This post was contributed by Professor James Devenney, Module Convenor for Commercial law.
Sometimes a commercial contract will be impacted by events occurring after the contract was concluded but before it is fully performed. In some situations this may result, under the Law of England and Wales, in the contract being frustrated, so that the parties are automatically discharged from the contract (for more detail, see M. Furmston and J. Devenney, Sale and Supply of Goods (4th edition., Routledge, 2025) Chapter 8). The modern statement of the doctrine of frustration can be found in Davis Contractors Ltd v Fareham UDC [1956] AC 696 at 728 and 729:
“So perhaps it would be simpler to say at the outset that frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstance in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.”
Two key points need to be made about the doctrine of frustration in England and Wales:
- It is difficult to establish. Take, for example, Tsakiroglou & Co v Noblee and Thorl [1962] AC 93. In that case the appellants had agreed to sell groundnuts to the respondents. The goods were to be shipped from Port Sudan to Hamburg. It was anticipated by the parties that the groundnuts would be shipped via the Suez Canal although this was not specified in the contract. The appellants argued that the contract was frustrated when the Suez Canal was closed by the Egyptian government as this meant that the groundnuts would need to be shipped via the Cape of Good Hope, extending the journey by about four weeks. The House of Lords disagreed. The mere fact that the shipping had become more expensive was not enough for the doctrine of frustration to operate. Significantly, neither the route for shipment nor the precise delivery date had been specified in the contract.
- It is subject to the terms of the contract. Express clauses dealing with what would otherwise be frustrating events are sometimes called force majeure clauses, and the reach of such clauses is a matter of contractual interpretation.
The Supreme Court considered the interpretation of a force majeure clause in RTI Ltd v MUR Shipping BV [2024] UKSC 18. In that case, M (a shipowner) and R (a charterer) entered into a contract for the charter of a ship. The ship was to carry cargoes of bauxite between Guinea and Ukraine. R was required to pay in US dollars and the contract contained a force majeure clause. The force majeure events were defined in clause 36, with clause 36.3(d) providing that an event would not be a force majeure event if it could be overcome by the “reasonable endeavours” of the affected party. Shortly thereafter the US imposed sanctions on the parent company of R, meaning, or so it was thought, that it was not possible for R to pay in US dollars. M claimed that this was a force majeure event. R offered to pay in Euros but M refused. The key question for present purposes was whether the “reasonable endeavours” proviso required M to accept the alternative offer (payment in Euros).
The Supreme Court (Lords Hamblen, Lord Burrows, Lord Hodge, Lord Lloyd-Jones and Lord Richards) held that the “reasonable endeavours” proviso did not require M to accept the alternative offer (payment in Euros). The proviso was aimed at securing performance (payment in US dollars) rather than substituting performance (payment in Euros). Ultimately clear words would have been required for the clause to require M to forgo a right (payment in US dollars).
One of the most interesting aspects of this case was the explicit interpretation of the clause in the light of the object of the proviso. The Supreme Court held that the object of such a proviso related to causation (as, subject to clear words to the contrary, to be able to rely on such a clause the party seeking to rely on the force majeure clause had to show that the force majeure event, not its own action, caused the inability to perform).
The wider significance of this case is that, although in this case the force majeure clause had an explicit “reasonable endeavours” proviso, such a proviso would often be implied into force majeure clauses anyway.
A useful discussion though, recent case law suggests that the courts strong emphasis on contractual certainty may sometimes overlook practical inequalities in bargaining power. In RTI v MUR Shipping [2024], the Supreme Court confirmed that a “reasonable endeavours” clause did not require acceptance of substitute performance reinforcing a strict rights based approach to commercial contracts. While this promotes predictability, it arguably favours the party with greater drafting leverage.
This contrasts with B2C contracts where statutory controls (e.g. the Consumer Rights Act 2015) recognise informational asymmetry and impose fairness requirements. The question is whether the sharp distinction between consumer protection and formalism in B2B contracting remains justified particularly where commercial parties may not be equal in practice.