• In the case of Davis Contractors ltd v Fareham UDC 1956 AC 696. It was held that a change in circumstance that makes a contract more difficult but not impossible to perform, does not cause frustration.

Facts of the Case

  • In 1946 the claimants agreed to build 78 houses for the defendants. The contract price was GBP 85,836.
  • The work was to be completed within eight months. Before the contract was signed the claimants had written to the defendants: “Our tender is subject to adequate supplies of material and labour being available as and when required to carry out the work within the time specified.”
  • Owing to bad weather, but more particularly to an unforeseen shortage of available labour, due to an unexpected lag in the demobilisation of troops after the war, the work took 22 months to complete. The contractors received the contract price, but they claimed that by reason of the delay they were entitled to treat the contract as void and to be paid on a quantum meruit.
  • The Court of Appeal had remitted the case to the arbitrator for further findings.
  • The appeal was heard after the arbitrator had made a supplemental award, when it was allowed on the grounds that the condition in the letter meant that, if adequate supplies of material and labour should not be available when wanted, the contractors would be excused from completing the work within eight months but would be given a reasonable time; that the condition affected the time, but not the price; and that, so interpreted, the condition had been fully honoured.
  • Secondly that when an owner employed a builder to do work for a fixed sum, his whole object was to secure himself against the unexpected difficulties which so often arose; and that the court could seriously damage the sanctity of contracts if it allowed a builder to charge more simply because, without anyone’s fault, the work took him much longer than he thought

Issues in Davis Contractors ltd v Fareham UDC 1956 AC 696

  • Can the contract be frustrated on the grounds the contract became harder to complete?

Held by House of Lords

  • Appeal dismissed

Lord Reid

  • Here, it was held, frustration occurred whenever the law recognised that, without default of either party, a contractual obligation had become incapable of being performed because the circumstances in which performance was called for would render it a thing radically different from that which was undertaken by the contract.
  • In this case, the letter only formed part of the negotiations which led up to the contract and its terms were not incorporated into that contract. In a contract of this kind the contractor undertook to do the work for a definite sum, and he took the risk of the cost being greater or less than he expected
  • “I think that the jury took the view, whether sound in law or not, that the delay was so great that it ought not to be covered by the exception and that the defendants should be treated as in breach. It is the form of two of the questions left to the jury that led the courts to deal with the case as one of frustration. The first two questions and answers were as follows: ” (1) Was ” it the duty of the defendants under the contract to be in a ” position at the commencement of and at all times during the ” contract to give the contractor the use of so much of the site ” of the works as might, in the opinion of the engineer, be required ” to enable the contractor to commence and continue the execution of the works in accordance with the contract? A. Yes. ” (2) Was the contract made upon the basis that the defendants would be in a position to act as aforesaid ? A. Yes.” I doubt if this second question was a proper question to put. It was in any event liable to mislead. ” Basis ” may mean no more than “expectation.” If it means more, it is difficult to reconcile questions (1) and (2) with giving any effect to the exception clause. The fifth question is also difficult: ” Were the conditions of the ” contract so completely changed, in consequence of the defendants inability to hand over the sites of the work as required, ” a s to make the special provisions of the contract inapplicable? “A. Yes.” This does not suggest that the contract is gone altogether but only that the special provisions are inapplicable. The jury, in my view, took these words as referring to the excep­tion. Question 8 was as to the ” damage suffered,” and the jury awarded £600 over and above the contract price.  It appears that Lord Esher had some doubt whether the answer to the fifth question should be taken as a binding finding. Findings by juries on mixed questions of law and fact are not precedents. That is, no doubt, why the case was not reported in any law report. I doubt myself, with respect, whether on the findings of the jury taken with the terms of the contract it was 1956 possible to treat it as a frustration case. I am clear that it cannot be regarded as a precedent in the law of frustration as applied to other contracts.  I would dismiss the appeal.” Pg. 735

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