally made under the Act of 1939. The regulation authorised a
competent authority (in the present case it was the Board of Trade)

“so far as appears to that authority to be necessary in the interest of the defence of the realm, or the
efficient prosecution of the war, or for maintaining supplies and services essential to the life of the
 community [to provide (inter alia)] for regulating … the … acquisition, use or consumption of articles of
any description, and, in particular, for controlling the prices at which such articles may be sold … “

It was under this power that the Board of Trade made the Cinematograph Film (Control) Order, 1943. By that order,

“(1) On and after Apr. 8, 1943, no person carrying on a business in the course of which cinematograph
film … is acquired or supplied, shall, except under the authority of a licence granted by the Board of
Trade and subject to any limitation or condition attaching thereto, acquire or supply any such film.”

The effect of this order was, therefore, to control the supply of film to renters such as the appellant company and, as
the recital of the supplemental agreement recognised, to restrict the consumption of raw film stock. One result of this
[1951] 2 All ER 617 at 622

scarcity would be to make it more difficult for renters to supply newsreels for the exclusive use of one exhibitor, and
another result would be likely to be that the price charged to exhibitors in future contracts would rise. It was, therefore,
in the interests of both parties to arrange for a more economical use of newsreels and, at the same time, to secure that
existing prices charged to exhibitors should not be increased unreasonably. Both these purposes were secured by the
supplemental agreement, the terms of which were settled by the organisations representing the two parties in a
common form.

After the supplemental agreement was made, the Cinematograph Film (Control) Order, 1943, continued under the
authority of Defence Regulation 55 without material change until it was revoked by the Cinematograph Film (Control)
(Revocation) Order, 1950 (SI, 1950, No 1469), made on 4 September 1950, which came into force on 1 October 1950.
This, of course, is after the date of the writ in this action, or, indeed, of the judgment in the Court of Appeal which is
now before the House. But, whereas Defence Regulation 55 derived its force originally from the Emergency Powers
(Defence) Act, 1939, after 24 February 1946, its authority rested on the Supplies and Services (Transitional Powers)
Act, 1945. The question is whether, in these circumstances, the supplemental agreement, when referring to “the
continuance” of the order and to “such time as the said order is cancelled,” ought to be construed as referring to a
period which ends when the statutory basis on which Defence Regulation 55 rests is thus altered.

This is, primarily at any rate, a question of construction. The respondent company contend that the expression “during
the continuance of the Cinematograph Film (Control) Order, 1943,” means so long as the order is and remains in force
by virtue of the Emergency Powers (Defence) Act, 1939, or any statutory amendment of the enactment thereto, and
that the expression “until such time as the said order is cancelled” means until the date when the order ceases to be in
force by virtue of the aforesaid authority, or until the date when the same is revoked, whichever shall be the earlier.
This restricted construction is quite legitimate if that is, in the circumstances, the correct interpretation of the language
used. But it is not the natural meaning of the words used, and I can find no sufficient ground for construing them in this
narrow sense. The economic considerations which must have influenced the parties in making the supplemental
agreement did not change on 24 February 1946. The restriction in the consumption of raw film stock, which is referred
to in the recital, continued after that date, and though a general licence was issued under the order of 15 July 1946, for
the acquisition of film used for other purposes, the restriction on film for newsreels continued until the cancellation of
the order late in 1950. The parties to the supplemental agreement chose to define the minimum period of its operation
by reference to the continuance of the order. What the length of that continuance might be was necessarily uncertain. It
might have come to an end while the war was going on if regulation 55 was revoked, or if Parliament had not adopted
addresses to continue in force the Emergency Powers (Defence) Act, 1939. In fact, the order continued for five years
after the fighting ceased, but all that time there was in operation a restriction on the consumption of raw film stock. And
it was throughout the original order, not a new order in the same terms. I agree with Slade J that the restricted meaning
sought to be put on the language of the supplemental agreement by the respondent company is not the correct
interpretation of the words used.

It is urged, in the alternative, that the supplemental agreement should be regarded as having terminated in February,
1946, owing to the operation of a doctrine “analogous to a frustration.” But what is the change of circumstances in
1946 which would cause the “officious bystander” of Mackinnon LJ: see Shirlaw v Southern Foundries (1926), Ltd:
([1939] 2 All ER 124); to get instant acceptance from both sides if he suggested that, of course, the supplemental
agreement would come to an end, although restriction on the consumption
[1951] 2 All ER 617 at 623
of raw film stock continued, if the Cinematograph Film (Control) Order, 1943, and regulations 55 are no longer
authorised by the Emergency Powers (Defence) Act, 1939, but gain their validity from a later Act of Parliament? It is by
no means clear to me that the parties would have assented. Hannen J in Baily v De Crespigny (LR 4 QB 186)
observed that:

“To hold a man liable by words, in a sense affixed to them by legislation subsequent to the contract, is to
impose on him a contract he never made.”

But here, though the legislative authority behind the words of the order altered, the words themselves mean the same
thing throughout. This is not a case in which there has been “a vital change of the law … operating on the
circumstances” (to use Lord Wright's phrase in Joseph Constantine SS Line Ltd v Imperial Smelting Corpn Ltd [1941]
2 All ER 185). Here the restriction on the consumption of raw film stock continued and the order creating the restriction
was not changed, vitally or at all.

I should have been glad to conclude at this point by expressing agreement with the careful judgment of Slade J but my
colleagues who heard this appeal concur with me in the view that it is desirable, to remove the possibility of
misunderstanding hereafter, to refer to certain passages in the judgment delivered by Denning LJ where phrases occur
which give us some concern. I will quote from the revision of his written judgment. After a reference to the Constantine
case and to Denny Mott & Dickson Ltd v James B Fraser & Co Ltd the judgment proceeds ([1950] 2 All ER 395):

“In these frustration cases, as LORD WRIGHT said, the court really exercises a qualifying power—a
power to qualify the absolute, literal or wide terms of the contract—in order to do what is just and
reasonable in the new situation, and it can now by statute make ancillary orders to that end. Until
recently the court only exercised this power when there was a frustrating event, that is a supervening
event which struck away the foundations of the contract. In the important decision of Sir Lindsay
Parkinson & Co., Ltd. v. Works & Public Building Comrs., however, this court exercised a like power
when there was no frustrating event, but only an uncontemplated turn of events.”

The learned lord justice went on to give his account of the decision in Parkinson's case, which he stated was based on
Bush v Whitehaven Town & Harbour Trustees, which in turn was based on the leading frustration case of Jackson v
Union Marine Insurance Co Ltd. He goes on (ibid):

“The judgments show that, no matter that a contract is framed in words which, taken literally or
absolutely, cover what has happened, nevertheless, if the ensuing turn of events was so completely
outside the contemplation of the parties that the court is satisfied that the parties, as reasonable people,
cannot have intended that the contract should apply to the new situation, then the court will read the
words of the contract in a qualified sense; it will restrict them to the circumstances contemplated by the
parties; it will not apply them to the uncontemplated turn of events, but will do therein what is just and
reasonable …

This does not mean that the courts no longer insist on the binding force of contracts deliberately made. It
only means that they will not allow the words in which they happen to be phrased to become tyrannical
masters. The court qualifies the literal meaning of the words so as to bring them into accord with the
contemplated scope of the contract. Even if the contract is absolute in its terms, nevertheless, if it is not
absolute in intent, it will not be held absolute in effect. The day is gone when we can excuse an
unforeseen injustice by saying to the sufferer: 'it is your own folly. You ought not to have passed that
form of words. You ought to have put in a clause to protect yourself.' We no longer credit a party with the
foresight of a

[1951] 2 All ER 617 at 624

prophet, or his lawyer with the draftsmanship of a Chalmers. We realise that they have their limitations
and make allowances accordingly. It is better thus. The old maxim reminds us that qui haeret in litera,
haeret in cortice, which, being interpreted means: He who clings to the letter clings to the dry and barren
shell, and misses the pith and substance of the matter. We have of late in this court paid heed to his
warning, not only in Parkinson's case, but also in John Lee & Son (Grantham) Ltd v Railway Executive,
Dennis Reed Ltd v Goody, and Bennett Walden & Co v Wood; and we must pay like heed now.”
With all respect to the learning and acumen of the learned lord justice, I do not agree that there has been a recent
change as the result of which the courts now exercise a wider power in this regard than they previously used. Apart
from the adjustment effected by the Law Reform (Frustrated Contracts) Act, 1943, which is quite irrelevant to the
present point, there has been no recent change. The possibility that a fundamental alteration in circumstances may
sometimes bring a contract to a premature end has long been recognised. The general principle on which the court
acts is well settled: so Lord Finlay LC stated in Bank Line Ltd v A Capel & Co ([1919] AC 441). It can be found, for
example, as Lord Porter observed in Denny Mott v Fraser ([1944] 1 All ER 687), in Earl Loreburn's judgment in F A
Tamplin SS Co Ltd v Anglo-Mexican Petroleum Products Co Ltd ([1916] 2 AC 403, 404), where it is thus expressed:

“… a court can and ought to examine the contract and the circumstances in which it was made, not of
course to vary, but only to explain it, in order to see whether or not from the nature of it the parties must
have made their bargain on the footing that a particular thing or state of things would continue to exist.
And if they must have done so, then a term to that effect will be implied, though it be not expressed in
the contract … no court has an absolving power, but it can infer from the nature of the contract and the
surrounding circumstances that a condition which is not expressed was a foundation on which the
parties contracted.”

While the principle remains the same, particular applications of it may greatly vary, and theoretical lawyers may debate
whether the rule should be regarded as arising from an implied term, or because the basis of the contract no longer
exists. In any view, it is a question of construction, as Lord Wright pointed out in Constantine's case ([1941] 2 All ER
187) and as has been repeatedly asserted by other masters of the law. When the authorities referred to by Denning LJ
as justifying the proposition that judges now exercise a wider power in these matters than they did some years ago are
examined, it will be found that they do not support any such notion. The decision of the Court of Appeal in Parkinson's
case does not mark a new departure at all. No extracts from the judgments in that case were quoted by the lord justice
on the ground that they were “so valuable that they should be read in full.” When they are read in full, however, it
seems to me indisputable that what was there decided was merely that, having regard to the terms of the variation
deed and to the circumstances which led up to its execution, the deed could not, on its true construction, be interpreted
as authorising the Commissioners of Works at their pleasure to order an infinite quantity of extra work, to be executed
over an unlimited time, on which the plaintiffs could never make any profit beyond the figure named. Asquith LJ's
judgment makes it perfectly clear that the only question was this question of construction. He says ([1950] 1 All ER
226):

“Where the language of the contract is capable of a literal and wide, but also of a less literal and a more
restricted, meaning, all relevant surrounding circumstances can be taken into account in deciding
whether the literal or a more limited meaning should be ascribed to it.”

[1951] 2 All ER 617 at 625

Cohen LJ reached the same conclusion as a matter of construction, and incidentally expounded Bush v Whitehaven
Town & Harbour Trustees—to which Denning LJ also referred as though it embodied some new doctrine—in a way
which shows that no novel principle was involved. Singleton LJ was of the same opinion. In substance, the decision in
Parkinson's case was that the work that had been executed by the contractors included more than was covered, on its
true construction, by the variation deed, and that the cost had, therefore, to be paid for by a quantum meruit.

The three other cases referred to in the Court of Appeal's judgment as further illustrations of the expanded doctrine are
equally mere applications of established rules of construction. In Lee v Railway Executive Denning LJ himself so
explained the decision, preferring “a limited construction” of which the words were capable to the wider interpretation
suggested. Dennis Reed Ltd v Goody was again merely a case of interpreting the language of a contract: Denning LJ
was again a party to the decision and said so. Bennett Walden & Co v Wood is also a pure case of construction; the
Court of Appeal held that the words “in the event of our securing for you an offer” referred to a firm offer, which by
acceptance would give rise to a contractual relationship. None of these three decisions illustrates the exercise of any
recent extension of judicial practice.

It is of the utmost importance that the action of a court, when it decides that, in view of a supervening situation the
rights and obligations under a contract have automatically ceased, should not be misunderstood. The suggestion that
an “uncontemplated turn of events” is enough to enable a court to substitute its notion of what is “just and reasonable”
for the contract as it stands, even though there is no “frustrating event,” appears to be likely to lead to some
misunderstanding. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of
events which they did not at all anticipate—a wholly abnormal rise or fall in prices, a sudden depreciation of currency,
an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the
other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made,
shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged,
the contract ceases to bind at that point—not because the court in its discretion thinks it just and reasonable to qualify
the terms of the contract, but because on its true construction it does not apply in that situation. When it is said that in
such circumstances the court reaches a conclusion which is “just and reasonable”: Lord Wright in Constantine's case
([1941] 2 All ER 186); or one “which justice demands”: Lord Sumner in Hirji Mulji v Cheong Yue SS Co ([1926] AC
510); this result is arrived at by putting a just construction on the contract in accordance with an “implication … from
the presumed common intention of the parties”: Lord Sumner in Bank Line Ltd v Capel (A) & Co ([1919] AC 455). If the
decisions in “frustration” cases are regarded as illustrations of the power and duty of a court to put the proper
construction on the agreement made between the parties, having regard to the terms in which that agreement is
expressed and to the surrounding circumstances in which it was made, including any necessary implication, such
decisions are seen to be examples of the general judicial function of interpreting a contract when there is disagreement
as to its effect. What distinguishes “frustration” cases is that the interpretation involves the consequence that, in view
of what has happened, further performance is automatically ended. This is because the frustrating event (such, for
example, as war or prolonged delay) must be regarded as introducing a new situation to which no limit can be put.
There are, of course, many other examples where the court has to put an interpretation on the agreement made, not
with the result that the contract is brought to an end by frustration, but with the result that the contract goes on and
continues to bind the parties according to
[1951] 2 All ER 617 at 626

its true construction. Bennett Walden & Co v Wood, quoted by Denning LJ is an obvious example. The advantage of
approaching the topic in this way seems to me to be that it makes plain that in all cases alike the question is really at
bottom a question of construction. In my opinion, the appeal succeeds and I move that it be allowed with costs here
and below.

LORD SIMONDS.

My Lords, I have had the advantage of reading the opinion which my noble and learned friend on the Woolsack has
just delivered. I agree so fully with it that I shall add only a few words out of respect for the Court of Appeal from whose
judgment we are differing.

The case is one which, as I think, presents little difficulty. There is first a question of construction, viz: Was the
respondent company entitled under the terms of the principal and supplementary agreements, read, as they must be
read, as one agreement, to give four weeks' notice to determine it? For the reasons given by my learned and noble
friend I think that clearly it was not. I do not understand that the Court of Appeal took a different view on this point.
Secondly, there is a question, which is also a question of construction and nothing else, whether there should be
implied in the agreement a term to the effect that it should continue in force for the duration of the emergency
contemplated by the Emergency Powers (Defence) Act, 1939, and (negatively) that it should not continue in force
when the Cinematograph Film (Control) Order, 1943, no longer had effect by virtue of the provisions of that Act? My
Lords, I can only say that, having considered the many authorities in which it has been held legitimate to imply a term
in a written contract, I can find none which by its example or its language would justify your Lordships in implying any
such term as that which is postulated in the agreement which these parties have made. On the contrary I think that it
would be the merest guesswork to do so. And if I had myself to make a guess it would be that the parties intended the
agreement to endure so long as the order of 1943 endured, whether or not that order owed its continued existence to
the Act of 1939 or some other Act. On this point I regret that I cannot accept the view of the Court of Appeal, though it
is not the primary reason for their decision in favour of the respondents.

Next, there was the familiar question of frustration. Here, too, I feel no difficulty. It would, in my opinion, be to push the
doctrine to unprecedented and extravagant lengths to say that any event has happened which has caused the contract
to be frustrated at law. Similar considerations are involved to those which are relevant to the question of an implied
term. I would say with respect that I prefer the view expressed by my Lord on the Woolsack in Constantine's case as to
the basis on which the doctrine is founded to that which found favour with one at least of the noble and learned Lords
who took part in Denny Mott v Fraser. But it is unnecessary to pursue this matter, for, as I read the judgment of the
Court of Appeal, the respondents' success does not rest on the doctrine of frustration.

These were the three grounds on which learned counsel for the respondents invited the House to dismiss the appeal—
plain construction, implied term, and frustration—and with each of them I have dealt briefly, for it appears to me that
the case against the respondents is overwhelming. But it was not on any of these orthodox grounds, as I may call
them, that the Court of Appeal founded its judgment. On this part of the case I wish to say explicitly that I concur in
every word that has fallen from my noble and learned friend who has just spoken. I hesitate to make any brief
comment on the judgment of Denning LJ lest by taking a passage out of its context I should do injustice to the whole.
But I must at least dissent from the suggestion of the learned lord justice ([1950] 2 All ER 395) that the court, whether it
is exercising its function in construing a document or in applying the law of frustration to particular circumstances,
“really exercises a qualifying power … in order to do what is just and reasonable in the new situation … “ Nor can I
accept the theory,
[1951] 2 All ER 617 at 627

which appears to underlie his judgment, that in recent cases and in Parkinson's case in particular there has been some
development of this branch of the law which would justify such a proposition as that just cited. It is, no doubt, essential
to the life of the common law that its principles should be adapted to meet fresh circumstances and needs. But I
respectfully demur to the suggestion that there has recently been, or need be, any change in the well-known principles
of construction or (except so far as the recent Act of 1943 provides) in the application of the law of frustration to
commercial agreements, and, if indeed, as Denning LJ appears to suggest, such cases as Lee v Railway Executive,
Dennis Reed Ltd v Goody, and Bennett Walden & Co v Wood illustrate such a change, they would have to be
regarded as of doubtful authority. They can, however, be justified on more orthodox grounds. I agree that the appeal
should be allowed and the judgment of Slade J restored.

LORD MORTON OF HENRYTON.

My Lords, I agree with the opinions which have just been delivered and I do not desire to add any words of my own.

LORD TUCKER.

My Lords, I agree that this appeal should be allowed for the reasons which have been stated by my noble and learned
friend on the Woolsack. I also desire to express my concurrence in the observations which he has made with regard to
the judgment of the Court of Appeal delivered by Denning LJ.

Appeal allowed.

Solicitors: Freshfields (for British Movietonews Ltd); Sydney Morse & Co (for London and District Cinemas Ltd).

J D Pennington Esq Barrister.