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Contractual disputes may arise
from unforeseen circumstances. For example, if you have made a contract with a
second hand car dealer to sell your current car and the car was totally
destroyed in a car accident due to no fault of yours, what do you do? Are you
expected to pay for damages?
Usually for such scenarios, the
straightforward thing is to claim insurance. However, if you do not have any
insurance on your vehicle, you may wish to plead frustration to discharge your
contract.
When does frustration of contract occur?
Frustration of contract occurs
when a contractual obligation has become incapable of being performed because
the circumstances in which performance is called for would render a thing
radically different from that which was undertaken by the contract[1].
The circumstances should not arise from the fault of either party.
What constitutes frustration of contract?
There are four main scenarios in
which you could plead frustration of contract:
i.
It is illegal to continue
performing the contract
ii.
The contract becomes impossible
to perform
iii.
It is overly onerous to
continue performing the contract
iv.
The purpose of the contract is
nullified due to external circumstances
The most common scenario pleaded
for frustration of contract is (ii) where the parties plead to the court that
their contract is frustrated due to impossible performance. For example, a
contract could be frustrated due to the death or incapacity of one party to a
contract provided if the contract is a personal contract.
If you are unsure if you should
be claiming frustration of contract for your case, it would be better to seek
out a commercial lawyer for his or her advice.
Do I need to continue paying for the contract which has been
frustrated?
It depends on your case. The
legislation that governs the effects of frustration in Singapore is the
Frustrated Contracts Act (Cap. 115) which sets out the guidelines after
contracts have been frustrated. A commercial lawyer would be best suited to
advise you on your contractual obligations after frustration is pleaded.
[1] Andrew Phang Boon Leong and Goh Yihan, Contract Law in Singapore (Wolters
Kluwer Law and Business, 2012)
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