## Facts

- Mr. Krell (claimant) and Mr. Henry (defendant) entered into a contract for the rental of a flat in Pall Mall on 26 and 27 June 1902.
- The rental dates coincided with the planned coronation processions of King Edward VII, although the contract did not expressly mention the coronation.
- Circumstances indicated the flat was rented specifically to view the coronation procession, being particularly suitable for that purpose.
- Mr. Henry paid a deposit, but the coronation was postponed due to the King’s illness, resulting in cancellation of the procession.
- Mr. Krell sought the outstanding rent, but Mr. Henry argued the contract was frustrated because the event did not take place.

## Issues

1. Whether a contract can be frustrated where an unforeseen event destroys the essential purpose for which the contract was entered, even though literal performance remains possible.
2. Whether the continued existence of the coronation procession constituted an implied condition or term fundamental to the contract.
3. Whether the absence of an express reference to the procession in the contract prevented the application of frustration.

## Decision

- The Court of Appeal held that the contract had been frustrated as the procession was the basis of the contract, and its cancellation removed the sole reason for the agreement.
- Vaughan Williams LJ determined that frustration extends beyond physical impossibility to situations where a specific state of affairs was fundamentally assumed by the parties.
- The court inferred an implied condition that the procession would take place; its non-occurrence rendered the contract's performance radically different from what was contemplated.
- The court contrasted this with contracts where only the purpose, not the basis, was affected, as illustrated by the "cab to Epsom on Derby Day" analogy.
- The contract was discharged, and Mr. Henry was relieved from further performance.

## Legal Principles

- The doctrine of frustration discharges a contract when a supervening event, unforeseen and not attributable to either party, makes performance impossible or radically different from that originally agreed.
- Frustration may result from the destruction of the contract’s purpose, not solely from physical impossibility.
- Implied terms may be recognized based on the parties’ presumed intentions and the surrounding circumstances.
- Not every event cancellation results in frustration; the event must remove the fundamental basis of the agreement.
- The doctrine applies restrictively, excluding circumstances where obligations simply become less beneficial, as subsequently confirmed in cases like Davis Contractors v Fareham UDC [1956] AC 696.

## Conclusion

Krell v Henry established that contracts may be frustrated where an unforeseen event destroys their fundamental purpose, even if literal performance remains possible. The decision clarified and expanded the doctrine of frustration in English contract law, with the court recognizing implied terms based on the contract's core premise and continuing to require a radical change in the obligation for frustration to apply.


Krell v Henry [1903] 2 KB 740