Tutorial 7 Assignment

Name: Lau Sum
Student Number: 3036064882
Tutor’s Name: Lo Stefan Huoy-Cheng
Tutorial Group Group 2

Number:
Issue (1): Whether the contract has expressly provided for what should happen in the new
circumstances
When there are contractual terms dealing with frustrating events, the terms apply instead of
doctrine of rectification. However, the doctrine of frustration is still applicable where
contractual term does not cover frustrating event
Issue (1.1): Whether the inclement weather clause covers the supervening event
Even though the language of a contractual term may be broad enough to cover the
supervening event, the court look into the true construction of the contract and consider
whether the circumstances is in the contemplation of the parties. In Metropolitan Water
Board v Dick Kerr & Co Ltd1, a clause in the contract provided for an extension of time
“whatsoever and howsoever occasioned”, and yet this clause was held only to cover
temporary difficulties, and not to cover delays that would hugely differ in degree and
magnitude from what could have been contemplated.
Here, although the inclement weather clause provided for the automatic extension of time in
the existence of abnormal climatic conditions, it was intended to delay restoration during the
“number of days of inclement weather” when it was either “not reasonable or not safe for
persons exposed thereto to continue working”. It is unlikely that this clause would provide for
circumstances where there would be significant delay after the occurrence of the inclement
weather condition.
Issue (1.2): Whether the force majeure clause could be invoked
Frustration is likely to be oust where supervening event foreseeable and there is any
allocation of risk.
Here, the force majeure event was defined as “anything outside the reasonable control of the
contractor, including earthquakes, flood, fire or other physical natural disaster”. It may be
arguable that the parties had already foreseen the risk of the destruction or unavailability of
the quay in circumstances of physical natural disasters. The parties thus had reasonably
contemplated the frustrating event, i.e. the complete destruction of the quay. Contractors
may be regarded as undertaking risk of contract withdrawal in such circumstances. The force
majeure clause could then be invoked, and the risks could be allocated with reference to the
construction of the contract.
On the other hand, the Foundation may contend that the contract expressly states that weather
conditions, regardless of severity, would be excluded from the force majeure clause. Since
the destruction of the quay was triggered by severe inclement weather conditions, it may be
arguable that the force majeure clause should not be invoked.
1
[1918] AC 119
Issue (2): Whether the new circumstances render the obligation to perform radically or
fundamentally different from that originally undertaken
If the force majeure clause was invoked, the doctrine of frustration would not apply. If the
force majeure clause could not be invoked, whether the contract is frustrated will be
discussed as follows.
In Jackson v Union Marine Insurance Co Ltd 2, delay of 6 months to repair ship renders the
contract frustrated, since it made “performance fundamentally different in a commercial
sense”.
Here, the significant delay is likely to result in radical difference in performance. Originally,
the time for completing restoration was around 6 months only. Nonetheless, due to the
complete destruction of the quay, the earliest time for completion of repairs to the quay by
authorities would be mid-2021, and the authorities declined to give any definitive timeframe
as to when the quay would be operational again. It would be impossible for the contract to be
performed before the completion of repairs to the quay. Moreover, since it is uncertain as to
when restoration can start, and thus indefinite delaying results, this is likely to render the
performance of the contract radically different from what was contemplated in a commercial
sense.
In Davis Contractors v Fareham, the court rejected frustration because by agreeing a fixed
price, Davis took the risk of increased costs and delay; the difficulties were clearly
foreseeable and Davis could have provided for them in the contract.
Here, however, the delay was greater in degree than to be expected. Although agreement
provided for liquidated damages of HKD 30,000 per week in case of delay, the massive
typhoon that may potentially result in indefinite postponement was unbeknownst to both
parties. This may distinguish the present case from Davis Contractors v Fareham, since it is
not objectively manifest that Tuppy Construction agree to took the risk for indefinite delay.
2
(1874) LR 10 CP 125
Legal option
(1) In circumstances where the force majeure clause could be invoked
It was agreed that if the force majeure clause is to be invoked, both parties would be entitled
to whatever benefits they had already received under the agreement; no further sums or
performance would be due.
(2) If the contract is frustrated, the Foundation may recover money paid for total failure of
consideration in common law
In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd3, in cases of total failure
of consideration, principles of restitution for unjust enrichment may apply, prepayment of
£1000 by purchaser to seller can be recovered. “Consideration” in this case is the
performance of the contract itself. Failure of consideration means that other party did not
receive any benefit. There would be no recovery for wasted expenses in performance of
contract by a party where other party did not receive any benefit.
Here, although Tuppy Construction did incur wasted expenses, the Foundation did not
receive any benefit. It is likely that total failure of consideration could be established.
Therefore, the Foundamation may recover the deposit of HKD 2,000,000 and the remaining
HKD 6,000,000 need not to be paid.
(3) If the contract is frustrated, the Foundation may recover money paid based on statutory
law
According to Section 16(2) of the Law Amendment and Reform (Consolidation) Ordinance
(LARCO), the court has broad discretion whether to allow the payee to retain money paid or
recover money payable for monetary expenses incurred in relation to the contract before the
frustrating event.
3
[1942] UKHL 4

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Name: Lau Sum

Student Number: 3036064882

Tutor’s Name: Lo Stefan Huoy-Cheng

Tutorial Group Group 2

Issue (1.2): Whether the force majeure clause could be invoked

(1) In circumstances where the force majeure clause could be invoked

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