Victorian Consolidated Legislation

Frustrated Contracts Act 1959 - SECT 3

Adjustment of rights and liabilities of parties to frustrated contracts

3. Adjustment of rights and liabilities of parties to frustrated contracts



(1) Where a contract becomes impossible of performance or is otherwise
frustrated or where a contract is avoided by the operation of section twelve
of the Goods Act 1958 and the parties thereto are for that reason discharged
from the further performance of the contract, the following provisions in this
section shall, subject to the provisions of section four of this Act, have
effect in relation thereto.

(2) All sums paid or payable to any party in pursuance of the contract before
the time of discharge shall, in the case of sums so paid, be recoverable and
in the case of sums so payable cease to be so payable:

Provided that, if the party to whom the sums were so paid or payable incurred
expenses before the time of discharge in or for the purpose of the performance
of the contract, the court may, if it considers it just to do so having regard
to all the circumstances of the case, allow him to retain or (as the case may
be) recover the whole or any part of the sums so paid or payable, not being an
amount in excess of the expenses so incurred.

(3) Where any party to the contract has by reason of anything done by any
other party thereto in or for the purpose of the performance of the contract
obtained a valuable benefit (other than a payment of money to which subsection
(2) of this section applies) before the time of discharge, there shall be
recoverable from him by the said other party such sum (if any) not exceeding
the value of the said benefit to the party obtaining it as the court considers
just having regard to all the circumstances of the case and in particular-

   (a)  the amount of any expenses incurred before the time of discharge by
        the benefited party in or for the purpose of the performance of the
        contract, including any sums paid or payable by him to any other party
        in pursuance of the contract and retained or recoverable by that party
        under subsection (2) of this section; and

   (b)  the effect, in relation to the said benefit, of the circumstances
        giving rise to the frustration or avoidance of the contract.

(4) In estimating for the purposes of the foregoing provisions of this section
the amount of any expenses incurred by any party to the contract the court
may, without prejudice to the generality of the said provisions, include such
sum as appears to be reasonable in respect of overhead expenses and in respect
of any work or services performed personally by the said party.

(5) In considering whether any sum ought to be retained or recovered under the
foregoing provisions of this section by any party to the contract the court
shall not take into account any sums which have by reason of the circumstances
giving rise to the frustration or avoidance of the contract become payable to
that party under any contract of insurance unless there was an obligation to
insure imposed by an express term of the frustrated or avoided contract or by
or under any enactment.

(6) Where any party has assumed obligations under the contract in
consideration of the conferring of a benefit by any other party to the
contract upon any other person whether a party to the contract or not, the
court may if in all the circumstances of the case it considers it just to do
so treat for the purposes of subsection (3) of this section any benefit so
conferred as a benefit obtained by the party who has assumed the obligations
as aforesaid.