Frustration of Contract in Nigeria
Frustration of contract is a defence available to a defendant who would otherwise be liable for breach of contract for non-performance of contractual obligations but for the occurrence of a fundamental event that makes it impracticable or impossible to perform the contract.
This defence is not readily available to all defendants in an action for breach of contract, and the existence of a frustrating event on its own does not avail the defendant.
This Article seeks to examine the doctrine of frustration of contracts in Nigeria, whether the doctrine applies to all contracts, circumstances where frustration does not occur, what the court considers in establishing frustration, the effect of frustration on a contract in Nigeria, and its relationship with force majeure.
MEANING OF FRUSTRATION OF CONTRACT
Frustration of Contract has been defined by the apex court in Nigeria to mean a premature determination of an agreement between parties lawfully entered into, owing to the occurrence of an intervening event, or change of circumstances so fundamental as to be regarded by law both as striking to the root of the agreement and entirely beyond what was contemplated by the parties when they entered into the agreement.
A contract is thus frustrated where, after its conclusion, events occur which make performance of the contract impossible, illegal, or something radically different from that which was in contemplation of the parties at the time they entered it. In other words, where the performance of the contract is dependent on the continued existence of a state of affairs, the destruction or disappearance of the state of affairs without the default of either of the parties will discharge them from the contract. The courts have restricted the doctrine of frustration to:
- Situations where the supervening event destroys a fundamental assumption on which parties had contracted on; and
- Where force majeure clauses are drafted into the contract.
The underlisted situations or events have been held by the courts at one time or the other to constitute frustrating events:
- Subsequent legal changes or statutory impossibility.
- An outbreak of war.
- Destruction of the subject matter of the contract or literal impossibility.
- Government acquisition of the subject matter of contract.
- The cancellation by an unexpected event. E.g., the death or permanent incapacitation by ill health or imprisonment of a party to a contract for personal service.
THE APPLICABILITY OF FRUSTRATION OF CONTRACT
It has been decided in a plethora of cases that the doctrine of frustration of contract is applicable to all types of contracts. However, the Supreme Court was faced for the first time in deciding whether frustration of contract is applicable to lease agreements in the case of Araka V. Monier Construction Co (Nigeria) Ltd.