Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd

Frustration discharges future contractual performance but does not prevent restitution of an advance payment where the payer has received none of the performance for which it was made. The claim arises independently of the contract as money had and received on a total failure of consideration. The contract need not have been void from inception, and the payee need not be at fault.

The result remains governed by the contract’s true construction. A payment made final or irrecoverable by express or implied term, division of the bargain, custom or law may remain with the recipient. English common law affords no general equitable apportionment for partial failure or expenses incurred. A clause allowing a reasonable extension for limited wartime delay does not prevent frustration where performance becomes indefinitely impossible or illegal.

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd concerned a contract under which an English manufacturer agreed to make and deliver flax-hackling machinery c.i.f. Gdynia for £4,800. The Polish purchaser paid £1,000 on account. War, the occupation of Gdynia and the resulting illegality of delivery prevented performance.

The purchaser sought repayment of the £1,000. Tucker J gave judgment for the manufacturer, applying the rule in Chandler v Webster [1904] 1 KB 493 that loss caused by frustration lay where it fell. The Court of Appeal affirmed that decision because it was bound by the earlier authority.

The House considered whether a contractual provision allowing a reasonable extension for delay caused by war prevented frustration and, principally, whether an advance payment could be recovered where frustration caused a total failure of consideration.

1. Disposition. The House of Lords unanimously allowed the appeal. Lord Chancellor Simon, Lord Atkin, Lord Russell of Killowen, Lord Macmillan, Lord Wright, Lord Roche and Lord Porter agreed that judgment should be entered for the appellants for £1,000. The appellants did not seek interest.

2. Frustration. Per Lord Chancellor Simon, with the conclusion shared throughout the speeches, the contract was frustrated by an indefinite wartime interruption and the supervening illegality of delivery to enemy-occupied Gdynia. The clause allowing a reasonable extension where despatch was delayed by war addressed a limited delay. It did not govern an interruption of indefinite duration or an illegality which made despatch impossible.

3. Recovery of the advance payment. Per all seven Law Lords, the rule attributed to Chandler v Webster [1904] 1 KB 493 was wrong and was overruled. Frustration leaves the contract effective until the frustrating event and discharges future performance. That proposition does not prevent a separate restitutionary claim for money paid on a consideration which has wholly failed. Such a claim arises outside the contract as money had and received. It does not depend on the contract having been void from the outset or on fault by the recipient.

   The £1,000 was paid on account of the price for machinery to be delivered at Gdynia. The purchaser received no machinery, documents or other contractual performance. The consideration therefore failed totally, and the manufacturer had no continuing right to retain the payment.

4. Limits of the rule. Per Lord Chancellor Simon, Lord Russell, Lord Wright, Lord Roche and Lord Porter, the contract’s true construction remains decisive. An express or implied term, custom or rule of law may make a payment final, out-and-out or otherwise irrecoverable. Advance freight was an established example. A divisible contract may also permit recovery or retention by reference to a separately attributable part.

   The common law provides no general equitable apportionment for partial failure of an indivisible consideration or for expenses incurred before frustration. Several Law Lords recognised that this could cause hardship and regarded broader adjustment as a matter for legislation.

5. Restitution. Lord Wright further explained that an obligation to reverse unjust enrichment is imposed by law. It belongs to the law of quasi-contract or restitution rather than depending on an actual or fictitious contractual promise.

1. House of Lords: In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32, also reported as [1942] UKHL 4, the House unanimously allowed the appeal, reversed the decisions below and entered judgment for the appellants for £1,000.
2. Court of Appeal: MacKinnon LJ, Luxmoore LJ and Stable J affirmed Tucker J’s judgment. The court considered itself bound by Chandler v Webster [1904] 1 KB 493. No citation for this stage is stated.
3. High Court: Tucker J gave judgment for the respondents and rejected the claim for repayment of the £1,000. No citation is stated.