- Alleged frustration of underlying contract due to coronavirus (COVID-19) restrictions (Salam Air v Latam Airlines)
- What are the practical implications of this case?
- What was the background?
- What did the court decide?
- Case details
Dispute Resolution analysis: An airline’s argument that the effects of the coronavirus (COVID-19) pandemic had been such as to frustrate the leases of three aircraft so as to make it appropriate to injunct the lessor (Latam) from issuing demands under standby letters of credit in place to secure the advance monthly rentals on the aircraft was described as ‘weak’ in this case. The only continuing obligation of Latam, having delivered the aircraft pursuant to the terms of the lease was to fulfil its contractual promise that neither it nor anyone else would interfere with the use, possession and quiet enjoyment of the aircraft by Salam Air (Salam). The restriction on the operation of the aircraft by coronavirus regulations did not prevent either party from performing their contractual obligations. There was no frustration of purpose (as in Krell v Henry). Even if, as was arguable, Salam had informed Latam of the specific purpose for which they intended to lease the aircraft, that purpose did not become the joint purpose of Salam and Latam. Written by David Fisher, barrister and associate member, at New Square Chambers.
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