Facts:

She went home for vacation in Ba (about 4 hours drive from Suva)

planning to come home with her friend Nora

Formation of contract:

Offer:

o Nora told her that she could come with Nora provided she was willing to contribute towards the refueling of the car i.e. make a full tank of the car

o Nora told her it usually cost $40 for a full tank. Acceptance

o Joanne agreed to refuel that car to a full tank. Consideration

o Nora went to pick Joanne up on the day of travelling to Suva as arranged, and they rode to Suva.

Force majeure

fuel prices in Fiji rose by 100%. Fuel prices had increased from $1 per litre to $2 per litre.

After arriving in Suva, Nora asked Joanne to refuel the car to full tank at the Mobil

Service Station in Suva.

When the Service station had refueled the car, they demanded $80 instead of the $40,

which Nora had told Joanne

Joanne refused to pay the $80. She stated that she had no contract with Nora to pay

$80.

Nora states that although there was no contract to pay $80, there was a contract to

refuel the car to full tank.

Service Station seized Nora’s car.

1. Area of Law: Contracts law

2. Issue: Remedies for breach of social contract _ what (if any) are the legal rights Nora may have

against Joanne?

3. Principles of Law that apply: Common Law- Frustration of contract

Law Reform (Frustrated Contracts) Act 1943 Section 1

(1)

(2)All sums paid or payable to any party in pursuance of the contract before the time when the parties were so discharged (in this Act referred to as “the time of

discharge”) shall, in the case of sums so paid, be recoverable from him as money received by him for the use of the party by whom the sums were paid, and, in the

case of sums so payable, cease to be so payable:

Provided that, if the party to whom the sums were so paid or payable incurred expenses before the time of discharge in, or for the purpose of, the performance of the contract, the court may, if it considers it just to do so having regard to all the circumstances of the case, allow him to retain or, as the case may be, recover the

whole or any part of the sums so paid or payable, not being an amount in excess of the expenses so incurred.

(3) Where any party to the contract has, by reason of anything done by any other party thereto in, or for the purpose of, the performance of the contract, obtained a

valuable benefit (other than a payment of money to which the last foregoing subsection applies) before the time of discharge, there shall be recoverable from him by the said other party such sum (if any), not exceeding the value of the said benefit

to the party obtaining it, as the court considers just, having regard to all the circumstances of the case and, in particular,—

(a)the amount of any expenses incurred before the time of discharge by the benefited party in, or for the purpose of, the performance of the contract, including any sums paid or payable by him to any other party in pursuance of the contract and retained or recoverable by that party under the last foregoing subsection, and

(b)the effect, in relation to the said benefit, of the circumstances giving rise to the frustration of the contract.

4. Application of law: frustrated contract

due to a severe or radical change in circumstances_ fuel price rise

Joanne does not have to pay for the additional $40 as contract has been

frustrated due to _force majeur

Despite contract being frustrated, joanne is still liable to pay the forty dollars as

she rode to suva in nora’s car which

i) Advise Nora with reference to principles of Contract law. Assume that Joanne is over the age of 21.

ii) Would your advice to Nora be any different if Joanne is under 21 years of age? How? Explain.

iii) Would your advice to Nora be any different if Joanne was under 18 years of age? How? Explain.

There is clear existence of a contract between the parties (Nora and Joanne) in this scenario. However,

due to rise of oil prices overnight, Joanne refused to uphold her end of the deal to pay for the fuel this

resulted in Nora’s car being seized.

The issue here is, did Joanne breach the contract between her and Nora and if so, what (if any) are the

legal rights Nora may have against Joanne?

A contract Under the Law Reform (Frustrated Contracts) Act 1943, the contract between Nora and

Joanne was frustrated, that is, a contract governed by English law has become impossible of

performance or been otherwise frustrated, and the parties thereto have for that reason been

discharged or released from the further performance of the contract (s 1 (1)). Hence, the rights and

obligations of parties cannot be enforced. As Lord Radcliff further elaborates in the case of Davis

Contractors Ltd v Fareham U.D.C.

“Frustration occurs whenever the law recognizes that without default of either party a contractual

obligation has become incapable of being performed because the circumstances 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.” (Davis Contractors Limited v Fareham

Urban District Council, 1956)

Frustration can occur in either of the following three ways, the subject matter of contract is destroyed,

an event central to the contract does not occur, and/or a radical change fundamentally alters the type of

performance contemplated. In the event of the occurrence of the third type of frustration, frustration is

based on the interpretation of the contract and limiting them to normal circumstances and not to

extraordinary circumstances. That is, the parties never agreed to carry out their obligations in the type

of circumstances which have eventuated. See Davis Contractors v Fareham UDC.

Under common law, party rights are only enforceable up to time of the discharge of the contract. The

effect of frustration on contracts is that the loss falls where the loss falls. This means that parties are no

longer liable for any monetary obligations or expenses incurred and money already paid cannot be

recovered.

However to overcome the potential hardships that arise from the rule, there has been reforms made to

the rule. According to the Law Reform (Frustrated Contracts) Act 1943, When a contract is frustrated

thus, the party which has obtained a valuable benefit prior to discharge of contract is liable for expenses

incurred before the time of discharge by the benefited party in, or for the purpose of, the performance

of the contract, including any sums paid or payable by him to any other party in pursuance of the

contract and retained or recoverable by that party. (s1 (3)) Another example of a reform is the

Frustrated Contract Act 1978 (NSW) that allows for parties to have an equal share to the cost that result.