Case: Krell v. Henry (1903)

Citation

[1903] 2 KB 740

Court

Court of Appeal, England

Date of Judgment

13 August 1903

Bench

Hon’ble Justice Vaughan Williams, Hon’ble Justice Romer, Hon’ble Justice Stirling

Facts of the Case

Krell, the plaintiff, owned a flat overlooking the route of King Edward VII’s coronation procession. Henry, the defendant, entered into a contract to rent the flat for two days to watch the procession. The agreement made no mention of the coronation being the primary purpose of the rental.

However, the coronation was postponed due to the King’s illness. Henry refused to pay the balance of the rental amount, arguing that the primary purpose of the agreement was frustrated. Krell sued for the unpaid amount, claiming that the contract remained enforceable.

Legal Issues

1. Whether the doctrine of frustration applies when the primary purpose of a contract is defeated by unforeseen events.
2. Whether Henry was still obligated to pay the balance despite the postponement of the coronation.

Reasoning of the Court

1. Frustration of Purpose
   • The court held that the foundation of the contract was the coronation procession. The unforeseen postponement frustrated the main purpose of the agreement, even though performance was not physically impossible.
2. Implied Condition
   • Justice Vaughan Williams reasoned that the contract was based on an implied condition that the coronation procession would occur as scheduled. The non-occurrence of this event nullified the foundation of the agreement.
3. Fairness in Performance
   • The court emphasized that enforcing the contract under these circumstances would be unfair, as the purpose of the rental was entirely defeated.

Judgment

The Court of Appeal ruled in favor of Henry, holding that the contract was frustrated and Henry was not obligated to pay the remaining balance.

Significance of the Case

1. Expansion of the Doctrine of Frustration
   • This case broadened the scope of the doctrine of frustration to include situations where the primary purpose of a contract is defeated, even if performance remains possible.
2. Commercial Contracts
   • It highlighted the importance of implied conditions and shared understanding in commercial agreements.
3. Foundation for Modern Law
   • The principles established in this case have influenced modern contract law, including the application of Section 56 of the Indian Contract Act, 1872, in similar cases.

Conclusion

The case of Krell v. Henry is a landmark judgment that refined the doctrine of frustration, ensuring that contracts are discharged when their fundamental purpose is destroyed by unforeseen events. It continues to serve as a guiding precedent for interpreting the impact of frustration on contractual obligations.