Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32

Fibrosa, a Polish company, agreed to buy machinery from an English manufacturer and paid £1,000 in advance. Before delivery, the outbreak of war and subsequent occupation of Poland made the agreed export and performance unlawful or impossible. No machines were delivered. Fibrosa sought repayment of its advance, while the manufacturer had incurred costs preparing the goods. The litigation concerned the financial consequences of a contract discharged by frustration. In particular, the court had to identify whether the manufacturer's preparatory expenditure prevented a total failure of the contractual basis for Fibrosa's payment.

Could the buyer recover its advance when the contract was frustrated before delivery, despite expenditure incurred by the manufacturer in preparing performance?

The House of Lords held that the advance payment could be recovered because the basis for it had wholly failed. The contract was frustrated by the supervening wartime circumstances preventing the agreed performance. Fibrosa had paid for delivery of the machines, but received none of the promised contractual return.

The manufacturer's expenditure preparing to perform did not itself amount to performance received by the buyer for the purpose of the common law total-failure inquiry. The earlier restrictive approach to payments under frustrated contracts was not followed. The decision therefore allowed recovery of the advance, while exposing the difficulty of allocating expenses through the common law alone. The Law Reform (Frustrated Contracts) Act 1943 subsequently supplied a broader statutory adjustment for contracts within its scope.

An advance payment may be recoverable at common law where frustration produces a total failure of the basis on which it was paid. Preparatory expenditure by the recipient is not necessarily a benefit received by the payer. For contracts within its scope, the 1943 Act now governs important financial adjustments.

Fibrosa links frustration with restitution and helped expose the need for statutory allocation of losses. It should be distinguished from an action for damages: neither party was liable merely because the supervening event discharged future performance. Gamerco illustrates the subsequent statutory approach to repayment and expenses. In a current problem, check the 1943 Act's scope and the contractual allocation before relying only on common law total failure. Recovery is not simply available because the payer regrets the bargain.