Gamerco v ICM [1995] 1 WLR 1226 (CA)

Facts

• Gamerco SA, a concert promoter, entered into a contract with ICM/Fair Warning (Agency) Ltd for Guns N' Roses to perform at a Madrid stadium.
• Before the event, Spanish authorities deemed the stadium unsafe and revoked the permit, making performance impossible.
• The contract was frustrated due to this external event beyond the parties' control.
• Gamerco had incurred expenses including advertising costs, travel arrangements, and other pre-concert expenditures.
• Gamerco sought recovery of these expenses under the Law Reform (Frustrated Contracts) Act 1943.

Issues

1. Whether the contract was frustrated by the revocation of the stadium permit by Spanish authorities.
2. Whether, under section 1(2) of the Law Reform (Frustrated Contracts) Act 1943, Gamerco could recover expenses incurred prior to the frustrating event.
3. How the court's discretion should be exercised in determining a “just sum” for the recovery of expenses.

Decision

• The court found that the contract was frustrated due to the withdrawal of the stadium permit, which was outside both parties’ control.
• It held that section 1(2) of the 1943 Act gave the court discretion to allow a party to recover expenses incurred before frustration if it was just to do so considering all the circumstances.
• The court examined the specific expenses claimed and concluded that Gamerco could recover a portion of its pre-frustration expenses.
• The "just sum" awarded reflected a fair allocation of losses between the parties, not necessarily the full amount claimed.

Legal Principles

• Section 1(2) of the Law Reform (Frustrated Contracts) Act 1943 permits discretionary recovery of expenses incurred prior to the frustrating event.
• The court's determination of a "just sum" is not automatic or formulaic, but depends on fairness, party conduct, and the circumstances.
• The Act provides a statutory mechanism ensuring equitable distribution of losses when a contract is rendered impossible without fault of either party.

Conclusion

Gamerco SA v ICM/Fair Warning (Agency) Ltd confirms the application of section 1(2) of the Law Reform (Frustrated Contracts) Act 1943, granting courts broad discretion to award reimbursement for pre-frustration expenses where just, with a focus on fairness and equitable balancing of losses caused by unforeseen events frustrating contractual performance.