The case of Davis Contractors Ltd v Fareham Urban District Council [1956] UKHL 3 is a landmark decision in English contract law concerning the issue of frustration of contracts. This case revolves around a dispute between Davis Contractors Ltd (the appellants) and Fareham Urban District Council (the respondents) over a construction contract that was delayed due to unforeseen circumstances, specifically a shortage of labour and materials.
The appellants claimed that the contract had been frustrated and, therefore, voided, entitling them to be paid on a quantum meruit basis for the work completed. The House of Lords, however, ruled that while the performance of the contract had become more onerous, it was not frustrated.
This case has significant implications for the doctrine of frustration and contract interpretation in English law, particularly with regard to the distinction between unforeseen difficulties and frustration.
Facts of Davis Contractors Ltd v Fareham Urban District Council
In Davis Contractors Ltd v Fareham Urban District Council, the appellants, Davis Contractors, entered into a contract with the respondents, Fareham Urban District Council, to construct 78 houses within eight months for an agreed sum of £92,425. The project, however, encountered significant delays, largely due to a shortage of skilled labour and materials. Instead of the projected eight-month timeline, the work stretched over 22 months. As a result, the cost of the project increased, rising to £115,223.
Faced with the increased costs and prolonged delays, Davis Contractors argued that the contract had been frustrated due to the unforeseen shortage of labour and materials. They contended that the frustration of the contract rendered it void, thus entitling them to payment on a quantum meruit basis, meaning they should be paid the value of the work done, rather than the original agreed price.
The case was initially heard by an arbitrator, who accepted the appellant’s argument, stating that the contract had come to an end due to frustration. The arbitrator concluded that the “footing of the contract was removed” and that the parties were no longer bound by the terms of the agreement. However, the decision was appealed, and the case ultimately reached the House of Lords, which was tasked with determining whether the contract was indeed frustrated.
Legal Issues
The key legal issues in Davis Contractors Ltd v Fareham Urban District Council revolved around:
- Whether the appellants were entitled to claim payment on a quantum meruit basis due to the alleged frustration of the contract.
- Whether the contract had been frustrated due to the shortage of labour and materials, which resulted in the delay of the project.
- Whether the terms of the contract, as originally agreed upon, were modified or overridden by the letter accompanying the tender, which outlined certain conditions about the availability of labour and materials.
Davis Contractors Ltd v Fareham Urban District Council Judgment
The House of Lords ultimately dismissed the appellants’ appeal, finding that the contract had not been frustrated and the appellants were not entitled to additional payment on a quantum meruit basis.
The Lords held that while the performance of the contract had become more onerous due to the unforeseen circumstances, it did not meet the legal standard for frustration. The contract remained binding, and Davis Contractors were not entitled to be paid for the work completed outside of the agreed terms.
Conclusion
In conclusion, Davis Contractors Ltd v Fareham Urban District Council [1956] UKHL 3 is a key case in English contract law that clarifies the doctrine of frustration. The case emphasised that frustration does not arise simply due to difficulties in performance, but rather when performance becomes impossible or radically different from what was originally agreed upon.
The House of Lords’ decision also reinforced the importance of interpreting contracts in light of the circumstances at the time they were made, rather than implying new terms or conditions. The case continues to be cited as an authoritative decision on the issue of frustration and the interpretation of contracts in English law.
