The contract frustration doctrine has seen multiple changes in common law to statutory treatments across different legal and judicial jurisdictions. A contract is deemed to be frustrated if, after its formation, the terms become impossible to carry out without any of the parties defaulting or due to an intervening impossibility that makes the performance of the contract substantially different from the terms that were originally contemplated. 20 While in Paradine v Jane, absolute obligation was emphasized, subsequent developments, such as in Taylor v Caldwell, have generated mitigations against the harshness of absolute obligation.
In order for a contract party to be able to avail these mitigations, it is necessary that the factors which result in the impossibility to perform the contract are not contemplated in the express contracts terms by way of the Force Majeure Clause. The Force Majeure Clause may, for instance, occur if a contract to export goods by sea includes a clause providing for the possibility of loss or damage of goods in transport. 21 The existence of specific clauses that provide for foreseeable specific risks precludes the defence of intervening impossibility.
Contracts may prove incomplete from other perspectives as perhaps best evidenced by the following example. The relationship between spouses may be viewed as a contract[ML13]. When one of the spouses behaves in a manner that is not in accordance with the laws of marriage, the marriage contract may be terminated. A case in study is that of a man who married a woman with whom he was cohabiting and for whom he was providing the necessities of life. All was well until the husband began drinking with his colleagues at work. Over time, he became an alcoholic and started beating his wife. This resulted in the wife seeking divorce.
As studied, these factors contributed to the end of the marriage. The husband's behaviour led to the automatic termination of the relationship. It is evident that, when one party contravenes a set rules and standards of a relationship, it adversely affects the basis of the contract. 25 This is a major reason for contracts failing to complete. 26 A valid contract is very specific: there is an offer and an acceptance of that offer (case scenario-if I offer to wash your car for a certain amount, and if you agree with me that the price indicated is sufficient to compensate you for your efforts, then a contract exists between us.
Once I wash your car, you are obligated to pay me the agreed amount. ) Most oral contracts may be binding but very difficult to prove; it is, therefore, necessary that contracts are made in writing. 27 Contracts between employers and employees are naturally binding, according to the rule of law anywhere in the world. A contract can prove incomplete when the employer and/or the employees neglect the subject matter of the contract and contravene the rules inculcated in place for safeguarding the interests of the parties.
28 This is so for the employer when he fails to pay the employee and for the employee when he fails to adequately perform his job. These can lead to termination of the contract and the injured party can claiming damages. Contracts are designed to profit both parties. Cases studies have shown that, once a contract is put into place, one party to the contract may act awkwardly with regards to it[ML14]. He may use the resources and facilities, brought about by the setting up of the contract to make personal, undisclosed profits. In the end, long-term, the dishonesty or disloyalty by the breaching party may bring the contract to an end.
this might prove to be disastrous to the relationship existing between the parties and is basis for termination of the contract. 29 The contract might prove to be incomplete. 30 The contract may also fail to be complete if it is invalid or illegal. There are several considerations in this regard, such as a minor (a person who is not of legal age[ML15]) cannot enter into a binding contract, nor can a person who has been proved to be declared insane or mentally incapacitated by the state. 31 These individuals are considered to lack contractual incapacity, and therefore are not able to enter into valid contracts.
Any contract may be viewed as invalid or unenforceable if it was entered into by the parties described above. Therefore, a contract may be considered incomplete if it is entered into by parties who lack contractual capacity. Breached contracts affect the parties involved, in a negative or positive manner. and contracts are initially entered into to protect the interests of the parties. The affected parties may be liable for the damage resulting from the breach or qualify for a number of remedies as may be determined by the court.
The parties concerned enjoy mutual economic and other benefits from the contract. , but the economic benefits override any other benefits that may be derived from the agreement. Once one of the parties decides to disregard the terms of the contract, through any of the previously stated ways, the contract is liable for breach[ML16]. (? ) Breaches of contract have adverse effects on the parties, leaving them unable to enjoy the advantages of the contract. 35 No positive advantages can be derived from a breach of contract. The negative commercial negative effects of breach of contract are discussed below.
36 Breach of cContract breach has a wide range of consequences to the parties involved. in the contract. Breaches of contract have It has a negative commercial impact on contracts that were designed for the parties to enjoy economic monetary benefits. Breaches may result in the closing down ure of a business set up by the contract. Parties to the contract would not be in a position to enjoy the advantages that might have been obtained from the completion of the contract depending on the circumstances of the contract and its conditions. 37
There are costs too, in the event of incomplete contracts involving institutions which form contracts with society [ML17]to produce results and products that are beneficial to the environment and other third parties. If, in the long-term the organization fails to deliver according to the intended purpose of its initiation, the third parties or the environment fail to be benefited from the contract. This could severely damage be disastrous to the image of the organization and to the organization itself over time, causing loss of customers to suffer from and the inability to enjoy the economic benefits derived from the project.
38 It is possible for individuals to experience these losses just because of acts of recklessness and inconsideration regarding the reasons that they originally entered into the contract. This is sufficient justification for the contract to be proved incomplete. 39[ML18] Schools, churches, institutions, and all organizations are established for a purpose. They represent a need in society and contract to provide these needs when they are founded(? ). If, in the long-run, they do not serve their purpose and are rendered valueless to society, their existence ceases and, therefore, their contract with society is incomplete.
A similar case is when an organization fails to deliver and is consequently closed. 40 When contracts fail to be complete, they damage the reputation of the business[ML19]. If word of the breach reaches third parties, which may include outsiders and business competitors, the party is deemed to have not honoured their part of the contract. In future, other businesses would be reluctant to enter into contracts with them. 41 Their image would be adversely affected, especially if it is evident that the mistake is intentional or part of business dealings that were illegal in nature.
42 Breach of contract in cases where financial payment is involved predisposes one to legal actions, not excluding insolvency proceedings. Breach by defaulting to pay the other party will trigger the event of a default clause in many commercial contracts. 43 The price one party has to pay to remedy a situation that he causedbrought, which resulted in a breach of contract, will be a challenge on his part. This is so in scenarios where the injured party claims for damages in figures ranging in the millions.
The price sometimes outweighs any benefits one might be able to receive from an intentional breach to the contract. Parties are, therefore, advised to be cautious in matters that might result in a breach of contract. 44 An intentional breach of contract sours the relationship between contracting parties. These should be avoided at all costs because, in business, a good reputation is more precious than silver or gold. It is important that one retains the partners he gathers in his business dealings. It is evident that incomplete contracts bring only negative consequences to all parties concerned.