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Cite as: [1956] 2 All ER 145, [1956] AC 696, [1956] UKHL 3

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    Die Jovis, 19° Aprilis 1956

    Parliamentary Archives,




    Morton of

    Lord Reid




    of Harrow




    19th April, 1956.

    Viscount Simonds


    This appeal arises out of arbitration proceedings to which the parties were
    the Appellants Davis Contractors Limited, a firm of building contractors,
    and the Respondents the Fareham Urban District Council. On the 9th
    July, 1946, the parties had entered into a building contract whereby the
    Appellants agreed to build for the Respondents 78 houses at Gudgheath
    Lane, Fareham, in the county of Southampton within a period of eight
    months for a sum of £85,836.

    For various reasons, the chief of them the lack of skilled labour, the work
    took not eight but twenty-two months. The Appellants were in due course
    paid the contract price which, together with stipulated increases and adjust-
    ments, amounted to £94,424. They contended, however, that owing to the
    long delay the contract price had ceased to be applicable and that they were
    entitled to a payment on a quantum meruit basis.

    The Appellants put their claims on alternative grounds (a) that the contract
    price was subject to an express overriding condition contained in a letter
    of the 18th March, 1946, that there should be adequate supplies of labour
    and material and (b) that the contract had been entered into on the footing
    that adequate supplies of labour and material would be available to complete
    the work within eight months, but, contrary to the expectation of both
    parties, there was not sufficient skilled labour and the work took twenty-two
    months, and that this delay amounted to frustration of the contract. It
    was conceded by the Respondents that, if the contract was frustrated as
    alleged, the Appellants were entitled to a further sum upon the basis of a
    quantum meruit. With this aspect of the case which might have presented
    some difficulty your Lordships will not be troubled. These two grounds
    of claim have persisted through the long course of these proceedings which
    have included a prolonged hearing before an arbitrator, an award in the
    form of a special case, a hearing of the case by the Lord Chief Justice,
    an appeal to the Court of Appeal, a reference back to the arbitrator, a
    supplemental award by him, a further hearing by the Court of Appeal,
    and an order of that Court rejecting the Appellants' claim.

    My Lords, with the first ground of claim I will deal very briefly. I am
    in full agreement with the opinion of Lord Justice Parker on this part
    of the case, which will be elaborated by my noble and learned friend, Lord
    Radcliffe. The Appellants' letter of the 18th March. 1946, to which I have
    referred, was a covering letter in which, while enclosing their tender prepared
    in accordance with the Respondents' Bills of Quantities and Specifications,
    they made a number of statements about the basis of that tender. The
    material statement was as follows: " Our tender is subject to adequate sup-
    " plies of material and labour being available as and when required to
    " carry out the work within the time specified ". It is possible that, if this
    letter had been followed by an immediate acceptance, the parties must have
    been deemed to enter into a contract which contained some such term, though
    its precise content and effect would have been extremely difficult to define.
    But that is not what took place nor what might be expected to take place.
    On the contrary, there were negotiations following the tender and these
    resulted in the formal agreement of the 6th July, which did not incorporate
    the letter of the 18th March. It would as it appears to me be contrary
    to all practice and precedent to hark back to a single term of preceding
    negotiations after a formal and final agreement omitting that term has been
    signed. The reference to the letter in an appendix to the tender is clearly
    confined to the matter with which that appendix dealt, namely the so-called
    " escalator" clause of the conditions of contract.


    The second ground of claim demands more serious consideration not
    because it has any intrinsic merit but because it has acquired from the
    course of the proceedings a certain specious validity.

    I cannot avoid reciting to your Lordships some of the findings of the
    Arbitrator. After stating that the site was handed to the Appellants and
    work was begun on the 20th June, 1946, and completed on the 14th May,
    1948, the Arbitrator proceeded thus:

    " (6) At the time of entering into the said agreement the Claimants
    " and the Respondents anticipated that there would be available in the
    " building industry a sufficient labour force and a sufficient supply of
    " materials to enable the work specified in the agreement to be carried
    " out substantially within the time stipulated in the agreement.

    " (7) The conditions in which the work had to be carried out were
    " different from those anticipated by the Claimants and the Respondents
    "in that:

    " (a) At all times there was a serious shortage of skilled labour
    " in the industry and the Claimants were unable to obtain an
    " adequate supply of such skilled labour ;

    " (b) There was difficulty in obtaining adequate supplies of bricks,
    " timber and plumbers' goods ;

    " (c) There was an adequate supply of unskilled labour in the
    " industry but not at all times within the locality of Fareham where
    " the Claimants were required under the General Conditions of
    " Contract to recruit such labour unless the importation of labour
    " from elsewhere were specially sanctioned by the Respondents.

    " (8) As a result of the said shortage of labour and materials the
    " Claimants were unable to complete the work within the time specified
    " in the agreement and the Respondents accepted the position and
    " allowed the work to continue until finally completed on 14th May,
    " 1948, without serious objections by the Respondents.

    " (9) As a result of the longer time taken to complete the work the
    " Claimants incurred additional expense and the actual cost to them
    " of carrying out the contract was £115,233 14s. 0d. The Claimants
    " have been paid by the Respondents the sum of £94,424 17s. 9d."

    He then referred to the Appellants' claim for further payment in respect
    of their additional cost and expense, which he found to have been partly
    due to the circumstances set out above, over which they had no control,
    and to exceptional weather conditions and partly due to matters for which
    they were themselves to blame, and came to the conclusion that the sum
    of £17,651 13s. 1d. (which was afterwards slightly reduced) represented the
    amount of additional cost properly and unavoidably incurred by them. He
    then stated the submission of the Appellants on this point, viz.: that the
    contract was entered into on the " basis" that adequate supplies of labour
    and materials would be available at the times required and that because
    they were not so available the " footing " of the contract was removed and
    that they were entitled to be paid on the basis of a quantum meruit. The
    question of law stated by him which was intended to cover this point was
    put baldly thus " Whether the Claimants " [the Appellants] " are entitled to be
    " paid any sum in excess of £94,424 17s. 9d. already paid them? "

    Upon the matter coming before the Court the Lord Chief Justice was of
    the opinion which your Lordships have rejected that the letter of the 18th
    March, 1946, was incorporated in the contract and upon that basis was
    further of opinion that there was an implied promise by the Respondents
    to pay a further reasonable sum if the conditions of the letter were not
    satisfied. The learned Judge referred to the case of Bush v. Whitehaven
    which must be discussed later, but observed " I do not think that
    " it is necessary to go as far as that because I do not think that it is a destruc-
    " tion of the whole foundation of the contract".

    An appeal was taken to the Court of Appeal. Upon the question of
    the letter of 18th March being incorporated in the contract the Court,
    though no order to that effect was drawn up, expressed a view adverse


    to the Appellants, but upon the alternative ground of claim, with which
    I am now concerned, thinking that the findings of the arbitrator were
    inadequate referred the case back to him with this direction " that the
    " said Arbitrator may make further findings of fact for the information
    " of this Court relevant to the application of the principle in the case of
    " Bush v. Whitehaven and the contentions of the parties on this issue. The
    " Arbitrator to state his own conclusions on the contentions of the parties
    " if he intends his award to be a final award ".

    My Lords, I do not find it easy to interpret this direction. The case of
    Bush v. Whitehaven Trustees, which is reported only in Hudson on Building
    Contracts, if it can be said to embody any principle, illustrates an early
    stage in the development of the doctrine of frustration which has since been
    the subject of many decisions in this House. And it was, I think, to this
    issue that the contentions of the parties and the further findings of the
    Arbitrator were directed. Thus, while the Appellants repeated their former
    contention that, because adequate supplies of labour and material were
    not available, the footing of the contract was removed, the Respondents
    contended that " in any event the footing on which the contract was agreed
    " was not so changed that the contract could be declared or treated as
    " void or the Claimants be entitled to payment on a quantum meruit" and
    " That any claim on a quantum meruit basis was precluded by reason of
    " the conduct of the parties after a claim for additional payment was first
    " intimated by the Claimants " and " That the Respondents so far from
    " allowing the Claimants to continue work on a different basis consistently
    " maintained that the contract was still applicable ".

    The Arbitrator then stated (inter alia) the following question of law
    " Whether the Claimants are entitled to be paid any sum in excess of the
    " £94,424 17s. 9d. already paid them, namely on a quantum meruit, by
    " reason of: (a) the footing upon which the contract was made having been
    " so changed in the course of its execution that its provisions no longer
    " applied or (b) an implied term in the contract that it ceases to bind in the
    " circumstances as found ".

    Having been asked to state his own conclusions he further found that
    both parties entered into the contract on the basis that adequate supplies
    of labour and material would be available at the times required, that such
    supplies were not so available and that, as the duration of the work was
    unavoidably extended from a period of eight months to one of twenty-two
    months, the footing of the contract was removed. I do not think it necessary
    to state all his conclusions but it is proper to add that, for reasons which
    are set out, he found that " the footing of the contract was so changed that
    " it became void and the Claimants are entitled to a fair and reasonable
    " price for the work they have done ". I do not refer to his findings about
    the conduct of the parties except to say that at an early stage they were
    at issue, the Appellants making and pressing a claim for additional pay-
    ment which the Respondents steadfastly resisted. Giving effect to his own
    conclusions the Arbitrator found that the Appellants were entitled to be
    paid a further sum of £17,258 13s. 1d.

    Now the matter came back to the Court of Appeal, which was not con-
    stituted as on the former occasion. The alternative grounds of claim were
    again fully argued. The first ground, that of the incorporation of the letter
    of the 18th March in the contract, was rejected either because it was held
    not to be incorporated or because, even if incorporated, it had not the
    effect for which the Appellants contended. Upon this I will say no more.

    The second ground of claim remains, and upon this the learned Judges
    of the Court of Appeal were unanimously against the Appellants and
    they were, in my opinion, clearly right. If the matter had in the first instance
    come before a Court of Law which after finding the facts as found by the
    Arbitrator had then to consider the law applicable to those facts, there
    could only have been one answer. The Lord Chief Justice was, in my
    opinion, stating the obvious when he said in the passage that I have cited
    " I do not think it is a destruction of the whole foundation of the contract".|


    The doctrine of frustration of a contract (for it is that doctrine and nothing
    else which must be invoked) has never been applied or, so far as I am
    aware, been sought to be applied to such a case unless indeed Bush v.
    Whitehaven was one. The contract was for completion of certain work in
    eight months: the contractors made their tender in the expectation that
    they would be able to do the work in the time and made a price accordingly.
    It may then be said that they made the contract on the " basis " or on
    the " footing " that their expectations would be fulfilled. Nor presumably
    were the expectations, or at least the hopes, of the Respondents in any
    way different. Let it be said, then, of them, too, that they contracted upon
    the same basis or footing. But it by no means follows that disappointed
    expectations lead to frustrated contracts. I do not propose to revive the
    controversy about the juridical basis of the doctrine of frustration. If it
    rests on an implied term of the contract to the effect that the parties will
    not be bound if a certain event happens or does not happen, I can see
    no ground for saying that such a term must be implied in this contract.
    If it is permissible to judge by the event, it is clear that the parties would
    not have agreed on any such term. I pause to observe that it is not enough
    to say that in the event of something unexpected happening some term must
    be implied: it must be clear also what that term should be. In such a
    case as this I can see no reason for supposing that the parties would
    have agreed either at what moment the frustrating event was to be deemed
    to happen or what was to be the position when it in fact happened. Equally,
    if, as is held by some, the true doctrine rests not on an implied term of
    the contract between the parties but upon the impact of the law on a
    situation in which an unexpected event would make it unjust to hold
    parties to their bargain, I would emphasise that in this aspect the doctrine
    has been and must be kept within very narrow limits. No case has been
    cited in which it has been applied to circumstances in any way comparable
    to those of the present case. It is sufficient to ask when in the course
    of this twenty-two month contract that unexpected disruptive event happened
    which put an end to it. " Rights ", said Lord Sumner in Bank Line, Limited
    v. Arthur Capel & Company
    [1919] AC 435, "ought not to be left in
    " suspense or to hang on the chances of subsequent events ". It is wholly
    inconsistent with this, as I think, fundamental condition that a building
    contractor should without intermission work upon his contract over a period
    which by much or little exceeds the contract time and at the end of it say,
    as the Appellants say here, " A twenty-two month project is not an eight
    " month project " or less formidably " An expenditure of £111,000 is not an
    " expenditure of £94,000 ", " therefore the original contract must be regarded
    " as frustrated and for all the work that has been done we must be paid
    " not the contract price but upon the basis of a quantum meruit". My Lords,
    I say it with all respect to the arguments of learned Counsel but it appears to
    me that that is to make nonsense of a doctrine which, used within its proper
    limits, serves a valuable purpose.

    But, it was urged, this case cannot be regarded in the manner that I
    postulated. There are the findings of the Arbitrator, a man experienced
    in the matter of building contracts, and they should not be set aside. I will
    say at once that the Arbitrator has clearly done his work with great care
    and skill. But his findings involve a blend of law and fact and, deliberately
    using the words that he has chosen, " basis" and " footing", I can see
    no justification for a conclusion of law that the contract was frustrated.

    It remains to say something about the case of Bush v. Whitehaven Trustees
    which has loomed so large in the earlier stages of this case and. in the
    argument before this House. I must say for myself that I find it an extremely
    puzzling case and, if it had been a decision of this House and therefore
    binding on us, I should have felt grave difficulty about it. But two things
    may be said: first it is not binding on us; secondly in so far as it is an
    authority on the law of frustration for which purpose alone I conceive it
    to have been cited, it must be read in the light of the numerous decisions
    of higher authority which have since been given. I am not satisfied that
    it can be supported on the ground suggested by Lord Justice Denning nor,


    on the other hand, do I say that the decision is a wrong one. But I do
    emphatically say that it cannot in the light of later authority be used to
    support the proposition that where, without the default of either party,
    there has been an unexpected turn of events which renders the contract
    more onerous than the parties had contemplated that is by itself a ground
    for relieving a party of the obligation he has undertaken. I agree with
    the learned Lord Justice that that is the import of the decision of this
    House in British Movietonews Ltd. v. London & District Cinemas Ltd., [1952]
    A.C. 166 and that it precisely covers this case.

    I would dismiss this appeal with costs.

    Lord Morton of Henryton


    Two questions of law arise on this appeal:

    1. Was the letter of 18th March, 1946, from the Appellants to the
      Respondents, incorporated in the contract under seal which was entered
      into by the parties on the 9th July, 1946?

    2. Was that contract frustrated, with the result that the Appellants,
      who have erected 78 houses for the Respondents, are not bound to accept
      the contract price, but are entitled to a further sum of over £17,000,
      which the arbitrator has awarded to them?

    My Lords, in my opinion the letter of 18th March, 1946 merely formed
    part of the negotiations between the parties which led up to the contract
    of 9th July and its terms were not incorporated into that contract. This
    matter is dealt with fully in the opinion which will be delivered by my noble
    and learned friend, Lord Radcliffe, and I am content to say that I agree with
    his reasoning and his conclusion.

    I can state quite briefly my views on the second question, since I understand
    your Lordships are all of opinion, as I am, that the Court of Appeal reached
    the right conclusion. The Appellants contracted to complete 40 houses
    within six months, 70 within seven months, and all the 78 houses within
    eight months. It is agreed that the work started on the 20th June, 1946,
    and should, therefore, have been completed in February, 1947. In fact, the
    progress of the work was delayed, because, as the arbitrator held, " adequate
    " supplies of labour and materials were not available at the times required ".
    Nevertheless, the Appellants went on with the work, without any actual inter-
    ruption, and completed it in a period of 22 months. They now contend that
    the contract was frustrated, and they rely on certain findings by the arbitrator,
    which have already been read, and on the decision of the Court of Appeal
    in Bush v. Whitehaven, reported in Hudson on Building Contracts, fourth
    edition, volume 2, page 122.

    My Lords, it is clear that the Appellants are entitled to no more than
    the contract price, unless they can satisfy your Lordships that at some time
    the contract of 9th July, 1946, came to an end, so that in continuing to erect
    houses they were no longer working under that contract. I am not so satisfied.
    I agree with the observation of Morris, L.J. that " though the basis or footing
    " of the contract was removed in the limited sense that the anticipations of
    " the parties were not realised, the facts found do not require an implication
    " in the contract that it was to come to an end if these anticipations were
    " not realised ". It is, I think, impossible to hold that a contract has been
    frustrated unless it can be said " as and from such and such a date, at latest.
    " the contract ceased to bind the parties ".

    In the course of the hearing Counsel for the Appellants were asked:
    " When do you say that the contract came to an end?", and they replied
    that they were unable to specify any time. I think that this answer was
    correct and inevitable, but it reveals the inherent weakness of the Appellants'


    The facts in the case of Bush v. Whitehaven are very briefly stated in the
    report, but I think it is clear that the judgments of the Court of Appeal in
    that case were based upon the findings of the jury, and in particular the fifth
    finding. The question put to the jury was: " Were the conditions of the
    " contract so completely changed, in consequence of the defendant's inability
    " to hand over the sites of the work as required, as to make the special pro-
    " visions of the contract inapplicable?", and the jury replied: " Yes ". This
    question was, I think, a question of law, or at least of mixed fact and law,
    but the Court of Appeal accepted the jury's answer, and on that footing
    held that by 8th October, 1886, when the contractors got possession of the
    required sites, the contract had ceased to exist. In my opinion Bush v.
    Whitehaven was a decision upon very special facts, which enabled the Court
    to find that, although the contractors finished the work specified in the
    contract, they were not working under the contract from 8th October, 1886,
    onwards. For this reason the case does not, in my opinion, assist the
    Appellants. I would add that since the decision in the case just cited, the
    doctrine of frustration has frequently been considered in your Lordships'
    House, and for an authoritative exposition of the doctrine one should turn
    to the speeches in this House rather than to the judgments of the Court of
    Appeal in Bush v. Whitehaven.

    I would dismiss the appeal.

    Lord Reid


    The arbitrator has found in his supplementary award that " the footing of
    " the contract was removed ", and his reason for so finding is that " both
    " parties entered into the contract on the basis that adequate supplies of
    " labour and materials would be available at the times required " but that
    adequate supplies were not available with the result that the duration of the
    work was unavoidably extended from 8 months to 22 months. It seems clear that
    he has used the words " footing " and " basis " because the Special Case was
    referred back to him for further findings of fact relevant to the application
    of the principle in the case of Bush v. Whitehaven, and the contentions of
    the parties on this issue, and the parties used these words in their contentions.
    The Appellants' submissions as stated in the award are almost identical with
    the arbitrator's findings, and the Respondents' submission is that the footing
    on which the contract was agreed was not so changed that the contract could
    be treated as void. This form of award gives rise to considerable difficulty.
    But I have some sympathy with the arbitrator: he may have found as much
    difficulty as I have in discovering " the principle in the case of Bush v.
    " Whitehaven ".

    In order to determine how far the arbitrator's findings are findings of law
    and therefore subject to review I think it is necessary to consider what is the
    true basis of the law of frustration. Generally this has not been necessary:
    for example, Lord Porter said in Denny, Mott & Dickson v. Fraser & Co,
    [1944] A.C. 265 at p. 281: " Whether this result follows from a true construc-
    " tion of the contract or whether it is necessary to imply a term or whether
    " again it is more accurate to say that the result follows because the basis
    " of the contract is overthrown, it is not necessary to decide ". These are the
    three grounds of frustration which have been suggested from time to time
    and I think that it may make a difference in two respects which is chosen.
    Construction of a contract and the implication of a term are questions of law,
    whereas the question whether the basis of a contract is overthrown, if not
    dependent on the construction of the contract, might seem to be largely a
    matter for the judgment of a skilled man comparing what was contemplated
    with what has happened. And if the question is truly one of construction I
    find it difficult to see why we should not apply the ordinary rules regarding
    the admissibility of extrinsic evidence whereas, if it is only a matter of com-
    paring the contemplated with the actual position, evidence might be
    admissible on a wider basis


    Further, I am not satisfied that the result is necessarily the same whether
    frustration is regarded as depending on the addition to the contract of an
    implied term or as depending on the construction of the contract as it stands.

    Frustration has often been said to depend on adding a term to the contract
    by implication: for example, Lord Loreburn in Tamplin Steamship Co. Ltd.
    v. Anglo Mexican Petroleum Products Co. Ltd. [1916] 2 A.C. 397 at p. 404,
    after quoting language of Lord Blackburn, said: " That seems to me another
    " way of saying that from the nature of the contract it cannot be supposed
    " the parties, as reasonable men, intended it to be binding on them under
    " such altered conditions. Were the altered conditions such that, had they
    " thought of them, they would have taken their chance of them, or such
    " that as sensible men they would have said: ' If that happens, of course,
    "' it is all over between us"? What, in fact, was the true meaning of the
    " contract? Since the parties have not provided for the contingency, ought a
    " court to say it is obvious they would have treated the thing as at an end? ".

    I find great difficulty in accepting this as the correct approach because it
    seems to me hard to account for certain decisions of this House in this way.
    I cannot think that a reasonable man in the position of the seaman in Horlock
    v. Beal
    [1916] 1 A.C. 486 would readily have agreed that the wages payable
    to his wife should stop if his ship was caught in Germany at the outbreak
    of war, and I doubt whether the charterers in the Bank Line case could
    have been said to be unreasonable if they had refused to agree to a term
    that the contract was to come to an end in the circumstances which occurred.
    These are not the only cases where I think it would be difficult to say that a
    reasonable man in the position of the party who opposes unsuccessfully
    a finding of frustration would certainly have agreed to an implied term
    bringing it about.

    I may be allowed to note an example of the artificiality of the theory of
    an an implied term given by Lord Sands in Scott & Sons v. Del Sel [1922]
    S.C. 592 at p. 595: " A tiger has escaped from a travelling menagerie. The
    " milk girl fails to deliver the milk. Possibly the milkman may be exonerated
    " from any breach of contract: but even so it would seem hardly reasonable
    " to base that exoneration on the ground that ' tiger days excepted ' must be
    " held as if written into the milk contract".

    I think that there is much force in Lord Wright's criticism in Denny, Mott
    & Dickson
    at p. 275: " The parties did not anticipate fully and completely,
    " if at all, or provide for what actually happened. It is not possible, to my
    " mind, to say that, if they had thought of it, they would have said: ' Well, if
    " ' that happens, all is over between us '. On the contrary, they would almost
    " certainly, on the one side or the other, have sought to introduce reservations
    " or qualifications or compensations ".

    It appears to me that frustration depends, at least in most cases, not on
    adding any implied term but on the true construction of the terms which are
    in the contract read in light of the nature of the contract and of the relevant
    surrounding circumstances when the contract was made. There is much
    authority for this view. In British Movietonews Ltd. v. London & District
    Cinemas, Ltd.
    [1952] A.C. 166 at p. 185 Lord Simon said: " If, on the other
    " hand, a consideration of the terms of the contract, in the light of the circum-
    " stances existing when it was made, shews that they never agreed to be bound
    " in a fundamentally different situation which has now unexpectedly emerged,
    " the contract ceases to bind at that point—not because the court in its
    " discretion thinks it just and reasonable to qualify the terms of the contract,
    " but because on its true construction it does not apply in that situation ".
    In Parkinson v. Commissioners of Works [1949] 2 K.B. 632 Asquith, LJ.
    said (at p. 667): " In each case a delay or interruption was fundamental
    " enough to transmute the job the contractor had undertaken into a job of a
    " different kind, which the contract did not contemplate and to which it
    "could not apply, although there was nothing in the express language of
    " either contract to limit its operation in this way ". I need not multiply
    citations but I might note a reference by Lord Cairns so long ago as 1876 to
    " additional or varied work so peculiar so unexpected and so different from
    " what any person reckoned or calculated upon " (Thorn v. The Mayor and


    Commonalty of London, 1 App. Cas 120 at p. 127). On this view there is
    no need to consider what the parties thought or how they or reasonable men
    in their shoes would have dealt with the new situation if they had foreseen
    it. The question is whether the contract which they did make is, on its
    true construction, wide enough to apply to the new situation: if it is not
    then it is at an end.

    In my view, the proper approach to this case is to take from the arbitrator's
    award all facts which throw light on the nature of the contract or which
    can properly be held to be extrinsic evidence relevant to assist in its con-
    struction and then, as a matter of law, to construe the contract and to
    determine whether the ultimate situation as disclosed by the award is or
    is not within the scope of the contract so construed.

    The Appellants on 18th March, 1946, sent to the Respondents with their
    tender a covering letter. I agree with your Lordships that this letter was not
    incorporated in the contract of 9th July, 1946, and I do not think that it can
    be used in construing this contract. It was simply part of the preliminary
    negotiations and we do not know and cannot enquire why it was not
    incorporated in the contract.

    The arbitrator has found that both parties " anticipated that there would
    " be available in the building industry a sufficient labour force and a sufficient
    " supply of materials to enable the work specified in the agreement to be
    " carried out substantially within the time stipulated in the agreement".
    The nature of the contract is such that they must have expected this. The
    contract required the Appellants to complete the work within 8 months and
    provided for payment of liquidated damages if the Appellants failed to do so
    subject to the surveyor being required in certain events to allow such addi-
    tional time as he might deem fair and reasonable: and it was clearly of great
    importance to the Appellants that there should be no substantial delay
    because any such delay was bound to add considerably to their costs. It
    appears from the arbitrator's findings that the parties did not make their
    expectations known to each other, and I do not think that a finding that
    the parties in fact expected that there would be no substantial delay adds
    anything material or alters the legal position.

    The arbitrator then found that the conditions in which the work had to be
    carried out were different from those anticipated in that at all times there was
    a serious shortage of labour and difficulty in obtaining adequate supplies
    of bricks and other material. He found that as a result of this shortage and
    the consequent delay in completing the work the actual cost to the Appellants
    of carrying out the contract was £115,233 whereas the sum paid to them
    under the contract was £94,424. The arbitrator has not awarded the whole of
    the difference between these sums. He held that to some extent the Appellants
    were themselves to blame and awarded £17,651 as the additional cost and
    expense properly and unavoidably incurred by them

    If the contract continued to apply then the Appellants are not entitled
    to more than they have already received; but if it was brought to an end
    then the Respondents admit that the Appellants are entitled to the sum
    awarded subject to a very small adjustment.

    The arbitrator found that "the Respondents accepted the position
    " and allowed the work to continue until finally completed on 14th
    " May, 1948, without serious objections by the Respondents". I do
    not think that that means or was intended by the arbitrator to mean
    that at some time while the work was in progress the parties agreed
    or must be held to have agreed that their contract should no longer
    apply and that the work should proceed on some other basis. There
    is no finding as to when any such agreement must be held to have been made
    or what were its terms and there are no facts found from which such an
    agreement could be inferred. The Respondents no doubt recognised that
    the delays were not due to the fault of the Appellants: they made no claim
    for liquidated damages, and they made no attempt to take the work out of
    the hands of the Appellants as they could have done if the Appellants had
    been at fault. But that is no ground for inferring an agreement to terminate
    the contract and proceed on some different basis.


    The Appellants' case must rest on frustration, the termination of the con-
    tract by operation of law on the emergence of a fundamentally different
    situation. Using the language of Asquith, L.J. (as be then was) which I have
    already quoted, the question is whether the causes of delay or the delays were
    " fundamental enough to transmute the job the contractor had undertaken
    " into a job of a different kind, which the contract did not contemplate and to
    " which it could not apply ". In most cases the time when the new situation
    emerges is clear, there has been some particular event which makes all the
    difference. It may be that frustration can occur as a result of gradual change,
    but if so the first question I would be inclined to ask would be when the
    frustration occurred and when the contract came to an end. It has been
    assumed in this case that it does not matter at what point during the progress
    of the work the contract came to an end, and that, whatever the time may
    have been, if the contract came to an end at some time the whole of the
    work must be paid for on a quantum meruit basis. I do not pursue this
    matter because the Respondents have admitted that if there was frustration
    at any time the Appellants are entitled to the sum awarded. But even so,
    I think one must see whether there was any tune at which the Appellants
    could have said to the Respondents that the contract was at an end and that
    if the work was to proceed there must be a new contract, and I cannot find
    any time from first to last at which they would have been entitled to say
    that the job had become a job of a different kind which the contract did not
    contemplate. There is a difficulty about a party being entitled to go on
    and finish the work without raising the question that a new agreement is
    necessary and then maintain that frustration occurred at some time while
    the work was in progress, but again I do not pursue that matter because it
    does not arise in view of the course this case has taken.

    In a contract of this kind the contractor undertakes to do the work for a
    definite sum and he takes the risk of the cost being greater or less than
    he expected. If delays occur through no one's fault that may be in the con-
    templation of the contract and there may be provision for extra time being
    given: to that extent the other party takes the risk of delay. But he does
    not take the risk of the cost being increased by such delay. It may be that
    delay could be of a character so different from anything contemplated that
    the contract was at an end, but in this case in my opinion the most that
    could be said is that the delay was greater in degree than was to be expected.
    It was not caused by any new and unforeseeable factor or event: the job
    proved to be more onerous but it never became a job of a different kind
    from that contemplated in the contract.

    Bush v. Whitehaven Trustees appears to me to be a very special case and
    it must be read in light of the development of the law in later cases. I agree
    with your Lordships' comments on it and I can get little assistance from it
    for the decision of the present case. I agree that this appeal should be

    Lord Radcliffe


    I agree that this appeal fails. Of the two main grounds upon which the
    Appellants rely the shorter is that which concerns the question whether their
    building contract was made subject to a condition as to the availability of
    adequate supplies of labour and material by incorporating in its terms the
    relevant part of a letter from the Appellants to the Respondents dated 18th
    March, 1946. I will deal with that point first. But at the outset I must
    remark that if I thought, as I do not, that the Appellants were right in their
    argument that such a condition was incorporated, I should not necessarily
    conclude from that that they were entitled to succeed in their appeal. For
    their success would depend upon a further question, What significance should
    be attached to the words of the condition as part of the whole contract and
    what legal consequences should flow from them? As I believe that your


    Lordships are at one in thinking that the incorporation claimed never took
    place, I do not think that I need say anything more with regard to this further
    question except that it is itself a difficult one upon which some difference of
    view has already shown itself in the Courts.

    The building contract is contained in a written agreement under seal dated
    the 9th July, 1946. The agreement itself is quite short and its main purpose
    is to identify a number of separate documents which, it states, are to " form
    " and be read and construed as part of this Agreement." These other docu-
    ments had come into existence for the purpose or during the course of the
    negotiations which had proceeded the making of the formal agreement.

    Thus, early in the year 1946 the Respondents had drawn up Bills of Quan-
    tities and a Form of Tender which indicated the nature of their requirements,
    and had invited inspection of their Drawings, Specifications and Conditions
    of Contract. Contractors wishing to tender for all or part of the projected
    work were to deliver their tenders on the form prescribed by the 19th March,

    On the 18th March, the Appellants sent in a signed Tender on the appro-
    priate form undertaking the erection of (inter alia) 78 houses at Gudgeheath
    Lane, Fareham, at a price of £92,425 and within the time limits specified.
    With it went a covering letter of the same date. As this is the letter which
    contains the alleged contractual term it is desirable to set it out in full.

    " davis contractors limited

    325, Kilburn High Road,

    London, N.W.6
    18th March, 1946.


    Clerk of the Council,

    Fareham Urban District Council,

    Westbury Manor,



    dear sir,

    Re Gudgeheath Lane, Fareham.

    We have pleasure in enclosing herewith our Tender prepared in accordance
    with your Bills of Quantities, and Specifications submitted by your Engineer
    and Surveyor for One hundred and fifty two houses on four sites.

    Our tender is subject to adequate supplies of material and labour being
    available as and when required to carry out the work within the time specified.

    It is also based on the present published market prices of materials delivered
    to site and existing established rates of wages in the various trades for the

    Purchase tax has not been allowed for in our Tender and payment of such
    will form a nett addition to the Contract's sum. Also any variation in price
    of labour or materials will form nett additions or omissions to or from the
    Contract's sum, as may be determined by calculation.

    We have based our price for facings on a p.c. amount of 20s. on the present
    quoted price for Fletton bricks delivered Fareham station. This has been
    necessary as we have been unable to get firm quotations for facings delivered
    to site.

    Thank you for this opportunity of serving you, and we assure you always of
    our best attention.

    Yours faithfully,

    For and on behalf of

    davis contractors ltd.
    (sd) W. B. W. C. Curd.

    contracts manager."


    The Form of Tender which the Respondents prescribed had an Appendix
    attached to it, bearing the heading " Materials and Goods to be purchased
    " directly by the Contractor, in respect of which variation of the Contract sum
    " is desired in accordance with Clause 68a of the Conditions of Contract."
    There was then a blank space left under two column headings " Materials or
    " Goods "
    and " Basic Price." In this blank space the Appellants had written
    the words " As terms of letter attached dated 18th March, 1946, reference
    " RL/JEM." There was nothing else in the Appendix except a Clause limiting
    to some extent the contractor's right to vary the contract sum in respect of
    price variations of materials and goods. As the Arbitrator found in his original
    Award, the purpose of the Appendix was " to enable contractors tendering
    " for work to make a list in that Appendix of all materials or goods which
    " might be subject to a rise or fall in price so that both parties to the contract
    " would be protected from the effect of fluctuation of prices ..."

    Between the 18th March and the date when the formal Agreement was
    entered into the Appellants in fact supplied the Respondents with a detailed
    Schedule of Prices, which was intended to constitute the list of materials and
    goods called for by Appendix I and was accepted. No further reference
    appears to have been made to the letter of the 18th March.

    These are the circumstances in which it has to be decided whether the
    second paragraph of this letter formed a qualifying condition incorporated
    into the building contract. As the formal Agreement of 9th July was evidently
    intended to sum up everything that had emerged from the preceding negotia-
    tions, it is necessary for the Appellants to show that that Agreement somehow
    carried into its terms the stipulation contained in that second paragraph.
    Nor did their argument before your Lordships proceed on any other basis.

    It is put in two ways. I do not agree with either of them. On the con-
    trary, I agree with the way that this question was disposed of by Lord
    Justice Parker in the Court of Appeal: but, since the Appellants' argument
    on this point commended itself both to the Lord Chief Justice in the Queen's
    Bench Division and to a majority of the Court of Appeal on the occasion of
    each hearing, it is only right that I should notice it with some particularity.

    The formal Agreement, as I have said, referred to and incorporated a num-
    ber of the preliminary documents. These were listed in Clause 2 as
    follows: —

    " (a) The said Tender

    " (b) The Drawings

    " (c) The General Conditions of Contract

    " (d) The Specification

    " (e) The Bill of Quantities

    " (f) The Schedule of Rates and Prices (if any)."

    Now what was the " said Tender'"? The actual form of the words is due
    to the only recital of the Agreement, it which it is stated that the Employer
    " has accepted a Tender by the Contractor for the sum of £92,425 8s. 4d.,"
    etc. The first way that the Appellants put their case is that the Tender
    referred to is the whole offer made on the 18th March, and that this offer
    included the second paragraph of the covering letter which was intended
    as a qualification of the terms of the Form of Tender.

    My Lords, I think that this argument is a misreading of what the Appellants
    and Respondents intended by the formal Agreement. Certainly all the other
    documents incorporated by Clause 2 are separate named documents which the
    parties were at some pains to identify by their respective signatures. Every-
    thing points to the " said Tender" being, similarly, the document called
    Form of Tender which the Appellants had signed on the 18th March and
    forwarded by their letter. Nothing else in fact could properly be referred
    to as a " Tender " : for there is a contradiction in terms in speaking of a
    letter which states that " our Tender " is enclosed as if it were itself part of
    that very Tender. As I see it, the truth of the matter is that in forwarding
    their Tender the Appellants proposed a qualification of the expected contract
    which the Respondents did not accept and to which the Appellants did not
    themselves return. I do not think it unfair to add the point that if they had,


    their stipulation could hardly have been left in its existing form which is at
    once sweeping and inconclusive.

    The alternative argument rests upon the fact that the Appendix to the
    Form of Tender had had written in it by the Appellants a reference to the
    letter of 18th March. But I do not see how this can avail them with regard
    to the second paragraph of that letter. For the whole purpose of the Appendix
    was to provide a list of materials and goods that were to rank in allowing
    variations of the contract sum. In so far as parts of the letter did refer to
    prices of materials and goods, as indeed some did, I think that it would be
    correct to say that those passages formed part of the Form of Tender and, as
    such, might have been incorporated in the formal Agreement. I say " might
    " have been ", because I think that the Arbitrator's finding that the later
    Schedule of Prices supplied on 20th May was intended to constitute Appen-
    dix I of the tender must mean that the original reference to the letter of 18th
    March ceased to have any contractual significance by the time that the formal
    Agreement was made. But, however that may be, I think it plain that the
    reference in the Appendix could only bear upon matters relating to the
    prices of materials and goods and could not possibly have been understood by
    the parties as bearing upon the general question of the availability of supplies
    of labour and material. The context of the Appendix makes it impossible
    to suppose that the reference was intended to introduce the letter of 18th
    March as a whole.

    If the second paragraph of that letter did not form part of the contractual
    arrangements, the Appellants' right to claim any payment beyond the
    original contract sum rests upon the argument that at some date before
    completion the original contract became frustrated by the continued shortage
    of the necessary supplies of labour and material and that as from that date
    the building work was carried on under a new working arrangement which
    admitted of further payment. The supplemental Award of the Arbitrator
    was drawn up on the basis that this argument succeeded. Despite his
    findings I think that the law is against the Appellants on this point and
    that the award in their favour cannot be sustained.

    Before I refer to the facts I must say briefly what I understand to be the
    legal principle of frustration. It is not always expressed in the same way, but
    I think that the points which are relevant to the decision of this case are
    really beyond dispute. The theory of frustration belongs to the law of con-
    tract and it is represented by a rule which the Courts will apply in certain
    limited circumstances for the purpose of deciding that contractual obligations,
    ex facie binding, are no longer enforceable against the parties. The description
    of the circumstances that justify the application of the rule and, consequently,
    the decision whether in a particular case those circumstances exist are, I
    think, necessarily questions of law.

    It has often been pointed out that the descriptions vary from one case of
    high authority to another. Even as long ago as 1918 Lord Sumner was able
    to offer an anthology of different tests directed to the factor of delay alone,
    and delay though itself a frequent cause of the principle of frustration being
    invoked is only one instance of the kind of circumstance to which the law
    attends (see Bank Line Ltd. v. Arthur Capel & Co.
    [1919] AC 435, 457/460).
    A full current anthology would need to be longer yet. But the variety
    of description is not of any importance so long as it is recognised that each
    is only a description and that all are intended to express the same general
    idea. I do not think that there has been a better expression of that general
    idea than the one offered by Lord Loreburn in F. A. Tamplin Steamship Co.
    v. Anglo-Mexican Petroleum Products Co. Ltd [1916] 2 A.C. 397,
    403/404. It is shorter to quote than to try to paraphrase it: " A court can
    " and ought to examine the contract and the circumstances in which it was
    " made, not of course to vary, but only to explain it, in order to see whether or
    " not from the nature of it the parties must have made their bargain on the
    " footing that a particular thing or state of things would continue to exist.
    " And if they must have done so, then a term to that effect will be implied,
    " though it be not expressed in the contract ... no court has an absolving
    " power, but it can infer from the nature of the contract and the surrounding


    " circumstances that a condition which is not expressed was a foundation on
    " which the parties contracted." So expressed, the principle of frustration,
    the origin of which seems to He in the development of commercial law, is seen
    to be a branch of a wider principle which forms part of the English law of
    contract as a whole. But, in my opinion, lull weight ought to be given to the
    requirement that the parties " must have made " their bargain on the particu-
    lar footing. Frustration is not to be lightly invoked as the dissolvent of a

    Lord Loreburn ascribes the dissolution to an implied term of the contract
    that was actually made. This approach is in line with the tendency of English
    courts to refer all the consequences of a contract to the will of those who
    made it. But there is something of a logical difficulty in seeing how the parties
    could even impliedly have provided for something which ex hypothesi
    they neither expected nor foresaw; and the ascription of frustration to an
    implied term of the contract has been criticised as obscuring the true action
    of the Court which consists in applying an objective rule of the law of con-
    tract to the contractual obligations that the parties have imposed upon them-
    selves. So long as each theory produces the same result as the other, as
    normally it does, it matters little which theory is avowed (see British Movie-
    tone News Ltd.
    v. London & District Cinemas Ltd. [1952] A.C. 166, 184 per
    Viscount Simon). But it may still be of some importance to recall that, if
    the matter is to be approached by way of implied term, the solution of any
    particular case is not to be found by inquiring what the parties themselves
    would have agreed on had they been, as they were not, forewarned. It is
    not merely that no one can answer that hypothetical question: it is also
    that the decision must be given " irrespective of the individuals concerned,
    " their temperaments and failings, their interest and circumstances " (Hirji
    v. Cheong Yue Steamship Co. [1926] A.C. 497 at 510). The legal effect
    of frustration " does not depend on their intention or their opinions, or even
    " knowledge, as to the event" (loc cit at 509). On the contrary, it seems
    that when the event occurs the " meaning of the contract must be taken
    " to be, not what the parties did intend (for they had neither thought nor
    " intention regarding it), but that which the parties, as fair and reasonable
    " men, would presumably have agreed upon if, having such possibility in
    " view, they had made express provision as to their several rights and
    " liabilities in the event of its occurrence " (Dahl v. Nelson, Donkin & Co.
    6 App. Cas. 38, at 59 per Lord Watson).

    By this time it might seem that the parties themselves have become so far
    disembodied spirits that their actual persons should be allowed to rest in
    peace. In their place there rises the figure of the fair and reasonable man.
    And the spokesman of the fair and reasonable man, who represents after
    all no more than the anthropomorphic conception of justice, is and must be
    the Court itself. So perhaps it would be simpler to say at the outset that
    frustration occurs whenever the law recognises that without default of either
    party a contractual obligation has become incapable of being performed
    because the circumstances in which performance is called for would render
    it a thing radically different from that which was undertaken by the contract.
    Non haec in foedera veni. It was not this that I promised to do.

    There is, however, no uncertainty as to the materials upon which the Court
    must proceed. " The data for decision are, on the one hand, the terms and
    " construction of the contract, read in the light of the then existing circum-
    " stances, and on the other hand the events which have occurred " (Denny,
    v. Dickson Ltd. & James B. Fraser & Co. Ltd.
    [1944] AC 265, 274/5,
    per Lord Wright). In the nature of things there is often no room for any
    elaborate enquiry. The court must act upon a general impression of what
    its rule requires. It is for that reason that special importance is necessarily
    attached to the occurrence of any unexpected event that, as it were, changes
    the face of things. But, even so, it is not hardship or inconvenience or
    material loss itself which calls the principle of frustration into play. There
    must be as well such a change in the significance of the obligation that the
    thing undertaken would, if performed, be a different thing from that
    contracted for.


    I am bound to say that, if this is the law, the Appellants' case seems to
    me a long way from a case of frustration. Here is a building contract entered
    into by a housing authority and a big firm of contractors in all the
    uncertainties of the post-war world. Work was begun shortly before the
    formal contract was executed and continued, with impediments and minor
    stoppages but without actual interruption, until the 78 houses contracted
    for had all been built. After the work had been in progress for a time the
    Appellants raised the claim, which they repeated more than once, that they
    ought to be paid a larger sum for their work than the contract allowed:
    but the Respondents refused to admit the claim and, so far as appears,
    no conclusive action was taken by either side which would make the conduct
    of one or the other a determining element in the case.

    That is not in any obvious sense a frustrated contract. But the Appellants'
    argument, which certainly found favour with the Arbitrator, is that at some
    stage before completion the original contract was dissolved because it
    became incapable of being performed according to its true significance
    and its place was taken by a new arrangement under which they were entitled
    to be paid not the contract sum but a fair price on quantum meruit for
    the work that they carried out during the 22 months that elapsed between
    commencement and completion. The contract, it is said, was an eight
    months contract, as indeed it was. Through no fault of the parties it turned
    out that it took twenty-two months to do the work contracted for. The
    main reason for this was that, whereas both parties had expected that
    adequate supplies of labour and material would be available to allow for
    completion in eight months, the supplies that were in fact available were
    much less than adequate for the purpose. Hence, it is said, the basis or
    the footing of the contract was removed before the work was completed: or,
    slightly altering the metaphor, the footing of the contract was so changed
    by the circumstance that the expected supplies were not available that the
    contract built upon that footing became void. These are the findings which
    the Arbitrator has recorded in his Supplemental Award.

    In my view these are in substance conclusions of law: and I do not think
    that they are good law. All that anyone, arbitrator or Court, can do is
    to study the contract in the light of the circumstances that prevailed at the
    time when it was made and. having done so, to relate it to the circumstances
    that are said to have brought about its frustration. It may be a finding of
    fact that at the time of making the contract both parties anticipated that
    adequate supplies of labour and material would be available to enable the con-
    tract to be completed in the stipulated time. I doubt whether it is: but, even
    if it is, it is no more than to say that when one party stipulated for completion
    in eight months and the other party undertook it each assumed that what
    was promised could be satisfactorily performed. That is a statement of the
    obvious that could be made with regard to most contracts. I think that
    a good deal more than that is needed to form a " basis " for the principle
    of frustration.

    The justice of the Arbitrator's conclusion depends upon the weight to be
    given to the fact that this was a contract for specified work to be completed
    in a fixed time at a price determined by those conditions. I think that his
    view was that, if without default on either side the contract period was
    substantially extended, that circumstance itself rendered the fixed price so
    unfair to the contractor that he ought not to be held to his original price.
    I have much sympathy with the contractor: but, in my opinion, if that sort
    of consideration were to be sufficient to establish a case of frustration, there
    would be an untold range of contractual obligations rendered uncertain and,
    possibly, unenforceable.

    Two things seem to me to prevent the application of the principle of
    frustration to this case. One is that the cause of the delay was not any
    new state of things which the parties could not reasonably be thought to
    have foreseen. On the contrary, the possibility of enough labour and
    materials not being available was before their eyes and could have been the
    subject of special contractual stipulation. It was not made so. The other
    thing is that, though timely completion was no doubt important to both sides,
    it is not right to treat the possibility of delay as having the same significance


    for each. The owner draws up his conditions in detail, specifies the time
    within which he requires completion, protects himself both by a penalty
    clause for time exceeded and by calling for the deposit of a guarantee bond
    and offers a certain measure of security to a contractor by his escalator
    clause with regard to wages and prices. In the light of these conditions
    the contractor makes his tender, and the tender must necessarily take into
    account the margin of profit that he hopes to obtain upon his adventure
    and in that any appropriate allowance for the obvious risks of delay. To
    my mind, it is useless to pretend that the contractor is not at risk if delay
    does occur, even serious delay. And I think it a misuse of legal terms to
    call in frustration to get him out of his unfortunate predicament.

    The arbitrator had put upon him the duty of making further findings
    of fact " relevant to the application of the principle in the case of Bush v.
    " Whitehaven ". This may have been hard upon him, for it implies that
    that decision can be ascribed to one ascertainable principle. In my opinion,
    it cannot. The judgment of the Court of Appeal applied a different principle
    of law from that upon which the trial judge's questions to the jury (and their
    answers) were based: and the judgment of the Divisional Court was more
    or less evenly balanced between the two. According to the findings of the
    jury taken together the case was one in which all the work done by Bush
    had been done under the original contract; the contract was such that it
    carried an implied term that the Whitehaven Trustees should give possession
    of the whole site without delay; the delay which had taken place changed
    the conditions of the contract to such an extent that the " special provisions "
    precluding Bush from making any complaint of delay could no longer be
    applied ; and Bush was entitled to damages for breach of contract arising
    from the Trustees' failure to keep the implied term, the damages being
    represented by the additional cost of the work to him over and above the
    contract price. It may be difficult to say by what principle of law the
    " special provisions " of the contract became inapplicable while the contract
    itself remained enforceable: but I suppose that judge and jury had in mind
    that the parties by their conduct had waived the enforcement of the particular
    clause. There is nothing out of order in such a finding, so long as the facts
    proved are clear enough to warrant it, though normally one would expect
    them to include some discussion, oral or written, between the parties. I
    daresay that everyone felt that rough justice had been done.

    The Court of Appeal, however, decided the case upon a basis which had
    only a slight resemblance to the findings of the jury. By ignoring all the
    findings except that which related to the change in the " conditions of the
    " contract " and by treating that as if it applied to the contract as a whole
    and not merely to whatever was to be understood by the words " special
    provisions ", they arrived at a new view of the facts upon which they thought
    that a case of frustration could be made out. At some time, apparently
    unknown to and unmarked by the parties concerned, the original contract
    had disappeared with all its incidents and obligations and in its place had
    been set up the legal relationship expressed in Bush's claim (though he had
    not made it) to be paid on the basis of a " quantum meruit ". I should have
    thought that it would have been much simpler to say, had the findings of
    the jury warranted it, that the parties had abandoned the original contract
    by mutual consent and substituted for it a new contract containing the sub-
    stance of the old terms but a reasonable price clause instead of the former
    fixed price. But that is not frustration: it is fulfilment with variations.

    My Lords, I think that Bush v. Whitehaven may be worth remembering
    as an instance of what can happen to a case during its passage through
    successive Courts, but I do not think it worth recording as an exposition of
    any principle of law. In that regard the editors of the Law Reports, who
    ignored it, showed a sounder judgment than Mr. Hudson, who enshrined it.
    In so far as it applied the principle of frustration to the facts of the case,
    the principle was in my view misapplied. In so far as the judgments of
    the Court of Appeal contain general statements as to the law of frustration,
    I think that the subject has been so fully explored in later cases of higher
    authority that the particular exposition is of no real value. I am sincerely


    sorry if our decision embarrasses builders, who may in some cases have
    found in the second volume of Hudson on Building Contracts a way of
    mitigating the risks of tenders to which the law did not truly entitle them.
    But in my view their safety lies in the insertion of explicit conditions in any
    fixed price contracts they may undertake; it does not lie in an appeal to
    the principle of frustration.

    Lord Somervell of Harrow


    I agree that the words on which the Appellant seeks to rely in the letter
    of 18th March were not incorporated in the contract.

    I have had the advantage of reading the opinion which has just been read
    by my noble and learned friend Lord Reid. I agree with him that it is
    desirable to decide what is the proper basis of " frustration ". I also agree
    with his conclusion on that matter and I should add nothing except the
    possibility of confusion if I sought to restate it in my own words.

    I therefore turn to its application to the issues in the present appeal.
    As the senior member of the Court of Appeal which remitted the case to
    the arbitrator, I would like to express my regret that we did not give
    more assistance to enable him to distinguish the " facts " from his conclusion
    on them. Fortunately, one or two questions put to counsel in the course
    of the argument showed that there was now no conflict as to relevant facts.

    Contracts to be performed in future are based on expectations. If each
    party is equally well informed as to the data on which expectations must
    be based, it may be said that these expectations are the " basis" or
    " footing " on which the contract is made. It would, of course, be absurd
    to suggest that if such expectations are not realised the " basis " has gone
    and the contract is frustrated. As Lord Sumner said in the Larrinaga case
    (29 Com. Cas. 1 at p. 18): " In effect most forward contracts can be regarded
    " as a form of commercial insurance, in which every event is intended to be
    " at the risk of one party or another." Later he says: " No one can tell
    " how long a spell of commercial depression may last; no suspense can be
    " more harrying than the vagaries of foreign exchanges, but contracts are
    " made for the purpose of fixing the incidence of such risks in advance, and
    " their occurrence only makes it the more necessary to uphold a contract
    " and not to make them the ground for discharging it."

    Under the present contract, was the risk of shortage of skilled labour
    fixed on the Appellant? A builder who undertakes to finish a building by
    a certain day is, on the face of it, plainly taking such a risk. There are
    provisions in the present contract which re-enforce this construction, were
    it necessary to do so. With regard to prices of certain materials and rates
    of wages there are what are called escalator clauses. The Appellant was
    not prepared to take the risk of increases in these matters. The parties also
    directed their minds to the possibility of the work not being completed in
    the specified time. The Appellant was to pay so much per week in
    damages. Extra time could, however, be allowed if there was delay by
    strikes or if the work was stopped by order of the surveyor. This is to
    me a somewhat obscure clause, but it is sufficient that there was an exception
    clause for delay which did not cover shortage of labour, and provided only
    for relief from penalties and not for any extra cost that the delay might
    cause the Appellant. The shortage of skilled labour as is shown by the
    admitted figures set out in the points of claim was very substantial. Evidence
    was called, which may not have been admissible, to show that the expecta-
    tions were based on statements on behalf of the government as to the
    probable availability of skilled labour. A party contracting in the light
    of expectations based on data of that or any other kind must make up
    his mind whether he is prepared to take the risk of those expectations
    being disappointed. If not then he will refuse to contract unless protected
    by some specific provision. There is no such provision here. The Appellant


    took the risk under the contract, and it seems to me quite impossible to
    maintain that the contract did not apply in the situation as it remained,
    the expectations on which the estimate was based not having been realised.

    But for the decision in Bush v. Whitehaven Trustees (2 Hudson's Building
    Contracts 4th edn. p. 122) I doubt if the issue of frustration would ever
    have been raised. I will give my reasons as shortly as I can for thinking
    that that case should not hereafter be citable as a decision relevant to
    the law of frustration. The case was fully examined by Cohen, L.J., as
    he then was, in Parkinson (Sir Lindsay) & Company Limited v. Commis-
    sioners of H.M.'s Works and Public Buildings
    [1949] 2 K.B. 632). The plain-
    tiffs' claim was for extra expenses incurred on work and labour in that the
    defendants had not made the site on which the plaintiffs were to do the
    work available as required. The delay was substantial and turned a summer
    contract into a winter contract. The defendants relied on an exception
    clause providing that a failure to make the site available when required
    should not " vitiate or affect the contract". I think that the jury took
    the view, whether sound in law or not, that the delay was so great that
    it ought not to be covered by the exception and that the defendant should
    be treated as in breach. It is the form of two of the questions left to the
    jury that led the courts to deal with the case as one of frustration. The
    first two questions and answers were as follows: —

    " (1) Was it the duty of the defendants under the contract to be
    " in a position at the commencement of and at all times during the
    " contract to give the contractor the use of so much of the site of the
    " works as might, in the opinion of the engineer, be required to enable
    " the contractor to commence and continue the execution of the works
    " in accordance with the contract? A. Yes.

    " (2) Was the contract made upon the basis that the defendants would
    " be in a position to act as aforesaid? A. Yes."

    I doubt if this second question was a proper question to put. It was in any
    event liable to mislead. " Basis " may mean no more than " expectation ".
    If it means more it is difficult to reconcile questions (1) and (2) with
    giving any effect to the exception clause. The fifth question is also difficult.
    " Were the conditions of the contract so completely changed, in consequence
    " of the defendants inability to hand over the sites of the work as required,
    " as to make the special provisions of the contract inapplicable? A. Yes."
    This does not suggest that the contract is gone altogether but only that
    the special provisions are inapplicable. The jury, in my view, took these
    words as referring to the exception. Question 8 was as to the " damage
    " suffered ", and the jury awarded £600 over and above the contract price.

    It appears that Lord Esher had some doubt as to whether the answer
    to the fifth question should be taken as a binding finding. Findings by
    juries on mixed questions of law and fact are not precedents. That is no
    doubt why the case was not reported in any law report. I doubt myself,
    with respect, whether on the findings of the jury taken with the terms of
    the contract it was possible to treat it as a frustration case. I am clear
    that it cannot be regarded as a precedent in the law of frustration as applied
    to building or any other contracts.

    I would dismiss the appeal.

    (32087)8124—124 35 5/56 D.L./PA/19

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