Krell v Henry [1903] 2 KB 740
Facts
Henry hired rooms from Krell for specified days when the coronation processions were expected to pass. Their location made them particularly suitable for viewing the event, although the written agreement did not expressly refer to the procession. Henry paid a deposit and owed a balance. The King's illness caused the processions to be postponed. Krell sought the outstanding payment, while Henry relied on the failure of the contemplated occasion. A deposit counterclaim was initially raised but not pursued in the appeal. The principal issue was whether the shared purpose of the hire had disappeared.
Legal Issue
Did postponement of the coronation processions destroy the shared foundation of the room hire, discharging Henry from liability for the remaining price?
Held
The Court of Appeal held that the cancellation of the processions frustrated the room-hire agreement. Although the written terms did not expressly make the procession a condition, the surrounding circumstances showed that viewing it from the rooms was the shared foundation of the bargain. The premises remained physically available, but their agreed commercial purpose had disappeared. Henry was therefore not liable for the outstanding balance. His counterclaim for the deposit had been abandoned, so the appeal did not establish a right to its repayment. The decision distinguished a shared contractual foundation from one party's private motive, and did not imply that every booking associated with a cancelled event is discharged.
⭐ Legal Principle
Frustration can occur when an unforeseen event destroys the shared foundation of a contract, even though literal performance remains physically possible. A party's personal motive is insufficient; the lost purpose must form part of the contractual basis assessed from the agreement and its context.
Significance
Krell explains frustration of purpose and is conventionally contrasted with Herne Bay, where a substantial agreed purpose remained possible. The difference depends on the bargain, not simply the external cancellation. It also requires careful separation of discharge from financial adjustment: the abandoned deposit counterclaim did not decide repayment. Modern treatment of money paid or payable following frustration may engage the Law Reform (Frustrated Contracts) Act 1943, subject to its scope. State the historical holding before applying that later statutory framework.
Common exam questions about this case
Why did physical availability of the rooms not answer the case?
The shared bargain concerned the rooms' particular suitability for viewing the processions. Once that foundation disappeared, supplying physical access was not the contemplated performance in its contractual setting. The reasoning went beyond literal possibility while still requiring a purpose shared by both parties.
Would cancellation of a hirer's private plan necessarily frustrate a booking?
No. A private motive may remain the hirer's risk even if the other party knows about it. The question is whether the event was the foundation of the contract itself. Krell's special rooms and viewing arrangement must be distinguished from an ordinary service usable for many purposes.
Did Krell decide that the deposit had to be repaid?
No. The counterclaim concerning the deposit was abandoned, so the decision on the unpaid balance should not be expanded into a repayment ruling. In a modern problem, monetary consequences may instead fall under the Law Reform (Frustrated Contracts) Act 1943, where its provisions apply.