Question

TermiFab is a steel fabrication business operating in Adelaide. The business is owned by Pedram. The business has a current 10-year lease of the factory where its manufacturing operations are run. Pedram has just been awarded a contract to supply steel frames that will be used in the building a commercial shopping centre in the Adelaide CBD. Under the contract, Pedram will start supplying steel frames to the shopping centre developer in 90 days. The construction period is estimated at 24 months, and Pedram is expected to supply steel frames for 16 of those months.
Two months before the delivery date of the first supply of steel frames to the shopping centre developer, the South Australian Government compulsorily acquires the site of Pedram’s factory. The factory happens to be along the route of a new tunnel link system that the government will start building.
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Pedram’s lessor advises him that he has to leave the premises within four months as provided by the lease contract. Pedram now has a massive problem: he must find new premises for his factory, and it might be another two to four months to establish the factory before it can start making steel frames. It is now clear that he cannot deliver the first supply of steel frames to the developer in time.
Pedram comes to you for advice. You are expected to advise on whether his contract to supply the steel frames with the shopping centre developer can be discharged by frustration. You must cite relevant provisions of law and cases in support of your answer. (Maximum 650 words)

Legal problem-solving questions must be answered using the IRAC (Issue, Rule, Application and Conclusion) method

Answer 1

Answer :

Pedram can discharge the contract by frustration because the South Australian government has compulsorily acquired the site of Pedram's company making it difficult for him to proceed with his contractual duties. If he decides to find new premises and start supplying steel frames, it may take too much time that will subsequently lead to an excessive and unavoidable delay.

Explanation:

Pedram can discharge the contract by frustration because the South Australian government has compulsorily acquired the site of Pedram's company making it difficult for him to proceed with his contractual duties. Considering parties in the case, it is neither Pedram's fault nor the other party's that the contract has been frustrated. While contracting, Pedram could not foresee that the government would compulsorily acquire Pedram's site and make it impossible for the factory to perform. Without notice, the government acquired the site after Pedram had contracted. He was required to leave the premise within four months and find another place to settle his factory, and which might take much time. Consequently, the situation has rendered it impossible to perform this contract because 4 months is not enough time for Pedram to deliver steel frames. If he decides to find new premises and start supplying steel frames, it will still take too much time that will subsequently lead to an excessive and unavoidable delay. Generally, Pedram should void the contract, because the current situation cannot allow him to perform and supply the steel frames within a period of 24 months. Both parties in this contract can be released from contractual obligations because the contract has been frustrated.