Q&As

If two parties enter into a service contract for the servicing of an asset (eg a photocopier) for a certain term, can the service contract continue if the underlying asset is destroyed during the initial term?

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Published on LexisPSL on 31/10/2016

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • If two parties enter into a service contract for the servicing of an asset (eg a photocopier) for a certain term, can the service contract continue if the underlying asset is destroyed during the initial term?
  • When is a contract frustrated?
  • Might the cause of the loss of the asset make a difference?
  • Consequences of a frustrated contract

If two parties enter into a service contract for the servicing of an asset (eg a photocopier) for a certain term, can the service contract continue if the underlying asset is destroyed during the initial term?

This Q&A covers exclusively English law.

We assume for the purposes of this Q&A that there is a single business-to-business contract that relates to the servicing of a single (now lost) asset. In conducting our research we have focussed on the doctrine of frustration. We have assumed there are no other provisions in the contract which address this scenario (and there is no force majeure or hardship clause).

When is a contract frustrated?

A contract will be discharged by frustration where, after the formation of the contract, an event occurs which renders further performance of the contract impossible, illegal or something radically different from what was contemplated by the parties when they made the contract. The doctrine of frustration will come into play where there is a radical difference between the original contractual obligation and the performance that is possible as a result of the changed circumstance.

Frustration depends on the true construction of the terms that are in the contract read in the light of the nature of the contract and the relevant surrounding

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