Krell v. Henry
Court of Appeal, 1903.
[1903] 2 K.B. 740.

Facts:

Krell agreed to let Henry rent a room for £75. Henry only wanted it for two days so that he could watch a Royal coronation from the window. However, the King got sick and the ceremony didn’t happen, so Henry didn’t pay.

  • Krell received £25 as a deposit and sued to recover the remainder.
  • Henry counterclaimed, and wanted his money back.

Issue:

Does the doctrine of frustration of purpose apply?

Holding:

Yes.

  • Supervening (after K entered into), not existing (at time K entered into).

Reasoning:

  • Krell solicited his room based on the view of the Royal coronation, and Henry was induced by that announcement.
  • The ceremony was the foundation of the contract.
  • The agreement was essentially a license to use the rooms for a particular purpose, and not to live in.

Note: Technically, there still could’ve been performance; it just would’ve been worthless. Hence the difference between impracticability and frustration doctrines.

Doctrine of “supervening frustration of purpose”

A party’s contract duty is discharged if:

(1) the party’s principal purpose

(2) is substantially frustrated

(3) without his or her fault

(4) by an event whose non-occurrence was a basic assumption on which the contract was made

(5) and the language or the circumstances do not indicate that the party agreed to perform despite the occurrence of the event.