Davis Contractors Ltd v Fareham UDC

Davis Contractors agreed with Fareham UDC to build 78 houses over eight months for £92,425. It ended up taking 22 months because Davis was short of labour and materials and cost £115,223. Davis submitted the contract was frustrated and void and therefore they were entitled to quantum meruit for the value of work done.

The House of Lords held that although the performance of the contract had become more onerous, it was not frustrated. Lord Reid argued that saying frustration was an implied term was fanciful because people do not write about unforeseeable events. Instead, he wrote the following:[1]

In my view, the proper approach to this case is to take... all facts which throw light on the nature of the contract, or which can properly be held to be extrinsic evidence relevant to assist in its construction and then, as a matter of law, to construe the contract and to determine whether the ultimate situation... is or is not within the scope of the contract so construe... appears to me that frustration depends, at least in most cases, not on adding any implied term but on the true construction of the terms which are, in the contract, read in light of the nature of the contract and of the relevant surrounding circumstances when the contract was made.

Lord Radcliffe concurred with the result:[2]

There is, however, no uncertainty as to the materials upon which the court must proceed.... [On the "officious bystander" test] it might seem that the parties themselves have become so far disembodied spirits that their actual persons should be allowed to rest in peace. In their place there rises the figure of the fair and reasonable man. And the spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is, and must be, the court itself. So, perhaps, it would be simpler to say at the outset that frustration occurs whenever the law recognises that, without the default of either party, a contractual obligation has become incapable of being performed because the circumstance in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.

Another argument that failed was that an express term was incorporated that the agreed price was binding only if there were in fact adequate supplies of labour and materials.

Lord Radcliffe's test was approved by the High Court of Australia in Codelfa Construction Pty Ltd v State Rail Authority of NSW.[3]

• English contract law
• Frustration in English law