Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696
Facts
Davis agreed to build seventy-eight houses for Fareham within eight months at a fixed price. The post-war project suffered shortages of labour and materials, and completion took about twenty-two months. The builders' costs substantially exceeded their expectation. They sought payment on a reasonable-remuneration basis, arguing that the original contract had been frustrated by the unexpected difficulties. A qualification concerning supplies had appeared during negotiations, but the effect of the concluded agreement was disputed. The House of Lords considered whether the delay and additional burden displaced the fixed-price bargain.
Legal Issue
Did the unexpected shortages and extended construction period make performance radically different from the agreed undertaking, releasing the builders from the fixed-price contract?
Held
The House of Lords rejected frustration. Labour shortages and other difficulties made the building operation slower and more expensive, but did not transform it into something radically different from the undertaking accepted. The builders had agreed a price for the work and could not substitute a reasonable-remuneration claim merely because their anticipated cost proved too optimistic.
Lord Radcliffe's explanation focused on the difference between the performance undertaken and that required after the event. Increased hardship, expense or inconvenience was not sufficient on these facts. The court also did not treat the qualification raised in pre-contract negotiations as changing the agreed allocation of risk. The contract remained operative and governed the builders' entitlement to payment.
⭐ Legal Principle
Frustration requires a supervening event, without relevant fault or allocated risk, which makes performance radically different from the obligation undertaken. Increased expense, delay or difficulty does not alone satisfy that test. The contract must first be construed to identify what risks and performance the parties accepted.
Significance
Davis supplies the familiar radical-difference formulation and resists using frustration to revise an unprofitable fixed-price bargain. It contrasts with cases where the promised event or subject matter disappears. The decision does not require literal physical impossibility in every case, nor does it make every delay irrelevant. Duration, contractual purpose and risk allocation must be assessed. Its failed quantum meruit claim also illustrates that restitution cannot simply replace the agreed price while the contract remains in force.
Common exam questions about this case
Why did the prolonged building work not frustrate the contract?
The shortage increased the time and cost of doing the agreed work, but did not make the undertaking radically different. The contractor had accepted the relevant commercial risk within the fixed-price bargain. Frustration therefore did not release it from that bargain merely because performance proved much less profitable than expected.
Does frustration require literal impossibility?
No. The test includes a sufficiently radical change in the required performance, not just physical impossibility. Davis failed because its increased difficulty did not cross that threshold. An answer should compare the contractual undertaking with the actual circumstances rather than assume either impossibility or expense is a complete formula.
Why could the builders not simply claim reasonable remuneration instead?
The contract had not been frustrated and continued to regulate the price. A quantum meruit could not be used to avoid that agreed allocation merely because the builders underestimated their costs. Identifying whether the contract remains operative is therefore essential before proposing a restitutionary alternative to its payment terms.