Unfortunately, contracts may not always go according to plan. Unexpected events can sometimes make performance impossible or fundamentally different from what was originally agreed on. In such cases, the legal concept of frustration comes into play, which can help your business navigate unforeseen circumstances that disrupt your contractual obligations. This article will explain what the frustration of a contract means and what it entails under New Zealand Law.<\/p>\n\n\n\n
The law recognises frustration when, without the fault of either party, a contractual obligation becomes incapable of being performed. This arises because the required performance could be substantially different from what the parties initially agreed upon in the contract due to a supervening event beyond the control of either party. <\/p>\n\n\n\n
In the event of an unforeseeable incident, it might become impossible to complete an original obligation. Likewise, although an alternative option may be possible, that option would be significantly different from what was initially agreed upon by both parties. As such, you can use frustration as a defence against a breach of contract claim<\/a>. <\/p>\n\n\n\n Frustration stands as an exception to the general rule that parties must fulfil their contractual obligations. This clause allows a party to terminate a contract due to unforeseen circumstances. Therefore, understanding the scope and implications of frustration is crucial for your business, given its potential to impact your contractual relationships significantly.<\/p>\n<\/div>\n\n\n\n New Zealand law recognises various grounds that may lead to the frustration of a contract. These grounds typically revolve around events that were unforeseeable and beyond the control of the parties. The key measure is that the event must make the performance of the contract impossible, illegal, or radically different from what the parties intended.<\/p>\n\n\n\n Examples of situations where a contract may be considered frustrated include:<\/p>\n\n\n\n Notably, courts tend to uphold a high threshold before they consider a contract frustrated. For instance, it might be storming on the day you were due to deliver goods. Unless there are significant road closures, the other party may still expect your delivery. If you were planning to make a delivery with a motorbike and it started raining, you cannot typically claim the contract is frustrated. This is especially the case if the other party would expect you to find another mode of transport, like a car. <\/p>\n\n\n\n Your obligations under a contract becoming more expensive or difficult to perform will not amount to frustration. Ultimately, frustration depends on how you negotiate<\/a> and draft your commercial contract. <\/p>\n\n\n\n Whether a contract has been frustrated will depend on factors such as the:<\/p>\n\n\n\nGrounds for Frustration<\/h2>\n\n\n\n
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