Krell v Henry [1903] Case Brief

Intro

Krell v Henry [1903] 2 KB 740 is an important English contract law case on frustration of purpose. It arose from the postponed coronation procession of Edward VII in 1902. The case considered whether a contract could be discharged when the event forming the foundation of the agreement failed to take place.

Facts of Krell v Henry

The dispute in Krell v Henry arose from arrangements made shortly before the proposed coronation procession of Edward VII and Alexandra in June 1902. The plaintiff, Paul Krell, had a flat at 56A Pall Mall. The defendant, C S Henry, agreed to hire the flat for 26 June and 27 June 1902. These were the dates on which the coronation processions had been announced to take place and pass along Pall Mall.

The arrangement was made by a written contract dated 20 June 1902. The defendant agreed to take the suite of chambers on the third floor at 56A Pall Mall for the two days. The agreed price was £75. The defendant paid £25 as a deposit and was to pay the remaining £50 later.

Although the surrounding circumstances showed that the flat was being hired so that the defendant could watch the coronation procession, the written correspondence between the parties did not expressly mention the coronation ceremony or the procession. The contract also did not contain an express term stating that the flat was being hired for the purpose of viewing the procession.

The defendant had been informed by the housekeeper of the premises that he would have an excellent view of the procession from the room. The correspondence also confirmed that the defendant would have the entire use of the rooms during the days, but not the nights, of 26 and 27 June.

The coronation processions, however, did not take place on the announced dates because of the King’s illness. Since the event for which the rooms had effectively been hired did not occur, the defendant refused to pay the remaining £50. The plaintiff then brought an action to recover the balance of the agreed rent. The defendant, in turn, counterclaimed to recover the £25 deposit already paid.

Issues Raised

The main issue in Krell v Henry was whether the defendant was still obliged to pay the remaining rent even though the coronation processions did not take place on the dates originally fixed.

The Court had to consider whether the holding of the coronation procession was merely part of the defendant’s personal motive, or whether it formed the foundation of the contract itself.

Another issue was whether an implied condition existed in the contract. In other words, the Court had to decide whether both parties had contracted on the basis that the coronation procession would take place on the specified days and would be capable of being viewed from the hired rooms.

The case also raised the question of whether the absence of an express reference to the coronation procession in the written contract prevented the Court from considering the surrounding circumstances.

Arguments

The references provided do not give detailed arguments from both parties in full. However, the position of each party can be understood from the nature of the claim and counterclaim.

The plaintiff sought to recover the balance of £50 under the contract. His position was that the defendant had agreed to hire the rooms for the two specified days at the agreed price and had not paid the remaining amount.

The defendant refused to pay the balance because the processions did not take place. He also counterclaimed for the £25 deposit, as the purpose for which the flat had been hired had failed.

The central disagreement, therefore, was whether the defendant’s obligation to pay remained enforceable despite the cancellation of the processions, or whether the contract had been discharged because the event forming its foundation had failed.

Krell v Henry Judgement

At first instance, Darling J held that there was an implied condition in the contract. He relied on the principles connected with Taylor v Caldwell and The Moorcock. The judgment was given for the defendant on both the plaintiff’s claim and the defendant’s counterclaim.

The Court of Appeal dismissed the plaintiff’s appeal. The decision was therefore in favour of the defendant. The plaintiff was not entitled to recover the remaining £50 under the contract.

Lord Justice Vaughan Williams considered whether there was an implied condition in the contract. The question was whether both parties knew, at the time the contract was made, that the reason for hiring the rooms was to watch the coronation procession.

The Court held that the taking place of the coronation processions on the dates originally fixed was regarded by both parties as the foundation of the contract. Since the processions did not take place, the obligation to pay for the use of the rooms was not to be treated as applying to that altered situation.

Romer LJ agreed, although he expressed some doubt. His doubt concerned whether the parties could be said not to have contemplated the risk that the processions might not take place or might not be viewable from the rooms. However, he accepted the conclusion reached by Vaughan Williams LJ on what was in the contemplation of the parties at the time. Stirling LJ also concurred.

Reasoning by the Court in Krell v Henry

The reasoning of the Court in Krell v Henry focused on the foundation of the contract. Vaughan Williams LJ first examined the substance of the agreement. The question was not limited to the literal words used in the written contract. Instead, the Court considered whether the contract had been made on the assumption that a particular state of affairs would exist.

The Court treated the timely occurrence of the coronation procession as that particular state of affairs. Even though the written contract did not expressly mention the coronation procession, the surrounding circumstances showed that the rooms were hired for that specific purpose. The fact that the rooms had a special view of the procession was central to the arrangement.

Vaughan Williams LJ considered that an implied condition need not always be stated in express words. It could be inferred from the circumstances surrounding the contract. For that reason, the absence of an express reference to the procession in the written correspondence did not prevent the Court from finding that the procession formed the foundation of the agreement.

The Court applied the principle from Taylor v Caldwell. That principle allowed a contract to be treated as discharged where an essential condition on which the contract was based ceased to exist. In this case, the coronation procession did not take place on the announced dates. This meant that the event forming the basis of the agreement had failed.

The Court distinguished the case from a situation where a person hires a taxicab to go to a race and the race does not take place. In such a case, the cab itself has no special qualification. By contrast, the rooms in Pall Mall had a special quality because they provided a view of the procession. The value and purpose of the hiring were directly connected with that view.

The Court also noted that the cancellation of the coronation could not reasonably have been anticipated by the parties when the contract was made. The failure of the procession was not simply an inconvenience or a change in the defendant’s personal plans. It went to the root of the contract.

Therefore, the Court concluded that the defendant was not bound to pay the balance of the rent. The contract had been made on the basis that the procession would take place, and when that basis failed, the defendant’s obligation to pay the remaining amount did not continue.

Krell v Henry Case Summary

Krell v Henry is a leading English case on frustration of purpose in contract law. The defendant hired rooms in Pall Mall for two days on which the coronation processions of Edward VII were expected to pass. Although the written contract did not expressly mention the coronation procession, the circumstances showed that viewing the procession was the foundation of the agreement.

When the processions were postponed because of the King’s illness, the defendant refused to pay the remaining rent. The plaintiff sued for the balance, while the defendant counterclaimed for the deposit.

The Court held in favour of the defendant. It found that both parties had contracted on the basis that the coronation processions would take place on the specified dates. Since that foundation failed, the plaintiff could not recover the balance of the rent.

The case is significant because it shows that a contract may be discharged where the common purpose forming its foundation fails, even if that purpose is not expressly stated in the written contract.