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Covid 19 and Escaping Contracts Using Frustration of the Contract

We wanted to address an argument related to frustration of the contract and look at its likelihood of success in a broader commercial context. Frustration of the Contract is a concept that can relieve parties of performing under a contract. It means that circumstances that were not contemplated under the contract arise which make carrying out the contract impossible.

This argument theoretically could relieve people from all kinds of contractual situations. If it worked it would throw contracts ranging from leases to business purchases to real estate purchases to vehicle and other purchases to contracts of insurance in question. It would create chaos and uncertainty in Canadian jurisprudence, and lead to a large number of cancelled contracts.

We have seen some reported cases from the Civil Resolution Tribunal of BC (which is a completely online forum for small claims matters! That in itself deserves a future article!) in which weddings and golf event changes due to Covid were not events of frustration. We have also seen out of Ontario the case of FSC (Annex) Limited Partnership v. ADI 64 Prince Arthur L.P, 2020 ONSC 5055 (CanLII). In this case the court treated the Covid situation like any other recession, and didn't not allow a party to get out of a shotgun agreement.

In our view, Frustration is not going to be available to parties in the Covid situation, as that would create unnecessary uncertainty in contractual situations.

If you want advice regarding your contractual obligations, please feel free to contact us.

The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.

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