Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd (1942)

English Contract Law

Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd
‘Steamship on Seashore’ by Vittorio Avondo

While the doctrine of frustration relies upon the existence of an unforeseen and thus unexpected event, its design is not one that requires any element of blame in order to apply, as was seen in this case between a corporation and shipowner.

In August of 1836 the now appellants contracted to supply one of their steamships to the respondents for the purposes of transportation to a number of international sea ports by way of commercial enterprise. Having been used for the reasons agreed, the ship was later anchored over the Christmas period while awaiting further use until its return in January 1837.

Unfortunately while dockside the ship suffered an enormous explosion that sent the auxiliary boiler over one hundred and sixty four feet from its original position, while the primary boilers were forced backwards by the blast, all of which rendered the vessel inoperable and thereby unable to complete its journey to the respondents.

Having cited frustration of contract, the appellants looked to leave matters as they were, however the respondents argued that the explosion had arisen by way of negligence, and so damages were owed for the loss accrued. 

First heard in the Court of the Kings Bench, the judge held that the appellants were merely unwitting victims of unforeseen circumstances, particularly when a Board of Trade Enquiry had failed to establish any liability in relation to the cause of the explosion, or any possible negligence shown by those working on the ship at the time; and so in closing the court held that:

“It is plain that it has not been established that they were guilty of negligence and there is no finding of any negligence. The worst finding against them is under the one heading of possibility of negligence.”

To which the respondents challenged the finding in the Court of Appeals, who awarded in their favour while holding that:

“A party prima facie guilty of a failure to perform his contract cannot escape under the plea of frustration, unless he proves that the frustration occurred without his default. There is no frustration in the legal sense unless he proves affirmatively that the cause was not brought into operation by his default.”

After being denied leave to appeal, the House of Lords Appeal Committee granted it so that the issue of liability could be afforded examined and conclusive clarification, and so the matter was once again given due discussion.

In the first instance Viscount Simon turned to Taylor v Caldwell in which the court held that: 

“[I]n contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance.”

While Viscount Maugham noted that in Hirji Muji v Cheong Yue Steamship Co Ltd the Privy Council held that:

“[W]hatever the consequences of the frustration may be upon the conduct of the parties, its legal effect does not depend on their intention or their opinions, or even knowledge, as to the event, which has brought this about, but on its occurrence in such circumstances as show it to be inconsistent with further prosecution of the adventure.”

Before illustrating that in Bank Line Ltd v Arthur Capel & Co the House of Lords had held that:

“I think it is now well settled that the principle of frustration of an adventure assumes that the frustration arises without blame or fault on either side. Reliance cannot be placed on a self-induced frustration; indeed, such conduct might give the other party the option to treat the contract as repudiated.”

And so it was that a uniform House held how the appeal court judgment was to be reversed on the very simple yet clear principle that: 

“[W]hen frustration in the legal sense occurs, it does not merely provide one party with a defence in an action brought by the other. It kills the contract itself and discharges both parties automatically.”

FA Tamplin Steamship Co Ltd v Anglo Mexican Petroleum Products Co Ltd (1916)

English Contract Law

FA Tamplin Steamship Co Ltd v Anglo-Mexican Petroleum Products Co Ltd
‘Queen Mary 2’ by Unknown Artist

Rescission of contract under abnormal circumstances can often be cited as frustration, yet unless the parties bargaining are in agreement as to the essence of the contract, there is little a court can do to amend the terms to suit.

In winter of 1912, a ship owner agreed to let one of their fleet to a commercial entity for a period of five years, with no specific requirements as to its use, aside from which types of cargo were acceptable for carriage. Just over two years into the agreement, the vessel was requisitioned by the British Government under Royal Proclamation, an act which would result in full compensation payable to the affected parties upon its safe return.

Having planned to return the ship after only two months, the Admiralty Transport Service informed the respondents that they would in fact be extending their requisition indefinitely, thereby denying the respondents any future use of the ship until the end of its military use. This left the appellants under the assumption that by an alteration in the use of the vessel, the contract had now expired and so no further payments were due, and that when issuing compensation, the State was liable for the loss suffered only by the appellants, as they were legally the owners of the ship at the time of requisition, a position fiercely argued by the respondents.

Having failed to settle the matter through arbitration, the case went to trial, during which the judge held that the requisitioning of the ship did not constitute a termination of the contract, but instead served to suspend the contract until such time that the vessel was returned, which at the point of litigation, was looking unlikely to happen within the agreed five year period.

When presented to the Court of Appeal, the Court affirmed the original judgment, at which point the matter was placed again before the House of Lords, who first examined the statement by Lord Blackburn in Dahl v Nelson, Donkin & Co, in which he stressed:

“[A] delay in carrying out a charterparty, caused by something for which neither party was responsible, if so great and long as to make it unreasonable to require the parties to go on with the adventure, entitled either of them, at least while the contract was executory, to consider it at an end.”

However, art.20 of the charterparty agreement also noted that:

“[T]he act of God, perils of the sea, fire, barratry of the master and crew, enemies, pirates and thieves, arrests and restraints of princes, rulers, and peoples, collisions, stranding and other accidents of navigation always excepted, even when occasioned by negligence, default or error in judgment of the pilot, master, mariners or other servants of the shipowner.”

Were exceptions to any rule that might provide for the end of the contract through unforeseen events, therefore the respondents argument that the contract was merely suspended was in fact validated by the imposition by the State during a time of war, and that despite implications forwarded by the appellants, the Court was in no position to argue against an express term of a contract, no matter how inconvenient that might be to those involved. It was for that simple reason that the House ruled by majority in favour of the Appeal Court judgment and dismissed the appeal with costs, while holding that:

“When a lawful contract has been made and there is no default, a Court of law has no power to discharge either party from the performance of it unless either the rights of someone else or some Act of Parliament give the necessary jurisdiction.”