A Case Study on Southern Water's Legal Concern

In the given case study, the doctrine of Frustration of Contract and doctrine of Force Majeure can be applied and in order to advice Southern Water regarding their legal concern and for the purpose of attaching academical critical commentary on the subject, the difference between the doctrine of frustration of contract and the doctrine of Force Majeure shall be discussed along with their development in the field of English law, referring appropriate case laws.

For the purpose of advising Southern Water, the given case study can be divided into two parts – one contract with the Guildtown County Council (GCC) and another with Professional Bricks. While the concept of doctrine of frustration and force majeure might seem having the same elements, both of them differ from each other on several key points. Hence, before applying the legal elements to the given case study of Southern Water, we shall discuss the basic definition of both of doctrine here.

Doctrine of Frustration of Contract – The doctrine of frustration of contract falls under the English Contract law that can be defined as setting aside of contractual obligation of both parties of a particular contract due to unforeseeable circumstances. For example, where the subject matter of the contract is destroyed or either party of the contract dies. Hence under any circumstance where it becomes impossible to fulfil the obligations of a contract by any of the parties, it is called the doctrine of frustration or a frustrated contract.

Doctrine of Force Majeure – The Doctrine of Force Majeure often refers to the Act of God or Act of nature which, even if foreseeable, could not be resisted by whatsoever mean. Force Majeure is often included in a contract as a clause under ‘extraordinary circumstances.’ Hence, if sudden extraordinary circumstances or event prevent either party of the contract from performing or fulfilling the obligations as set out in the particular contract, it shall come under the clause of doctrine of force majeure. War,

---

1. National Carriers Ltd. V Panalpina Ltd., [1981] AC 675
2. Condor v The Baron Knights, [1966] 1 WLR 87
3. Kiley, Roger. “The Doctrine of ‘Frustration.’” American Bar Association Journal, vol. 46, no. 12, 1960, pp. 1292–1294
4. McKendrick, Ewan. Contract Law, Text, Cases and Materials (2020), 9th ed., OUP Oxford: Oxford, p.710

strike, riot, pandemic etc. are considered extraordinary events or circumstances that prevents one or both parties of a contract form fulfilling their obligations herein.

In first part of the abovementioned case study of Southern Water with GCC, they had entered into a contract where it had an explicit clause of cancellation.

Analysis

Under the English Law of Contract, force majeure as a term does not hold any position unless and until it has been given a particular definition or circumstances. Thus, in order to invoke the concept or doctrine of force majeure in a contract, it should be elaborately explained in the section of ‘termination of contract’ or any other section of the same nature. Also, in case of happening of force majeure, the remedial consequences should be elaborated under the contract i.e., whether the contract would be terminated or shall be granted extensions or any other terms as the parties of the contract wants to perform of whatsoever nature. In simple terms, it can be said that unliked doctrine of frustration which is more of a default feature in case of an unforeseeable circumstances, the clause of force majeure needs to be inserted into a contract for it to be valid. The basic elements of the doctrine of force majeure are precisely defined as follows:

As it has been mentioned in several case laws that force majeure is not a term of art, in order to invoke the same, a B2B or a B2C contract needs to be clear on the list of such events and such description of such events are needed to be reasonable under the clauses of the Unfair Contract Terms Act 1977.

Such clause shall always be clear on the terms of obligations of both the parties of the contract under the events of a force majeure which also includes the happening of vis majeure as well.

Such clause shall be clear on the ground whether there would be any remedial obligation or not.

---

5. Nicholas, Barry. “Force Majeure and Frustration.” The American Journal of Comparative Law, vol. 27, no. 2/3, 1979, pp. 231–245
6. British Electrical and Associated Industries (Cardiff) Ltd v Patley Pressings Ltd, [1953] 1 W.L.R. 280
7. McKendrick, Ewan. Contract Law, Text, Cases and Materials (2020), 9th ed., OUP Oxford: Oxford, pp. 399-402
8. Lauritzen A.S. v Wijsmuller B.V, (The Super Servant Two), [1990] 1 Lloyd's Rep 1
9. Notcutt v Universal Equipment Co (London) Ltd, [1986] 1 WLR 641
10. Unfair Contract Terms Act 1977, s.11

Possible Advice to Southern Water

From the limited information that has been provided in the given case study, it can be seen that in the first part of the contract of Southern Water with GCC, only a cancellation clause has been inserted along with a remedial obligation by one party to another. According to the abovementioned discussion, no list of force majeure clause has been inserted into the contract between Southern Water and GCC even though ‘local opposition’, due to which the contract was suspended, comes under the definition of force majeure. Hence it can be said that the first contract of the given case study is silent on the force majeure clause as it is only vaguely mentioned as ‘if the contract is cancelled.’

When the clause is silent on the events of force majeure, instances from different case laws can be drawn to understand what are the scopes of Southern Water to redeem the remedial clause of the contract. Previously, in the case of British Electrical and Associated Industries (Cardiff) Ltd v Patley Pressings Ltd, it was held by the English courts that without any clear list of events decided by the parties under the clauses of contract, the ground of force majeure is void. Also, in the case of In Metropolitan Water Board v Dick Kerr & Co, it was essentially held that a force majeure shall not cover the events of the First World War. Similarly, in the case of Notcutt v Universal Equipment Co (London) Ltd, it was held that the clause of force majeure shall only strictly cover the terms that are mentioned in the contract and any of such other events which are more permanent in nature and does not come exclusively under the clauses of contract, shall not be considered as such.

However, these are the old precedents which are not in force in the present and in the recent case of Great Elephant Corp v Trafigura Beheer BV, it has been held that the old restrictive approach of English common law is exhaustive in today’s situation as clear and precise legislation has been enacted namely Unfair Contract Terms Act 1977. Hence, the modern approach shall be applicable to normal parlance of contract or construction, if any and the ambiguity in the clause will not be taken as strictly as it was used to. Also, in the case of Lebeaupin v Richard Crispin & Co, it was held that the clause of force majeure shall not

---

11. British Electrical and Associated Industries (Cardiff) Ltd v Patley Pressings Ltd, [1953] 1 WLR. 280
12. Metropolitan Water Board v Dick Kerr & Co [1918] AC 119
13. Notcutt v Universal Equipment Co (London) Ltd [1986] 1 WLR 641
14. Great Elephant Corp v Trafigura Beheer BV [2013] EWCA Civ 905
15. Beale, Hugh. Chitty on Contract (2019). 33rd edn., Sweet & Maxwell, ch. 15, para. 15-160
16. Lebeaupin v Richard Crispin & Co [1920] 2 KB 714

only include the Act of God but it shall also consider the inclusion of other forms of interventions such as human interventions as a valid form of force majeure herein.

Hence, applying all these provisions and the precedents in the given case study and the limited information that we have received, it is of the best interest of Southern Water to imply the contract with GCC under the force majeure clause and command the clause of cancellation to be inclusive of the local opposition which essentially falls under the definition of force majeure human interventions. For such purpose, Southern Water should refer to the Unfair Contract Terms Act, 1977 and the precedents of Fyffes Group Ltd v Reefer Express Lines Pty Ltd should be applied. The local opposition could not be a complete unforeseeable circumstance as to come under the doctrine of frustration as in case of any construction projects, the happening of some local opposition on grounds whatsoever are reasonably expected. Hence, the human intervention in this case can be adjudicated and governed under the term of cancellation and it can be said that the GCC has impliedly included the means of force majeure under the clause. Thus, Southern Water can ask for the remedial obligation mentioned under the contract but they cannot compel GCC to provide them with the particular site.

The Contract between Southern Water and Professional Bricks

In the second part of the abovementioned contract between Southern Water and Professional Brick, they had entered into a contract for the purpose of building the plant for the Richmond sewage project. Within a few days of proceeding with the project herein, an unfortunate collapsing of roof of the plant, built by Professional Bricks, destroyed one of the robots of Southern Water which caused them a huge damage.

Analysis

Under the English Common Contract Law, the term frustration of contract means the occurrence of such events that renders the obligations of either party of the contract impossible or causes them irreparable damage and radically changes the purpose of entering into the contract in the first place. Previously, the development of frustration of contract was extremely strictly measured and it was held by the court that a contract needs to be performed and in lieu of such performance, the party at fault in the case shall have to compensate the

---

17. Unfair Contract Terms Act, 1977, s.11
18. Fyffes Group Ltd v Reefer Express Lines Pty Ltd, [1996] 2 Lloyd's Rep 171

other party. The situation only radically changed on the point of view after the case law of Taylor v. Caldwell where the harshness of the previous English case was reduced and the concept of doctrine of frustration was adopted by the court of law

In the case of CTI Group v Transclear, it was held that if the subject matter of the very contract is destroyed with the fault of either of the party and the occurrence of the event i.e., the destruction of the subject matter of the contract happened under such unforeseeable circumstances that neither of the party could presume it beforehand, it shall come under the doctrine of frustration. Also, the same judgement was held in the case of Asfar v Blundell, the doctrine of frustration was upheld by the courts of United Kingdom and it was said that if the circumstances are unforeseeable to such extent that it cannot be covered under the normal parlance force majeure clause as well, it shall come under the purview of the doctrine of frustration.

In the case of Krell v Henry, it was held that even in the case where the main purpose of the contract is destroyed due to unforeseeable circumstances, it shall come under the clauses of frustration of contract and no breach of contract shall be held in such cases and neither of the party shall force the other party to fulfil the clauses of the contract.

However, if the unforeseeable event does not cause the whole of the contract under the non-performance, it shall not be construed as being frustrated. In the case of Herne Bay Steam Boat Co v Hutton, it was held that if one part of the contract can be performed by the parties, it shall go as unaffected and under such circumstance, the whole of the contract will not come under the doctrine of frustration.

Again, such doctrine of frustration shall have various limitation such as negligence, where the unfortunate event was caused by choice and where the events are necessarily foreseeable and preventable by either party of the contract.

Advice to Southern Water

---

19. Paradine v Jane, [1647] EWHC KB J5
20. Taylor v. Caldwell, EWHC QB J1, (1863) 3 B & S 826, 122
21. CTI Group v Transclear, [2008] EWCA Civ 856
22. Asfar v Blundell, [1896] 1 QB 123
23. Krell v Henry, [1903] 2 KB 740
24. Herne Bay Steam Boat Co v Hutton, [1903] 2 KB 683
25. Joseph Constantine Steamship Line Ltd v Imperial Smelting Corpn Ltd, [1942] AC 154 at 163
26. Maritime National Fish Ltd v Ocean Trawlers Ltd, [1935] AC 524
27. Edwinton Commercial Corp v Tsavliris (Worldwide Salvage & Towage) Ltd., [2007] EWCACiv 547

From the limited information that has been provided to us in the given case study, it can be said that the second part of the contract between Southern Water and Professional Bricks are clear case of doctrine of frustration by negligence and remedy can be available to Southern Water against Professional Bricks. As per the abovementioned discussion and analysis, it can be said the given case study falls under the purview of ‘frustration of contract or breach of contract due to negligence of the respondent party’. Due to the collapsing of the roof of the plant, a robot of Southern Water was destroyed and even though it was held by experts that the presence of the robot at the moment when the roof collapsed was of extreme coincidence as it was not the usual place of survey, the roof collapsed due to incorrect installation by the Professional Bricks. Also, from the limited information provided by the given case study, it can be assumed that the plant whose roof collapsed was an usual route of the robot for the purpose of surveying the project and even though the chance of the robot, being present at the instant place of collapsing is rarest, the damage caused to Southern Water cannot be waived accordingly under the grounds of frustration as the root of such unforeseeable event is the incorrect installation of the roof of the plants by Professional Bricks, hence they would be responsible for breach of contract under negligent behavior.

In the case of J. Lauritzen A.S. v Wijsmuller B.V, (The Super Servant Two), it was reiterated by the court of England that if either party of the contract essentially does something that knowingly on their part shall frustrate the contract in the future, such knowledge of frustration would come under the purview of negligence and the doctrine of frustration would not be applicable in the case herein. The same judgement was held in the case of Joseph Constantine Steamship Line Ltd v Imperial Smelting Corpn Ltd, if the other party is proved to have caused the unforeseeable event by negligence, it would not be counted under unforeseeable event anymore and the doctrine of frustration will not be applicable as well. In such cases, it shall come under the purview of breach of contract.

Hence, Southern Water can sure Professional Bricks under breach of contract due to negligence of such nature that it radically changed the obligations of the parties to the instant contract.

---

28. J. Lauritzen A.S. v Wijsmuller B.V, (The Super Servant Two) [1990] 1 Lloyd's Rep 1
29. Joseph Constantine Steamship Line Ltd v Imperial Smelting Corpn Ltd, [1942] AC 154 at 163

In the abovementioned cases, it is thus held that Southern Water can held GCC liable under the clause of force majeure for the first part of the contract and the Professional Bricks shall be held liable for breach of contract under the provision of negligently frustrating the contract herein.

According to McKendrick, the concept of force majeure is relatively less developed and less matured in the English law and it still has wide scope to grow into a more detailed chapter under which this clause can be applied more accurately in the United Kingdom. Thus, force majeure is essentially the exhaustive provision of a contract which is now comes under the Unfair Contract Terms Act, 1977.

While it is true that the concept and clarity of force majeure has widened since the British Electrical and Associated Industries (Cardiff) Ltd case, it still needs to work on various grounds, especially under the present circumstances of the Covid-19 situation. The pandemic has been harsh for the people involved in big projects and the English courts were essentially reluctant in giving leisurely provision on such basis and restricted themselves under the literal interpretation of the subject. In the case of Travelport Ltd v Wex Inc, it was held that the term pandemic of such wide range as of Covid-19 shall not be covered by the exhaustive definition clause of a contract and the parties are under obligation to fulfil their duties herein. Cockerill J was of the view that the concept of force majeure cannot be applied loosely or else it would become a trend in the English law. The same view was upheld in the case of Financial Conduct Authority v Arch Insurance (UK) Ltd

Hence, under the present circumstances, it can be critically commented that English courts of the United Kingdom taking a step backwards from being a welfare judiciary system to a strict judiciary system where they are forcing the parties of a contract to be fearful of their contract terms and it shall only make the rich richer and poor poorer. While it is true that many of the privileged parties who can perform the contract, shall use the pandemic as their excuse and make profit of it, the precedents of the court is overall providing with a literal interpretation of the exhaustive definition of contracts and from the wide point of view, the judicial system in case of adjudicating contractual cases, becoming more and more police in nature and leaving their welfare jacket



---

30. McKendrick, Ewan. Contract Law, Text, Cases and Materials (2020), 9th ed., OUP Oxford: Oxford
31. Travelport Ltd v Wex Inc, [2020] EWHC 2670
32. Financial Conduct Authority v Arch Insurance (UK) Ltd, [2021] UKSC 1

BIBLIOGRAPHY

Journals

Kiley, Roger. “The Doctrine of ‘Frustration.’” American Bar Association Journal, vol. 46, no. 12, 1960, pp. 1292–1294

Nicholas, Barry. “Force Majeure and Frustration.” The American Journal of Comparative Law, vol. 27, no. 2/3, 1979, pp. 231–245

Books

McKendrick, Ewan. Contract Law, Text, Cases and Materials (2020), 9th ed., OUP Oxford: Oxford

Beale, Hugh. Chitty on Contract (2019). 33rd edn., Sweet & Maxwell

Legislation

Unfair Contract Terms Act, 1977

Case Laws

Asfar v Blundell, [1896] 1 QB 123

British Electrical and Associated Industries (Cardiff) Ltd v Patley Pressings Ltd, [1953] 1 W.L.R. 280

Condor v The Baron Knights, [1966] 1 WLR 87

CTI Group v Transclear, [2008] EWCA Civ 856

Edwinton Commercial Corp v Tsavliris (Worldwide Salvage & Towage) Ltd., [2007] EWCACiv 547

Fyffes Group Ltd v Reefer Express Lines Pty Ltd, [1996] 2 Lloyd's Rep 171

Financial Conduct Authority v Arch Insurance (UK) Ltd, [2021] UKSC 1

Great Elephant Corp v Trafigura Beheer BV [2013] EWCA Civ 905

Herne Bay Steam Boat Co v Hutton, [1903] 2 KB 683

Joseph Constantine Steamship Line Ltd v Imperial Smelting Corpn Ltd, [1942] AC 154 at 163

J. Lauritzen A.S. v Wijsmuller B.V, (The Super Servant Two), [1990] 1 Lloyd's Rep 1

Krell v Henry, [1903] 2 KB 740

Lebeaupin v Richard Crispin & Co [1920] 2 KB 714

Metropolitan Water Board v Dick Kerr & Co [1918] AC 119

Maritime National Fish Ltd v Ocean Trawlers Ltd, [1935] AC 524

National Carriers Ltd. V Panalpina Ltd., [1981] AC 675

Notcutt v Universal Equipment Co (London) Ltd, [1986] 1 WLR 641

Paradine v Jane, [1647] EWHC KB J5

Taylor v. Caldwell, EWHC QB J1, (1863) 3 B & S 826, 122

Travelport Ltd v Wex Inc, [2020] EWHC 2670