However, there are some principles that you should be aware of. The length of the delay in relation to the contract as a whole is likely to be a relevant factor. For example, if a party to a three-year shared office space contract has not had access to the premises for two months, this may be considered insignificant and would not lead to frustration. However, if the contract was valid for six months and the occupation was banned by the government for five months, it is possible that this frustrated the contract. Nor is it easy to demonstrate that the impact of COVID-19 on the contract goes beyond inconveniences, costs and burdens. The execution of the contract must become impossible or radically different. The most obvious example might be when a party has died of COVID-19 and the primary purpose of the contract is the personal rights and obligations of the deceased party. The problem that many businesses are currently facing is uncertainty about the length of the delay caused by Covid-19 and the lack of clarity about the resumption of a number of services – for example, the reopening of closed premises. It is therefore difficult to predict whether the delay caused by Covid-19 will frustrate contracts. The Court recognized that the forced closure of a site following a global event, particularly where leases allow only certain uses that have become impossible, can, in principle, lead to frustration. But even if the premises were completely closed, the frustration would only apply in rare cases. The test remains whether the situation has become so „radically different” from the situation envisaged by the parties at the time of the conclusion of the contract that it would be „unfair” for the contract to continue (The Sea Angel [2007] 2 Lloyd`s Rep 517).

Despite the fact that the frustration of the contract is difficult to determine, drafting contracts broad enough to be applied to new situations or circumstances can help parties who want to avoid finding a frustrated contract. For example, force majeure clauses are used in contracts to avoid frustration. These are clauses that suspend performance in the event of incidental events without fault of one of the parties, but maintain the existence of the contract. To avoid finding a frustrated contract, the parties should share the risks as much as possible. It should be noted that the change in circumstances is not the only event that causes frustration of the contract. A radical change in the obligations as they are found in the terms of the contract may ultimately lead to the application of the doctrine. If it is determined that a contact has become frustrated, damages can only be claimed for breaches before the frustration of the contract, which can significantly limit the amount of recovery. In addition, frustration may mean that there is no compensation under a relevant insurance policy.

Frustration should usually be the last resort, especially in cases where the parties want to pursue a business relationship, want to continue the contract in the future, or when it may be difficult to find another buyer or supplier. In short, the doctrine of frustration will only apply in rare cases. The parties should not use it as an automatic remedy in the event of an unprecedented event or even a global pandemic. While the courts have recognized the possibility of a lease or contract being thwarted, they have repeatedly said that the threshold for proving frustration remains high. This is an important warning for parties entering into contracts of all kinds. Some clauses refer to actions that „prevent” a party from fulfilling an obligation, and this wording is likely to be interpreted as meaning that an obligation must be impossible to fulfil rather than more difficult or costly. Other clauses may refer to „hinder”, „hinder”, „alter” or „delay”. Nevertheless, courts generally require that the service be much more cumbersome, not only more expensive or heavier in execution or less economically desirable. If one party`s primary obligation is to pay money, it would be unusual for a force majeure provision to waive that obligation when the other party is willing to perform its respective obligations.

In such a contract, the contractor agrees to perform the work for a certain amount of money and runs the risk that the costs will be higher or lower than expected. If the delays occur through no fault of anyone, this may be due to the examination of the contract, and an additional period may be provided: in this regard, the other party assumes the risk of a delay. But it does not run the risk of increasing costs as a result of such a delay. It may be that the delay is so different from anything that has been considered that the contract has ended, but in this case, in my opinion, at most one could say that the delay was greater than expected. It was not caused by a new and unpredictable factor or event: the work turned out to be more stressful, but it never became a job of a different type than the one provided for in the contract. [33] A contract can be thwarted if a contracted person or group is no longer available (whether due to death, illness or unavailability). This is usually only done for the provision of personal services[24], and not for general commercial services such as construction work, which could be carried out by many people. [2] Robinson v Davison[25] concerned a pianist who had fallen ill before a concert where he was to be signed; The contract was perceived as frustrating. A similar result can be seen in Condor v The Baron Knights. [26] There is no fixed rule as to which event is considered a frustrating event by the courts.

On the contrary, a party must consider whether the situation in which performance of the contract was originally envisaged has become radically different. The standard of proof is very high and generally higher than the circumstances considered in a force majeure clause. Frustration applies to the core obligations of a contract rather than to peripheral obligations. A force majeure clause releases part of the performance of its contractual obligations due to an event beyond the reasonable control of the party concerned. In Australia, force majeure is generally not recognized at common law, but it is a contractual concept. Since force majeure is the product of contractual negotiations, the parties have the freedom to negotiate force majeure clauses at their own discretion, which means that force majeure clauses vary from contract to contract. Common force majeure cases include „force majeure”, „natural disasters”, „state action or intervention”, „labour shortages”, „national emergencies” and „acts of war”. A contract is not perceived as frustrated when a party enters into a bad deal or faces difficulties, inconveniences or material losses. .