Believe it or not, there is such a thing as a frustration of a contract. The “frustration” has nothing to do with people’s feelings. It is governed by the doctrine of frustration of contracts at common law and under the Frustrated Contracts Act. The frustration may come about when the parties to a contract cannot perform it, or cannot continue to perform it, due to some outside event not related to the conduct of the parties or contemplated by them. There can be no frustration if the outside event results from the voluntary act of one of the parties, or if the possibility of such event was contemplated by the parties and provided for in the agreement. Illness or physical incapacity is an example. A contract of employment may be frustrated, or declared to be at end without compensation to either party, due to an employee’s illness or incapacity. This will depend on the terms of the contract, the type of employment, the expected duration of employment, and most importantly, the prospects of recovery for the employee.
The Tenant Protection Act expressly provides that the doctrine of frustration of contracts and the Frustrated Contracts Act apply to tenancy agreements in Ontario. Here are the facts of a decided case. A tenant leased a room located above a laundromat for one year. The laundromat created a lot of heat from the clothes dryers and the tenant’s room had poor cross-ventilation. The landlord had installed air conditioning in the room to compensate for the poor ventilation. However, the lease did not require such installation. For a period of three months in the summer, the air conditioning was not working because it broke down. Two months before the end of the lease, the tenant informed the landlord that she was being transferred in her employment, and thereupon vacated the premises. The tenant refused to pay the rent for the last two months because the air conditioning had not been operating for the three month period in the summer.
The landlord sued for the two months rent butthe action was dismissed. One of the legal grounds for the court’s dismissal was that the lease had been partially frustrated because of the breakdown of the air conditioning equipment. Was the case correctly decided on the basis of a frustration of contract? I will leave it to you to decide.