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. 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) REFERENCE CITATION PLSE

Answer 1

Solution:

Yes, the contract can be discharged by frustration.

Explanation:

The doctrine of frustration provisions that contracting parties may relieved from their contractual obligations if after the formation of the contract, performance is rendered impossible or different. Generally, the docrtine of frustration applies in cases of changes in circumstances. However, the events causing the change of circumstances must not be the fault of either of the contracting individuals. In this case the disruption caused by the government to Pedrum's factory caused delay that caused hardships and inconvinience such that the company cannot deliver their first supply as stipulated in the contract. As such Pedrum may be discharged from their contractual obligations by the doctrine of frustration since the delay is impossible to avoid. Besides, they cannot perform according to the stipulated terms. Edwinton Commercial Corporation & Anor v Tsavliris Russ Ltd, The Sea Angel