May 31, 2025
So, let’s talk about frustration in construction contracts. No, not the kind that makes you want to pull your hair out when a project goes sideways, but the legal concept that can actually help you out when things go seriously wrong. Frustration happens when an unforeseen event makes it impossible for either party to fulfill their contractual obligations. Think of it as a legal safety net for those unexpected curveballs that may be thrown your way.
What Does Frustration Mean?
Simply stated, frustration occurs when an unforeseen event, beyond the control of either contracting party, fundamentally impacts the ability to perform the contractual obligations. This means that if something happens that neither party could have predicted, and it prevents them from performing their duties, the contract may be considered frustrated. However, the reality of frustration in contracts is a very high bar to overcome.
When Does This Happen?
For a contract to be considered frustrated, an unforeseen event must occur which makes the performance of the contract impossible or substantially different from what was agreed. The event must not have been reasonably predicted or included in the contract. Consequently, a contract will not be frustrated where the frustrating event was the result of a bad bargain as this would be classified as a foreseeable event.
The standard of proof required to argue frustration is significantly high. For a contract to be frustrated, the frustrating event must have been unforeseeable and typically must have occurred as below:
- After the formation of the contract: Knowledge of the event must come during the performance of the contract, not before; and
- Outside each of the party’s control: Neither party should have caused or contributed to the event.
For example, the discovery of an unforeseen condition like hard rock during excavation might make construction impossible or substantially different from the contract, potentially resulting in frustration. However, frustration typically applies to events that arise after the contract is signed and then prevent performance, although in limited circumstance it may apply to an unforeseen pre-existing condition.
Examples of Frustration
Some events which may lead to frustration include the following:
- Supply Chain Issues: Events like a global pandemic can significantly restrict the supply of essential materials. If these restrictions significantly alter the nature of the contract and no alternatives are available, the contract may become frustrated; and
- Natural Disasters: If a natural disaster, such as a cyclone, flood or earthquake, destroys a construction site, this could be deemed a frustrating event. However, it’s important to note that many construction contracts include an express regime, typically through force majeure (discussed below) to deal with certain frustrating events.
What Happens Next?
When a contract becomes frustrated, the parties’ future obligations are usually discharged automatically, resulting in the termination of the contract.
However, many contracts include specific clauses that address the consequences of frustration. The implications of a frustrated contract will depend upon the specific terms of the contract clause, and the parties may still be obligated to continue performance of some contractual obligations.
The most common clause that considers the effects for frustration are force majeure clauses. These clauses usually address unforeseeable events such as natural disasters and warfare and specify how the contract should proceed in those circumstances.
The doctrine of frustration offers a critical legal mechanism in construction contracts for unforeseen, uncontrollable events that fundamentally alter or freeze performance. While it has a high legal threshold, understanding its principles are crucial for stakeholders navigating severe project disruptions.
Key Takeaways:
- Frustrating event: An unforeseeable, uncontrollable event making contract performance impossible or fundamentally different.
- High standard of proof: Requires significant evidence to demonstrate the event meets legal criteria.
- Event characteristics: Typically occur after contract formation and is outside the parties’ control.
- Effect of frustration: Future obligations are discharged, leading to termination, unless force majeure applies.
Be sure to check our previous articles on mutual agreement, repudiation, and serious breach for the full understanding on contract termination.
Lamont Project & Construction Lawyers
The Lamont Project & Construction Lawyers team has extensive knowledge regarding various contract mechanisms to mitigate current industry risks for both Principals and Contractors. With this knowledge and expertise, Lamont Project & Construction Lawyers can provide the required support and advise on major projects with respect to design risks across the life cycle of a project.
If you would like to discuss any matters raised in this article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.
The content of this article is for information purposes only and does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Isabella Welsby
Email: peter@lpclawyers.com or isabella@lpclawyers.com
Phone: (07) 3248 8500
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