Taylor v Caldwell (1863) 3 B & S 826

Caldwell agreed to let the Surrey Gardens and Music Hall to Taylor for four specified days so that Taylor could stage concerts and fêtes. Taylor was to pay £100 for each day and undertook significant work and expense in advertising and preparing the events. After the agreement was made, but before the first concert, the music hall was accidentally destroyed by fire. Neither party was responsible for the destruction, and the events could not take place at the agreed venue. Taylor sued Caldwell for failing to make the hall available and sought compensation for the wasted expenditure. Caldwell argued that the contract depended on the continuing existence of the music hall and that the accidental fire had discharged both parties from further performance.

Was Caldwell's obligation to provide the music hall absolute, or was the contract discharged because its performance depended on the hall's continued existence and it had perished without fault?

The Court of Queen's Bench held that Caldwell was not liable for failing to provide the hall. Blackburn J reasoned that the agreement was made on an implied condition that the specific music hall would continue to exist. Its accidental destruction, without fault on either side, made performance impossible and excused both parties from their future obligations. The court distinguished contracts imposing an absolute promise, where unexpected difficulty may not excuse performance. Here, the identity and continued existence of the venue were fundamental to what the parties had agreed. The decision introduced an exception to strict contractual liability for cases in which an essential person or thing ceases to exist before performance is due.

A contract may be discharged where performance depends on the continued existence of a specific person or thing and, without either party's fault, that person or thing ceases to exist. The event must strike at a basic assumption of the agreement rather than merely making performance more difficult or expensive.

The decision marked a major departure from the older insistence on absolute contractual obligations and became the starting point for frustration in English law. Later cases moved from the language of an implied condition to asking whether the supervening event makes performance radically different from what was undertaken, notably Davis Contractors Ltd v Fareham UDC. Krell v Henry extended the doctrine beyond physical destruction. The Law Reform (Frustrated Contracts) Act 1943 now governs many financial consequences of frustration, including payments and valuable benefits received before discharge.