National Carriers Ltd v Panalpina Ltd [1981] AC 675, UKHL
Citation:National Carriers Ltd v Panalpina Ltd [1981] AC 675, UKHL
Rule of thumb:Do societal changes that make a contract less beneficial than it was before, do these frustrate the contract? No. Where societal circumstances change and this interferes with the enjoyment of their rights under a contract, this does not frustrate the contract.
Background facts:
The facts of this case were that Panalpina had a lease of a warehouse for a period of 10 years. Work was to be done on a listed building near the warehouse and under local authority orders they had to share the warehouse for 2 years, which Panalpina found extremely annoying.
Parties argued:
Panalpina stated that this contract was over due to frustration because they contracted for exclusive use, this was no longer provided and they found the new contract unbearably irritating. Carriers argued that their space was reduced but they still had their privacy and they were still fundamentally being provided with what they contracted for, and the Government planning conditions was not their fault and foreseeable as an eventuality that can happen to anyone's land.
Judgment:
The Court held that these planning conditions did not frustrate the contract – the Court affirmed that reducing the usefulness of the land to make a contract less profitable or more awkward, but certainly not impossible, falls well short of meeting the test for frustration. Just because a person feels 'frustrated' under a dictionary definition of the word, this does not necessarily mean that they will be considered to be legally frustrated, with this principle applying only in limited and extreme situations.
Ratio-decidendi:
'capable of applying to leases does not mean that it should be readily applied ... some of the limitations ... the doctrine cannot possibly invoked in the present case', Lord Roskill.
'My Lords, it follows that on the question of principle, I find it impossible to justify compartmentalisation of the law or to agree that the doctrine of frustration applies to every type of contract save a lease. I can see no logical difference between frustration of a demise charterparty and frustration of a lease. In principle the doctrine should be equally capable of universal application in all contractual arrangements. I therefore find myself in respectful agreement with the reasoning of Viscount Simon L.C. and Lord Wright and in respectful disagreement with the views of the second Lord Russell of Killowen and Lord Goddard in the Cricklewood case. But to hold that the doctrine is capable of applying to leases does not mean that it should be readily applied. Viscount Simon L.C. and Lord Wright both indicated in the Cricklewood case some of the limitations to which the invocation of the doctrine would be subject. I respectfully agree with what was there said but I do not think any useful purpose would presently be served by attempting to categorise those cases where the doctrine might be successfully invoked and those where it might not. Circumstances must always vary infinitely. I am, however, clearly of the view in common with all your Lordships that the doctrine cannot possibly be invoked in the present case for the reasons given by my noble and learned friend Lord Wilberforce’, Lord Roskill at 27-28
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