Q&As

Is entry into insolvency an event of frustration for a contract?

read titleRead full title
Published on LexisPSL on 19/01/2017

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

  • Is entry into insolvency an event of frustration for a contract?

Is entry into insolvency an event of frustration for a contract?

For the purposes of this Q&A we have assumed that the contract does not expressly provide for termination on an insolvency event.

A contract may be frustrated if an unforeseen event occurs after the contract is formed and:

  1. as a result of that event:

    1. the contract becomes impossible to perform, and/or

    2. the obligations under the contract are transformed into something radically different

  2. the contract does not contain a clause intended to deal with the unforeseen event

  3. the unforeseen event is not caused by either party’s conduct

Frustration of a contract takes place when: '…there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances…' (see National Carriers v Panalpina (Northern)) (and for further details on frustration generally, see Lexis®PSL Dispute Resolution Practice Note: Discharge by frustration).

Although the categories of

Related documents:

Popular documents