Depends on the specific wording of the FM clause and the factual circumstances, typically:
- The party relying on the FM clause has the burden of proving the FM event by producing evidence of the impact of the event.
- The affected party is usually required to give a written notice of the FM event to the counterparty. Note time limits imposed on such notification and the consequence of non-compliance.
Depends on the specific wording of the FM clause, typically:
- Performance is suspended for a short period or for the duration of the FM event.
- Following such suspension, an extension of time for performance may then be granted automatically or by agreement.
- If the FM event is prolonged or permanent then the clause may provide for termination by default or by agreement.
Frustration: If there is no FM clause, parties may rely on the doctrine of frustration but the inclusion of an FM clause may oust the operation of frustration as the FM clause may demonstrate that the parties have already considered the issue and risk allocation. A frustrating event is a supervening event that is:
- not the fault of either party;
- significantly changes the nature of the contractual rights and/or obligations; and
- makes it unjust to hold the parties to the contract.
It is not sufficient if the event makes performance more expensive, onerous or impracticable or if alternative performance is available.
Frustration results in the termination of the contract. A term may continue to operate after frustration if this is the parties' intention.
The common law provides that if a contract is frustrated, losses lie where they fall. However, losses may be borne differently in New South Wales, Victoria and South Australia where legislations allow alternative allocation of losses for a fairer result.