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Frustrated Contracts and Statutory Adjustment: The Case for a Reappraisal

Published online by Cambridge University Press:  16 January 2009

Andrew Stewart  and
J. W. Carter
Andrew Stewart
Affiliation:
Associate Professor of Law, Flinders University of South Australia.
J. W. Carter
Affiliation:
Associate Professor of Law, University of Sydney.
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Extract

The principle of frustration of contracts, so succinctly stated by Lord Radcliffe in Davis Contractors Ltd. v. Fareham U.D.C., is now well settled and accepted in both Britain and Australia. Its difficulty lies mainly in its application to particular facts, for opinions may sensibly differ as to whether a given contract is frustrated. Of course it can be conceded that some aspects of the doctrine still raise interesting matters of principle, such as the idea that frustration must not be self-induced. But overall the doctrine itself engenders a certain feeling of contentment.

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Articles
Information
The Cambridge Law Journal , Volume 51 , Issue 1 , March 1992 , pp. 66 - 112
Copyright
Copyright © Cambridge Law Journal and Contributors 1992

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References

1 [1956] A.C. 696 at 729. See further Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales (1982) 149 C.L.R. 337.

2 See, e.g., J. Lauritzen A.S. v. Wijsmuller B.V. (The Super Servant Two) [1990] 1 Lloyd's Rep. 1. See further Swanton, J.P., “The Concept of Self-Induced Frustration” (1990) 2 J.C.L. 206;Google ScholarMcKendrick, E., “The Construction of Force Majeure Clauses and Self-Induced Frustration” [1990] L.M.C.L.Q. 153.Google Scholar

3 See Dawson, J.P., “Restitution Without Enrichment” (1981) 61 Boston U.L.R. 563;Google ScholarHedley, S., “Unjust Enrichment as the Basis of Restitution—An Overworked Concept” (1985) 5 Leg. Stud. 56;Google ScholarStoljar, S.J., “Unjust Enrichment and Unjust Sacrifice” (1987) 50 M.L.R. 603;CrossRefGoogle ScholarBurrows, A.S., “Free Acceptance in the Law of Restitution” (1988) 104 L.Q.R. 576;Google ScholarCarter, J.W., “Contract, Restitution and Promissory Estoppel” (1989) 12 U.N.S.W.L.J. 30;Google ScholarJackman, I.M., “Restitution for Wrongs” [1989] C.L.J. 302;Google ScholarBirks, P., “Restitution after Ineffective Contracts: Issues for the 1990s” (1990) 2 J.C.L. 227;Google ScholarJones, G., “A Topography of the Law of Restitution” in Finn, P.D. (ed.), Essays on Restitution (Sydney 1990), p. 1;Google ScholarBeatson, J., Use and Abuse of Unjust Enrichment (Oxford 1991), ch. 2 (hereafter Beatson).Google Scholar

4 See Birks, P., An Introduction to the Law of Restitution (Oxford 1985), p. 314ff. (hereafter Birks).Google Scholar

5 See Birks, p. 109ff.; Lord Goff, of Chieveley and Jones, G., Law of Restitution, 3rd ed. (London 1986), p. 19ff. (hereafter Goff and Jones);Google ScholarBeatson, ch. 2; Sullivan, T.J., “The Concept of Benefit in the Law of Quasi-Contract” (1975) 64 Geo. L.J. 1;Google ScholarBurrows, A.S., “Free Acceptance in the Law of Restitution” (1988) 104 L.Q.R. 576.Google Scholar

6 See Carter, J., “Contract, Restitution and Promissory Estoppel” (1989) 12 U.N.S.W.L.J. 30;Google ScholarBeatson, ch. 4.

7 Restatement of Contracts (1932), §468.

8 See, e.g., Albre Marble & Tile Co. v. John Bowen Co. (1959) 155 N.E. (2d.) 537. See also Earhart v. William Low Co. (1979) 600 P. 2d. 1344; Dawson, J.P., “Restitution Without Enrichment” (1981) 61 BostonU.L.R. 563.Google Scholar

9 Restatement (Second) of Contracts (1981), §272(2).

10 Re Continental C. & G. Rubber Co. Ltd. (1919) 27 C.L.R. 194 at 201; Joseph Constantine S.S. Line Ltd. v. Imperial Smelting Corp. Ltd. [1942] A.C. 154 at 170; C.T. Bowring Reinsurance Ltd. v. Baxter (The M. Vatman and M. Ceyhan) [1987] 2 Lloyd's Rep. 416 at 424.

11 For criticism of the notion that frustration should necessarily discharge a contract, as opposed to merely providing a defence to an action for non-performance, see, e.g., Stannard, J.E., “Frustrating Delay” (1983) 46 M.L.R. 738.CrossRefGoogle Scholar An alternative to discharge which is utilised in European jurisdictions is for the court to engage in revision or “reformation” of the contract: see, e.g., Dawson, J.P., “Judicial Revision of Frustrated Contracts: Germany” (1983) 63 Boston U.L.R. 1039.Google Scholar The question is a controversial one in the United States: see Aluminium Co. of America v. Essex Group Inc. (1980) 499 F.Supp. 53; Speidel, R.E., “Court-Imposed Price Adjustments Under Long-Term Supply Contracts” (1981) 76 Northwestern U.L.R. 369;Google Scholarcf. Dawson, J.P., “Judicial Revision of Frustrated Contracts: The United States” (1984) 64 BostonU.L.R. 1.Google Scholar

12 (1933) 48 C.L.R. 457 at 476–477. See also Johnson v. Agnew [1980] A.C. 367.

13 (1933) 48 C.L.R. 457 at 477.

14 Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32 at 53.

15 [1980] 1 W.L.R. 1129. cf. Terrex Resources N.L. v. Magnet Petroleum Ply. Ltd. [1988] 1 W.A.R. 144.

16 Westralian Farmers Ltd. v. Commonwealth Agricultural Service Engineers Ltd. (1936) 54 C.L.R. 361 (express provision for termination).

17 Photo Production Ltd. v. Securicor Transport Ltd. [1980] A.C. 827 at 848–850.

18 Watts, Watts & Co. Ltd. v. Mitsui & Co. Ltd. [1917] A.C. 227; Carter, J.W. and Harland, D.J., Contract Law in Australia, 2nd ed. (Sydney 1991), §2063 (hereafter Carter and Harland).Google Scholar

19 Metropolitan Water Board v. Dick Kerr & Co. Ltd. [1918] A.C. 119.

20 BP Exploration Co. (Libya) Ltd. v. Hunt (No. 2) [1979] 1 W.L.R. 783 at 829.

21 Codelfa Construction Co. Pty. Ltd. v. State Rail Authority of New South Wales (1982) 149 C.L.R. 337; State Rail Authority of New South Wales v. Codelfa Construction Pty. Ltd. (1982) 150 C.L.R. 29; Paal Wilson & Co. A.IS. v. Partenreederei Hannah Blumenthal [1983] 1 A.C. 854 at 917.

22 Chandler v. Webster [1904] 1 K.B. 493.

23 [1904] 1 K.B. 493. See also Blakeley v. Muller (1902) 88 L.T. 90; Civil Service Co-operative Society Ltd. v. General Steam Navigation Co. [1903] 2 K.B. 756.

24 [1942] 1 K.B. 12.

25 Sub nom Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32.

26 (1760) 2 Burr. 1005, 97 E.R. 676.

27 [1943] A.C. 32 at 61.

28 Ibid, at 55, 74, 77–78. Cf. the approach taken under Scottish law: see Cantiare San Rocco S.A. v. Clyde Shipbuilding and Engineering Co. Ltd. [1924] A.C. 226.

29 [1943] A.C. 32 at 67.

30 (1933) 48 C.L.R. 457.

31 (1919) 27 C.L.R. 194. See also Scottish Halls Ltd. v. The Minister (1915) 15 S.R. (N.S.W.) 81 at 89.

32 [1903] 2 K.B. 756.

33 (1919) 27 C.L.R. 194 at 201. They also referred to Appleby v. Myers (1867) L.R. 2 C.P. 651, although the relevance of that case, which involved a quantum meruit claim, is not self-evident.

34 (1919) 27 C.L.R. 194 at 204.

35 Cf. Hyundai Heavy Industries Co. Ltd. v. Papadopoulos [1980] 1 W.L.R. 1129.

36 See, e.g., Starke, J.G. Q.C., Seddon, N.C. and Ellinghaus, M.P., Cheshire and Fifoot's Law of Contract, 5th Aust. ed. (Sydney 1988), p. 649, n. 80.Google Scholar The status of Fibrosa in Australia is described there as “uncertain”, although this implies a somewhat greater element of doubt than in previous editions: see, e.g., 4th Aust. ed. (Sydney 1981), §2525.

37 See, e.g., Shaw v. Ball (1962) 63 S.R. (N.S.W.) 910 at 916; Lobb v. Vasey Housing Auxiliary (War Widows Guild) [1963] V.R. 239; Marsh v. Mackay [1948] St. R. Qd. 113 at 126; Muschinski v. Dodds (1985) 160 C.L.R. 583 at 618. Cf. Westralian Farmers Ltd. v. Commonwealth Agricultural Service Engineers Ltd. (1936) 54 C.L.R. 361 at 371–372.

38 (1933) 48 C.L.R. 457 at 477.

39 Cf. Rover International Ltd. v. Cannon Film Sales Ltd. [1989] 1 W.L.R . 912.

40 See Orakpo v. Manson Investments Ltd. [1978] A.C . 95 at 104; though cf. the persistent references to the notion of unjust enrichment in Lipkin Gorman v. Karpnale Ltd. [1991] 3 W.L.R. 10.

41 (1987) 162 C.L.R. 221. See Jones, G., “Restitution: Unjust Enrichment as a Unifying Concept in Australia?” (1988) 1 J.C.L. 8.Google Scholar

42 (1987) 162 C.L.R. 221 at 256–257. See also Winterton Constructions Pty. Ltd. v. Hambros Australia Ltd. (1991) 101 A.L.R. 363.

43 Ibid, at 256.

44 (1867) L.R. 2 C.P. 651. As noted above, the decision was referred to with approval by Knox, C.J. and Barton, J. in Re Continental C. & G. Rubber Co. Pty. Ltd. (1919) 27 C.L.R. 194 at 201.Google Scholar

45 (1867) L.R. 2 C.P. 651 at 661.

46 (1795) 6 T.R. 320, 101 E.R. 573. See also Horlock v. Beal [1916] 1 A.C. 486; Stoljar, S.J., “The Great Case of Cutter v. Powell” (1956) 34 Can. Bar. Rev. 288.Google Scholar

47 See Goff and]ones, pp. 5–12.

48 Birks, pp. 109–117.

49 See, e.g., Harvey v. Thomas Brown & Sons [1920] St. R. Qd. 25.

50 See, e.g., Sumpter v. Hedges [1898] 1 Q.B. 763.

51 For criticism, and a suggestion that total failure of consideration could be used in substitution for acceptance, see Burrows, A.S., “Free Acceptance in the Law of Restitution” (1988) 104 L.Q.R. 576.Google Scholar

52 Cf. Steele v. Tardiani (1946) 72 C.L.R. 386.

53 On “incontrovertible benefit”, see Birks, p. 114ff; Jones, G., “Restitutionary Claims for Services Rendered” (1977) 93 L.Q.R. 273;Google ScholarMonks v. Poynice Pty. Ltd. (1987) 8 N.S.W.L.R. 662 at 664; Procter & Gamble Philippine Manufacturing Corp. v. Peter Cremer GmbH. & Co. (The Manila) [1988] 3 All E.R. 843 at 855 (see Cooper, J., (1989] L.M.C.L.Q. 397;Google ScholarMcKendrick, E., [1989] L.M.C.L.Q. 401);Google ScholarMcKeown v. Cavalier Yachts Pty. Ltd. (1988) 13 N.S.W.L.R. 303 at 312–313.

54 As to the question of valuing the benefit obtained, see text accompanying notes 113–116 below.

55 Flett v. Deniliquin Publishing Co. Ltd. [1964–65] N.S.W.R. 383 at 386; Goff and Jones, p. 27.

56 Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32.

57 (1831) 8 Bing. 14, 131 E.R. 305.

58 See Hunter, H.O. and Carter, J.W., “Quantum Meruit in Building Contracts (Part I)” (1989) 2 J.C.L. 95;Google ScholarCarter, J.W., “Services Rendered Under Ineffective Contracts” [1990] L.M.C.L.Q. 495.Google Scholar

59 Cf. Birks, pp. 126–127.

60 [1980] 1 W.L.R . 1129. See also Re Continental C. & G. Rubber Co. Pty. Ltd. (1919) 27 C.L.R. 194: see text accompanying note 31 above.

61 See further text accompanying note 72 below.

62 Lipkin Gorman v. Karpnale Ltd. [1991] 3 W.L.R. 10.

63 See Australia and New Zealand Banking Group Ltd. v. Westpac Banking Corp. (1988) 164 C.L.R. 662.

64 (1982) 149 C.L.R. 337. But see Davis Contractors Ltd. v. Fareham U.D.C. [1956] A.C. 696 at 715–716.

65 [1961] 2 Q.B. 278 at 312–315; cf. Adelfamar S.A. v. Silos E. Mangimi Martini S.p.A. (The Adelfa) [1988] 2 Lloyd's Rep. 466. The decision in Société Franco Tunisienne was subsequently overruled, but only on the basis that the contract was not frustrated: Ocean Tramp Tankers v. V.IO. Sovfracht (The Eugenia) [1964] 2 Q.B. 228. See also Kissavos Shipping Co. S.A. v. Empress Cubana de Fletes (The Agathon) [1982] 2 Lloyd's Rep. 211 at 214 (quantum meruit for services rendered after frustration of charterparty).

66 Hereafter cited as U.K. Act. Note that the Act applies only to a “contract governed by English law” (s. 1(1)), thus excluding any operation in Scotland.

67 See, e.g., Whincup v. Hughes (1871) L.R. 6 C.P. 78.

68 Lobb v. Vasey Housing Auxiliary (War Widows Guild) [1963] V.R. 239.

69 [1979] 1 W.L.R. 783 at 799–800 (aff'd. without reference to the point [1981] 1 W.L.R. 232; [1983] 2 A.C . 352). Cf. Haycroft, A.M. and Waksman, D.M., “Frustration and Restitution” [1984] J.B.L. 207 (hereafter Haycroft and Waksman).Google Scholar

70 [1979] 1 W.L.R. 783 at 801.

71 Ibid, at 808. See also Libyan Arab Foreign Bank v. Bankers Trust Co. [1989] Q.B. 728 at 772.

72 [1979] 1 W.L.R. 783 at 800.

73 Birks, p. 257.

74 Ibid.

75 See Frustrated Contracts Act 1944 (N.Z.). In Canada the 1948 Conference of the Commissioners on Uniformity of Legislation recommended a model Frustrated Contracts Act, based on the English statute, which was subsequently adopted by most of the provinces.

76 See, e.g., New South Wales Law Reform Commission, Report on Frustrated Contracts, L.R.C. 25 (Sydney 1986), pp. 22–30;Google ScholarBritish Columbian Law Reform Commission, Report on the Need For Frustrated Contracts Legislation in British Columbia (Vancouver 1971), ch. IV.Google Scholar

77 Hereafter cited as B.C. Act.

78 Report on the Need For Frustrated Contracts Legislation in British Columbia (Vancouver 1971) (hereafter B.C. Report).Google Scholar

79 Hereafter cited as N.S.W. Act.

80 New South Wales Law Reform Commission, Report on Frustrated Contracts, L.R.C. 25 (Sydney 1986) (hereafter N.S.W. Report).Google Scholar

81 Hereafter cited as S.A. Act.

82 Thirty-Seventh Report, Relating to the Doctrines of Frustration and Illegality in the Law of Contract (Adelaide 1976) (hereafter S.A. 37th Report).Google Scholar

83 Seventy-First Report, Relating to the Doctrine of Frustration in the Law of Contract (Adelaide 1983) (hereafter S.A. 71st Report).Google Scholar

84 N.S.W. Act, s. 5(1); S.A. Act, s. 3(1); B.C. Act, s. 1(1). Sec also section 3(1) of the Frustrated Contracts Act 1959 (Vic), which as noted above is in other respects modelled on the British Act.

85 Bank of Boston Connecticut v. European Grain and Shipping Ltd. [1989] A.C. 1056.

86 See the “casus omissus” discussion in Treitel, G.H., Law of Contract, 8th ed. (London 1991), pp. 814–815 (hereafter Treitel).Google Scholar

87 See also N.S.W. Act, s. 7.

88 See text accompanying notes 20–21 above.

89 As the common law appears to require in any event: see note 18 above and accompanying text.

90 Cf. N.S.W. Act, s. 8, which addresses the former but not the latter.

91 These are that the contract remain intelligible after the severed portions are extracted and that what is left behind still substantially reflects the parties' original bargain: Carney v. Herbert [1985] A.C. 301.

92 See Carter and Harland, §2060.

93 N.S.W. Act, s. 6(3); S.A. Act, s. 5.

94 Cf. U.K. Act, s. 2(4); B.C. Act, s. 4; N.S.W. Act, s. 10. As far as South Australia is concerned, therefore, unless the obligation and its price can be treated as a severable part of the contract, they will have to be brought into account if an adjustment is made.

95 See McKendrick, E., “Frustration, Restitution and Loss Apportionment” in Burrows, A. (ed.), Essays on the Law of Restitution (Oxford 1991), p. 147.Google Scholar Cf. Haycroft and Waksman, who are forced into arguing that the statute is defective in order to support their rejection of the unjust enrichment characterisation. This rather misses the point.

96 Law of Restitution, 1st ed. (London 1966), p. 333.Google Scholar

97 See, e.g., Hospital Products Ltd. v. United States Surgical Corp. (1984) 156 C.L.R. 41. Cf. Lücke, H.K., “Good Faith and Contractual Performance” in Finn, P.D. (ed.), Essays on Contract (Sydney 1987), p. 155.Google Scholar

98 The Law Reform (Frustrated Contracts) Act 1943 (London 1944), pp. 35–36.Google ScholarCf. Haycroft and Waksman at 215–216: while doubting whether “the invocation of natural justice here is any more apposite than an appeal to ‘unjust enrichment’”, they go on to conclude that loss sharing is “realistic” and “just” without exploring any of the assumptions or difficulties attending such a notion. The same appears to be true of many American calls for loss apportionment: see, e.g., Comment, “Apportioning Loss After Discharge of a Burdensome Contract: A Statutory Solution” (1960) 69 Yale LJ 1054. Cf. Trakman, L.E., “Winner Take Some: Loss Sharing and Commercial Impracticability” (1985) 69 Minnesota L.R. 471,Google Scholar proposing that any court-imposed allocation vary in accordance with the capacity of each party to “exercise control over the risk of loss”.

99 Op. cit., pp. 35–36.

100 Posner, R.A. and Rosenfield, A.M., “Impossibility and Related Doctrines in Contract Law: An Economic Analysis” (1977) 6 J. Leg. Stud. 83.CrossRefGoogle Scholar

101 B.C. Report, p. 32.

102 N.S.W. Report, p. 30.

103 S.A. 71st Report, p. 10. The 37th Report does not address the issue, other than (ironically) quoting Goff and Jones' first edition views, as set out above, without attribution: S.A. 37th Report, p. 10.

104 The New South Wales and South Australian Acts quite sensibly bring into calculation benefit-conferring and/or cost-incurring acts done after the date of frustration in the reasonably held belief that the contract was still on foot: N.S.W. Act, s. 5(4); S.A. Act, s. 7(6)). Cf. B.C. Report, pp. 30–31.

105 Although section 3(1) of the South Australian Act does offer a definition of “contractual benefit”, it is a partial one only, its main purpose being to ensure that incidental benefits accruing to a performer from frustration (for example, part-manufactured articles whose property remains with the performer) are taken into account in calculating the net position of the parties.

106 See Goff and Jones, p. 19ff; Birks, p. 117.

107 [1983] 2 A.C. 352.

108 See also now Supreme Court Act 1981, s. 35A; County Courts Act 1984, s. 69.

109 Hungerfords v. Walker (1989) 171 C.L.R. 125. Cf. President of India v. La Pintado Cia Navegacion S.A. (No. 2) [1985] A.C. 104.

110 See the discussion of the question of severance at text accompanying notes 91–94 above.

111 See, e.g., the facts of BPv. Hunt [1979] 1 W.L.R. 783.

112 (1795) 6 T.R. 320, 101 E.R. 573.

113 See Goff and Jones, pp. 26–27.

114 This end-product may be property which is created by the performer, or existing property which is modified or improved in such a way that its value rises. It need not of course be tangible, as where work is done which creates a trade secret or some other form of intellectual property.

115 Where the end-product is not complete, its value to the recipient can be expressed in two ways: in terms of the market value it has in its existing state; or in terms of the value it would have in its completed state, less the reasonable cost of having the work finished. There seems no reason not to settle on the higher of these two figures in any given case. However where there is no market for the end-product, or where the recipient is able to show that the end-product was not wanted for its realisable value (cf. Bellgrove v. Eldridge (1954) 90 C.L.R. 613; Radford v. De Froberville [1977] 1 W.L.R. 1262), there would seem no alternative to falling back on the measure of expense saved (i.e. reasonable cost) to express the value of the benefit received.

116 See text accompanying notes 48–54 above.

117 [1979] 1 W.L.R. 783 at 801–802.

118 See, e.g., Haycroft and Waksman at 218–220.

119 The word “or” is presumably intended to be understood after paragraphs (a) and (b): the subsection makes little sense if the paragraphs are to be taken as cumulative rather than alternative requirements.

120 As far as services are concerned, it is doubtful that such a rise could be taken into account in the calculation of a just sum under the British Act, even if a loss in value could be; for if indeed it is the case that benefits are to be valued as at receipt, the value at that point would set a ceiling for the amount of the just sum.

121 (1867) L.R. 2 C.P. 651: see note 44 above and accompanying text.

122 See note 55 above and text immediately following.

123 Note that no provision is made for a rise in the value of a benefit wrought by the frustrating event. This is not as implausible as it might at first appear. The N.S.W. Report, p. 76 gives the example of an international contract of sale frustrated by the countries involved declaring war on each other. If the vendor's country is the only source of the relevant product, but is now embargoed, goods already received by the purchaser may well rise in value.

124 B.C. Act, s. 6; S.A. Act, s. 3(4)(b).

125 N.S.W. Report, pp. 76–77.

126 Ibid., p. 76.

127 BP v. Hunt [1979] 1 W.L.R. 783 at 801. See also Goff and Jones, pp. 495–496.

128 Parsons Bros. Ltd. v. Shea (1965) 53 D.L.R. (2d.) 86.

129 See, e.g., Carter and Harland, §2083; Treitel, pp. 813–814; Birks, p. 253; Haycroftand Waksman at 220.

130 Birks, p. 253.

131 See text accompanying notes 91–94 above.

132 See, e.g., Birks, pp. 252–253. This view has been taken in a number of American jurisdictions, as noted earlier: see text accompanying note 8.

133 As mentioned earlier, this point is central to the “lost value” concept in the New South Wales Act: see text accompanying note 125.

134 [1979) 1 W.L.R. 783 at 801–802: see text accompanying note 117 above.

135 U.K. Act, s. 2(3); B.C. Act, s. 2; N.S.W. Act, s. 6(l)(e); S.A. Act, s. 4(l)(b).

136 See Hunter, H.O. and Carter, J.W., “Quantum Meruit in Building Contracts (Part II)” (1989) 2 J.C.L. 189;Google ScholarBirks, P., “Restitution after Ineffective Contracts: Issues for the 1990s” (1990) 2 J.C.L. 227.Google Scholar

137 [1979] 1 W.L.R. 783 at 805.

138 The crucial provision in the British Columbian Act in this respect is section 7, which provides that the cost of performance is to be calculated only by reference to reasonable costs. Section 8(a) also specifically excludes “loss of profits” from the process of determining entitlements under the Act.

139 N.S.W. Report, p. 32, n. 5.

140 This can be illustrated by reference to an example offered by the Law Reform Commission (N.S.W. Report, pp. 32–34). Suppose that a contract to supply a pair of matched earrings is frustrated with only one delivered. The contract price is £200, the market value of the pair £100 (thus making it a bad bargain for the buyer), and the market value of the single earring only £20 on its own. The attributable value of the earring is £100 (as a rateable proportion of the contract price), whereas the lost value is only £30 (£50 with its mate, £20 without), leaving the buyer to pay £70.

191 See again the earrings example referred to in the previous footnote, and assume that the pair would have been worth £300 in the hands of the buyer, while the value of a single earring is £60. The attributable value to be paid for that earring will now be the proportionate allowance, £100, less lost value, £240—in other words nothing. Attributable cost will now exceed attributable value, and the buyer will have to pay half the maker's reasonable cost, a figure which may exceed the residual value of the earring. In any event, the buyer's good bargain goes effectively unrecognised.

142 See Comment, “Apportioning Loss After Discharge of a Burdensome Contract: A Statutory Solution” (1960) 69 Yale L.J. 1054 at 1059–1060.

143 See B.C. Report, pp. 31–32; N.S.W. Report, p. 38; S.A. 71st Report, pp. 16–17.

144 See, e.g., Ambatielos v. Anton Jurgens Margarine Works [1923] A.C. 175; Hong Guan & Co. Ltd. v. R. Jumabhoy & Sons Ltd. [1960] A.C. 684; B. & S. Contracts and Design Ltd. v. Victor Green Publications Ltd. [1984] I.C.R. 419; Pagnan S.p.A. v. Tradax Ocean Transportation S.A. [1987] 3 All E.R. 565. See generally Yates, D., “Drafting Force Majeure and Related Clauses” (1991) 3 J.C.L. 186.Google Scholar

145 See especially Wahons Stores (Interstate) Ltd. v. Maker (1988) 164 C.L.R. 387, though cf. Austotel Ltd. v. Franklins Ltd. (1989) 16 N.S.W.L.R. 582.

146 Cf. Finn, P.D., “Commerce, the Common Law and Morality” (1989) 17 M.U.L.R. 87.Google Scholar

147 The emphasis here, of course, is on workable. The more elaborately one attempts to cover every eventuality, the more cumbersome the formula becomes: see, e.g., the scheme proposed in Comment, “Apportioning Loss After Discharge of a Burdensome Contract: A Statutory Solution” (1960) 69 Yale L.J. 1054.

148 Bank of Boston Connecticut v. European Grain and Shipping Ltd. [1989] A.C. 1056 at 1108. The Act was inapplicable in this case, the contract in question (a voyage charterparty) falling into one of the classes excluded by section 2(5).

149 Restatement (Second) of Contracts (1981), §272(2).

150 For a recent example of this development, see Lipkin Gorman v. Karpnale Ltd. [1991] 3 W.L.R. 10; although cf. Guinness p.l.c. v. Saunders [1990] 2 W.L.R. 324 at 331, employing the outmoded “implied contract” analysis.

151 [1943] A.C. 32.

152 (1795) 6 T.R. 320, 101 E.R. 573.

153 See, e.g., Notcutt v. Universal Equipment Co. (London) Ltd. [1986] 1 W.L.R. 641; F.C. Shepherd & Co. Ltd. v. Jerrom [1987] O.B. 301. Cf. Finch v. Sayers [1976] 2 N.S.W.L.R. 540; Williams v. Watsons Luxury Coaches Ltd. [1990] I.C.R. 536.

154 Cf. Nicholls, R.C., “Problems in Project Finance—Fixtures, Force Majeure, Frustration and Fundamental Breach” in Austin, R.P. and Vann, R. (eds.), Law of Public Company Finance (Sydney 1986), p. 536 at p. 563ff.Google Scholar