Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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In an ideal world, once you’ve entered into a contract-whether as an employer, employee, or business partner-things progress exactly as planned. But life has a habit of throwing up surprises. Sometimes, a completely unforeseen event makes fulfilling a contract impossible, even though neither side is at fault. In legal terms, this is known as “frustration of contract”-and understanding how it works is crucial if you want to protect your business against sudden shocks.
If you’re running a business or managing employees, it pays to know when frustration of contract might apply, what events could trigger it, and how you should handle the fallout. With the right knowledge (and a bit of careful planning), you can deal with unexpected terminations smoothly and avoid legal headaches down the line. Let’s break down what frustration in contract law means, when it typically arises, and how you should respond if it happens to you.
What Does “Frustration of Contract” Mean?
First, let’s define frustration. In contract law, “frustration” occurs when something totally unexpected happens that makes it impossible for one or both parties to carry out their duties under the contract. Importantly, the event must be:- Unforeseeable – no one could reasonably have anticipated it
- Not the fault of either party
- So major that it fundamentally changes what you agreed at the outset
What Are Typical Situations Where Frustration May Apply?
While frustration can affect any type of contract (supply agreements, property leases, service contracts and more), it’s especially important in the context of employment relationships. Let’s look at some common examples:1. Imprisonment
If an employee is sentenced to prison and can’t come to work, their employment contract may become impossible to perform. However, frustration isn’t automatic-the facts of each case really matter.- If the sentence is short, or there’s a valid way to adapt, frustration may not apply.
- If the imprisonment is connected to misconduct at work and could have been foreseen, a straightforward dismissal (not frustration) might be the better route.
2. Serious or Prolonged Illness
If an employee becomes seriously ill-say, through a medical emergency or unexpected long-term health condition-this could frustrate their contract. But again, it’s not a foregone conclusion. As an employer, you should consider:- How serious is the illness or injury? How long is the employee likely to be away?
- How critical is their role? Could someone else step in for a while?
- How long has the employee worked for you, and how much longer were they expected to stay?
- Does the employment contract have special clauses about sickness or long-term incapacity?
More Examples Of Frustration Events
- Destruction of the subject matter – e.g. a fire destroys an office needed for the contract
- Supervening illegality – e.g. a law changes overnight making the contract’s object unlawful
- Death – in personal service contracts, if one party dies, this will often frustrate the agreement
What Factors Should Employers Consider Before Deciding a Contract Is Frustrated?
If you think a contract (especially an employment contract) might be frustrated, slow down and take a careful look at the specific circumstances. Some key factors to weigh up:- Foreseeability – Was the risk of this event obvious or specifically covered in your contract? If it was or could have been anticipated, you might not be able to claim frustration.
- Duration and Nature of the Obstacle – Is the disruption short-term or likely to persist? The longer and more fundamental the interruption, the more likely frustration will apply.
- Critical Role/Possibility Of Replacement – Is the absence so crucial that no workaround is possible?
- Contractual Policies – Many contracts (especially employment ones) have built-in mechanisms for sickness, absence or temporary incapacity. If you’ve planned for this in advance (for example, through a clear sickness absence policy), you may need to follow those steps before frustration even becomes relevant.
- Previous Circumstances – If the employer or employee could have prevented or mitigated the event, frustration is less likely to apply.
What Are The Legal Consequences Of Frustration?
When a contract is frustrated in English law, several things happen automatically:- The contract ends “by operation of law”-that is, it finishes on the date of the frustrating event, without need for formal notice or dismissal procedures
- Neither side can sue the other for non-performance after the frustrating event (but any obligations that accrued before frustration still stand)
- With employment contracts, this usually means that the worker cannot then claim unfair dismissal or redundancy pay for the end of their job, because their contract didn’t end through normal “dismissal” procedures
Why Is a Case-by-Case Assessment Essential?
No two situations are the same when frustration is in question. Courts and lawyers look at all the facts-why the event happened, what the contract says, how foreseeable it was, and what the parties may have done to prevent or adapt. If you’re an employer, don’t jump to the conclusion that a setback or prolonged absence automatically frustrates the contract. You must check:- What the employment contract (and any policies) actually say about prolonged absence or business interruption
- Whether the same or similar event has happened before (in which case, it may be treated as foreseeable)
- If there’s a way to temporarily adapt or “cover” the work, rather than immediately invoking frustration
Best Practices For Handling Potentially Frustrated Contracts
Navigating a possible frustrated contract can feel daunting, but there are clear steps you can take to stay protected:1. Document Everything
- Keep clear records of what happened, when, and how you responded.
- Note down any adaptations or steps you attempted before viewing the contract as frustrated.
- If in doubt, seek input from HR, senior management, or legal advisers.
2. Review Your Contracts Regularly
- Make sure contracts are up to date and contain clear provisions on issues like illness, incapacity, or supervening events.
- Consider including a “force majeure” clause (which can provide a framework for handling unexpected events outside your control).
3. Get Professional Legal Advice
- Frustration of contract is a technical area-especially in employment law, where the stakes are high.
- Seek specialist advice before concluding that a contract is frustrated. Making the wrong move can have serious repercussions (employment tribunal claims, breach of contract lawsuits, or financial liabilities).
- Sprintlaw’s team can help assess your unique situation and ensure you’re meeting your obligations along every step.
4. Communicate Openly and Sensitively
- If an employee has been affected by an illness or unforeseen absence, approach conversations openly and empathetically.
- Clearly explain the process, your obligations, and their rights (signposting ACAS or relevant resources, if applicable).
Key Takeaways: Frustration Of Contract Explained
- Frustration of contract occurs when an unforeseen event makes it impossible or radically different for either party to perform their contractual obligations.
- Common events include imprisonment, serious illness, death, destruction of key property, or supervening illegality.
- Employers should not assume frustration applies automatically-they need to evaluate each situation individually and carefully assess the facts.
- When frustration does apply, contracts end by law (not dismissal), which affects employees’ rights to claim unfair dismissal or redundancy pay.
- Employers should review contractual terms, keep detailed documentation, and always seek legal advice before deciding a contract has been frustrated.
- Getting your contracts reviewed and tailored to fit your business can avoid many headaches down the line.
