COVID-19 and frustration of contract

The common-law doctrine of frustration of a contract applies where an unforeseen event occurs that is neither party’s fault but that makes the performance of the contract impossible or radically changes the original nature of the contract.

If a contract doesn’t have a force majeure provision, or one that deals with the event in question, then an affected party should consider of frustration.

Delay caused by the Covid-19 pandemic could in principle be a frustrating event, depending on the nature of the contract in question and the length of the delay. You will need to consider the specific contractual obligations and whether they have ‘radically changed’ to the extent that requiring a party to comply with its strict contractual obligations would mean requiring it to do something fundamentally different from the terms of the original agreement. Typically, frustration is very difficult to prove.

The effect of frustration on a contract is that it comes to an end automatically, and not that it is suspended.

As the contract has come to an end, there is no further performance of future obligations. All sums paid by a contracting party before the frustrating event will be repayable, subject to giving credit for expenses incurred or benefits provided by the other contracting party.