Krell v. Henry
2. K.B. 740 (CA 1903)

  • Krell offered to rent out his rooms in London overlooking a street where processions to the royal coronation were going to take place.  Henry offered to pay £75 to rent the rooms in order to watch the processions (a lot of money in 1903).  Henry put down £25.
    • Nowhere in their written correspondence did either of them explicitly mention the coronation ceremony.
  • The king got sick and the processions didn’t happen.  Henry refused to pay.  Krell sued for the remaining £50 and Henry countersued for the £25 deposit.
  • The English Trial Court dismissed the Krell’s complaint and found for Henry on his counterclaim.
    • The Trial Court found that there was an implicit condition in the contract.  Namely that there would be a coronation.
      • The principle that an implied condition which ceases to exist voids the contract stems from the case of Taylor v. Caldwell (3 Best & S. 826 (Unknown Court – UK 1863)), which in turn was borrowed from Roman law.
        • Unlike Taylor, the contract in this case could still have been completed. In Taylor the music hall Taylor wanted to rent had burned down so it was unavailable. Here Krell’s room was fine, Henry could still rent it, there just wasn’t much of a point to it without the coronation.
      • It wasn’t so much that Henry was renting a room, he was buying a view of the coronation. In the same way it would be silly to think of a person buying a movie ticket as renting a chair to sit in for 2 hours.
        • On the other hand, assuming the parade happened, what if Henry rented the rooms but didn’t watch the parade?  Would he be in breach of contract.
    • The Court analogized the situation to one in which a man hired a taxicab to take him to a race. If the race did not occur on the particular day the passenger had thought, he would not be discharged from paying the driver; but unlike the situation in this case, the cab did not have any special qualification, as the room here did (its view of the street).
    • Furthermore, the cancellation of the coronation could not reasonably have been anticipated by the parties at the time the contract was made.
  • Note that implicit conditions are not the same as parol evidence.  It’s not that there is something meant to be in the contract that was not formally written down, it’s that there is some fundamental thing that exists outside the scope of the contract, which neither party has control over, that is an essential part of the contract.
  • Henry gave up his claim for the initial £25 deposit.  A later British case (Chandler v. Webster) established that deposits paid before the frustrating event are not recoverable.
    • The goal is to leave parties where they contracted to be at the moment when the frustrating event occurred.
    • Most American courts do not follow this rule, and force the return of the deposit back.
  • This is often called the doctrine of impossibility, the doctrine of impracticablity, or even the doctrine of frustration.  In American common law, it is narrowly construed.  There are three factors that must all be met for a party to be excused (from damages) from performance of a contractual obligation:
    • Performance of the contract must have been come extremely difficult.
    • The event that made performance extremely difficult was an unforeseen development that was not the fault of either party.
    • The parties must have not assumed the risk, or explicitly mentioned the risk in the contract.
    • If you can prove impossibility, most American Courts will consider it to be a contract rescission.  You get back your deposit.