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Frustration of contract

A contract is frustrated when it cannot be carried out, though neither party is to blame. Before the Fibrosa case (1942) the law took the view that the loss should lie where it fell; afterwards, that money paid could be recovered where the consideration had failed. The position was clarified by the Law Reform (Frustrated Contracts) Act 1943, which stated that monies paid could be recovered, but that the party from whom they were recovered might be allowed to deduct expenses and charge for the value of work done where the other party had received a benefit. (The Act does not apply to contracts for carriage of goods by sea, certain charter parties, insurance contracts and contracts for the sale of specific goods where the frustration arises from the perishing of the goods.)

Reference: The Penguin Business Dictionary, 3rd edt.