Frustration of Contract (LTB)

Caselaw.Ninja, Riverview Group Publishing 2021 ©
Date Retrieved:	2024-11-22
CLNP Page ID:	228
Page Categories:	[Contract Law, Leases, & Sub-Letting (LTB)], [Category:Section 19 (RTA)]
Citation:	Frustration of Contract (LTB), CLNP 228, <https://rvt.link/3t>, retrieved on 2024-11-22
Editor:	Sharvey
Last Updated:	2023/05/18

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London (City) v. Ordinal 2010 ONSC 1998

13 He therefore submits that there is a conflict between the two acts, such that it is necessary to decide which act should prevail. However, s. 19 of the RTA states the following:

19. The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements.

14 Mr. Hoffer submits that this section applies only so as to render applicable the common law of frustration of contract, which provides that a contract will be frustrated where performance has been rendered legally impossible. He submits that the section does not embrace the situation where a contract has been deemed to be frustrated pursuant to statute.

15 No authority has been offered to support this submission, and I find no basis in logic to make the distinction sought. In my view, the relevant provisions of both statutes are clear and unambiguous. Under the RTA, a lease may cease to exist because the contract has been frustrated, and it does not matter whether that frustration has been brought about because the common law criteria for frustration have occurred, or through the operation of statute.

CET-55930-16-RV (Re), 2016 CanLII 88098 (ON LTB)

2. Section 19 of the Residential Tenancies Act, 2016 (the 'Act') states that the doctrine of frustration and the Frustrated Contracts Act apply to tenancy agreements.

3. The doctrine of frustration (or impossibility of performance as it is also sometimes referred to) requires that a number of conditions be met before the doctrine will apply as identified in the Dictionary of Canadian Law, 3rd edition, D. D, pages 513-514.

4. First, an unexpected event that was not contemplated in the contract or foreseeable must occur.

5. Second, the unexpected event cannot be self-induced or the fault of one of the parties. A frequently quoted case on frustration states that the event cannot be the fault of either party (National Carriers Ltd. V. P (Northern) Ltd. [1981]1 A11 E.R. 161 (H.L.).

6. If it were otherwise, a party could undertake a destructive act (such as destroying a rental unit by fire or flood) in order to get themselves out of their obligations under a contract. This would be a self-induced frustration and an unjust result would occur if a party could rely on their own negligent acts or fault to get themselves out of an otherwise binding contract.

7. Third, the event must drastically change the nature of the contract so that it is impossible (not just difficult or expensive) to perform the obligations under the contract. The impossibility of performance must be of a long term nature and not temporary or transient.

8. The court in Re S and J et al., 1984 CanLII 2014 (ONSC) quoted the case of Lord S S.S. Co. Ltd. v. D C Co., Ltd., 1925 CanLII 330 (UK JCPC), (1926) 1 D.L.R. 873, (1926) A.C. 108 at p. 114, (1926) 1 W.W.R. 273, which held that:

... frustration can only be pleaded when the events and facts on which it is founded have destroyed the subject matter of the contract, or have, by an interruption of performance thereunder so critical or protracted as to bring to an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.

9. All the conditions must be met for the doctrine of frustration to apply. If it is determined that one condition does not apply, it is not necessary to do a further analysis of whether the other conditions were met.

TSL-79813-16 (Re), 2017 CanLII 28616 (ON LTB)

13. Section 19 of the Act speaks to the issue of frustration of contracts. It reads as follows:

19. The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements. 2006, c. 17, s. 19.

14. Frustration of contract means that a contract can be brought to an end because of some factor that makes it impossible for a party, or both parties to comply with its fundamental terms. The party that argues that the contract should be put to an end must establish that it is impossible to perform the contract.

15. The facts in this case do not establish that on a balance of probabilities the Landlord is unable to perform the contract. Rather, what is evident is that the tenancy could continue once the Landlord has repaired the residential complex. The Tenant’s unit is intact; there is no dispute that the Tenant’s unit is not damaged. The issue is that the Landlord needs to repair the remainder of the residential complex, and her presence in the unit impedes his ability to do so.

CET-53895-15 (Re), 2016 CanLII 44625 (ON LTB)

13. In this case, the Landlord did not serve the Tenant with a notice of termination of tenancy for the purpose of repairs or renovations. The repairs and renovations were only initiated because of the fire, which was an unexpected and unfortunate event. Therefore, section 53 of the Act does not apply and the Tenant is not entitled to have the right of first refusal or to reoccupy the unit.

14. The Landlord is relying on the doctrine of frustration of contract and would like termination of the tenancy on this basis.

15. Section 19 of the Act states that: The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements.

18. This tenancy is currently impossible to perform given the condition of the building. Therefore, the tenancy agreement was frustrated as a result of the fire on November 5, 2015. As a result, the parties were discharged from any performance of the tenancy agreement after November 5, 2015. Therefore, the Tenant is entitled to the return of her November 2015 rent on a pro-rated basis

TET-67067-16 (Re), 2016 CanLII 72234 (ON LTB)

1. At 4:30 a.m. on Sunday, October 11, 2015, the Tenant was sleeping on the couch when she was woken by the police and evacuated from the rental unit along with her adult son and 7 year old granddaughter. The unit was on fire. The ignition point was the balcony. The family was transported to a local hospital and released shortly after. The Tenant has been staying in a hotel ever since, waiting for the rental unit to be repaired so she can return.

2. The Landlord takes the position that the tenancy was terminated as a result of the fire based on the doctrine of frustration of contract. (See section 19 of the Residential Tenancies Act, 2006 (the 'Act').) If the tenancy was terminated at the time of the fire then the Landlord cannot be held responsible for what happened to the Tenant afterwards.

3. In the alternative, it argues that the Tenant, an occupant or guest caused the fire and the Tenant or her insurer should be liable for the damage that occurred and all of the Tenant’s losses.

4. In the further alternative, the Landlord argues that it has addressed the disrepair in the rental unit in a timely and effective manner and no remedy should flow to the Tenant from the breach of subsection 20(1).

5. For the reasons that follow the Board finds that the tenancy agreement between the Landlord and Tenant was not terminated as a result of the application of the doctrine of frustration; the evidence is insufficient to establish that it is more likely than not that the Tenant, an occupant or guest wilfully or negligently caused the fire; and the Landlord has not responded to the disrepair to the rental unit in a timely or effective manner.

11. With respect to the first definition of frustration, it cannot be said that the rental unit was utterly destroyed. It was not. It was seriously damaged but there is no question that the unit was capable of being renovated and restored.

12. With respect to the second definition of frustration it cannot be said that the fire was unforeseeable. The Tenant had fire insurance for just such an eventuality. The Landlord’s Site Supervisor estimated he had been involved in maybe ten fire restorations in his career.

13. So the evidence simply does not support the conclusion that the tenancy agreement was frustrated as a result of the fire.

It is ordered that:

1. The Landlord shall forthwith complete the repairs to the rental unit.

2. The Landlord shall return vacant possession to the Tenant as soon as the unit is habitable.

3. The Landlord shall pay to the Tenant $45.00 for the cost of filing the application.

4. If the Landlord does not pay the Tenant the full amount owing by August 13, 2016, the Landlord will owe interest. This will be simple interest calculated from August 14, 2016, at 2.00% annually on the outstanding balance.

NOT-01163-10 (Re), 2010 CanLII 18612 (ON LTB)

10. Section 19 of The Residential Tenancies Act 2006 states: “The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements”. In considering this possibility, I must find that contract between the Landlord and the Tenant (the rental agreement) was subject to an event so significant that it changed the nature of the contract to the point that the Tenant should be discharged from her obligation to the contract.

11. The Tenant’s representative offered no tangible evidence (such as photographs or a property standards report) to support her claim that the Landlord’s delayed preparation rendered the rental unit uninhabitable - thereby frustrating the contract.

12. Sub-section 37(1) of The Residential Tenancies Act 2006 (‘the Act’) states: “A tenancy may be terminated only in accordance with this Act”.

13. Sub-section 44(3) of The Residential Tenancies Act 2006 states: “A notice under section 47, 58 or 144 to terminate a yearly tenancy shall be given at least 60 days before the date the termination is specified to be effective and that date shall be on the last day of a yearly period on which the tenancy is based”.

TSL-05808-10 (Re), 2010 CanLII 58985 (ON LTB)

1. At the hearing before me the parties filed an order dated September 27, 2010 issued by the City of Toronto that says the residential complex is unsafe and that occupancy of the rental unit is prohibited.

2. As I explained at the hearing section 19 of the Residential Tenancies Act, 2006 (the ‘Act’) says: “The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements.” Essentially the doctrine of frustration says that when a contract becomes impossible of performance, then the contract has come to an end. As the doctrine applies to residential tenancy agreements what this means is that when a residential complex cannot be physically lived in anymore because it has been condemned, the tenancy has come to an end by operation of law.

3. As a result, an order will issue declaring the tenancy termination by operation of the doctrine of frustration.

EAT-59142-16 (Re), 2016 CanLII 106381 (ON LTB)

8. The Landlord’s Representative invoked the “doctrine of frustration of contract” and the Frustrated Contracts Act , which apply to tenancy agreements pursuant to section 19 of the Residential Tenancies Act, 2006 (the ‘Act’). The tenancy agreement was impossible to perform, and therefore frustrated, as a result of a severe rainstorm on July 9, 2016 that left. According to the Landlord, responsibility for the leak cannot be attributed to the condition of the roof or the roof drains.

13. On July 9, 2016, the rental unit was rendered uninhabitable due to a severe rainstorm that caused a significant amount of water to leak into the Tenant’s rental unit. While the inspection report prepared for the Tenant’s insurer indicates that the roof may not have been in good condition, this evidence is contradicted by an earlier report from the Landlord’s roofing contractor. More importantly, it is not possible to conclude from the evidence before me that either the condition of the roof or that of the roof drain is directly responsible for the leak that damaged the Tenant’s unit. I find, on a balance of probabilities, that the clogged drain or the condition of the roof in general were not the cause of the leak that caused damage inside the Tenant’s unit.

14. The Tenant is entitled to reimbursement of the monthly rent for July 2016, the monthly rent for August, the last month’s rent deposit that he paid as well as interest that accrued on the deposit. The amount that the Landlord must pay the Tenant is $2,562.42.

15. The Tenant is not entitled to compensation for the increase in rent that he incurred as a result of having to move into another rental unit because that other unit is not comparable to the one that he lived in previously. While the Tenant contends that other comparable rental units were not available in the same neighbourhood, he has not presented persuasive evidence to support that contention.

16. The Landlord complied with its responsibility under subsection 20(1) of the Act to provide and maintain the residential complex in a good state of repair. It also complied with its responsibility under section 22 of the Act not to interfere with the Tenant’s reasonable enjoyment of the rental unit. Since the cause of the Tenant’s loss was something other than the Landlord’s failure to maintain the residential complex or interference with the Tenant’s reasonable enjoyment of the rental unit, the Tenant’s claim for compensation for property damage is denied.

SWL-20529-18-RV (Re), 2019 CanLII 89686 (ON LTB)

16. Furthermore, the cause of the fire was relevant to the Member’s decision in the Tenant’s application because the Landlord claimed frustration of contract. The Member quoted the Divisional Court decision in Dhillon v. PM Management Systems Inc. (2014) ONSC 5407 at para. 14 stating that “an event is not a frustrating event if it is foreseen or provided for in the contract or the frustrating event was caused by the fault of a party to the contract”. Therefore, the cause of the fire was a relevant issue in the Board’s consideration of the Landlord’s argument that the tenancy had been frustrated, and hence terminated, due to the fire.

17. While I agree with the Landlord that the Courts have indicated that issue estoppel should not be applied rigidly in a manner that results in an injustice, I do not find that to be the case here. The Landlord had a chance to present its arguments and evidence to support its position that the Tenant was responsible for the fire during the hearing of the Tenant’s application.

TST-99550-18-AM (Re), 2019 CanLII 87146 (ON LTB)

22. The Landlord relies upon the doctrine of frustration as grounds for his terminating the tenancy. In SWT-15411-18-AM (RE), 2018 CanLII 88487, the Board determined at para. 29 that the landlord cannot first unlawfully evict the tenant and thereafter obtain an order from the Board vindicating that eviction.

23. Furthermore, the fire was not a frustrating event. Section 19 of the Act states that the doctrine of frustration of contract and the Frustrated Contracts Act, R.S.O. 1990, c. F.34 apply with respect to tenancy agreements.

24. Section 3 of the Frustrated Contracts Act reads:

3. (1) The sums paid or payable to a party in pursuance of a contract before the parties were discharged,

(a) in the case of sums paid, are recoverable from the party as money received for the use of the party by whom the sums were paid; and

(b) in the case of sums payable, cease to be payable.

25. What this means is that where a tenancy agreement is frustrated the agreement to pay rent in return for the right to occupy is over. Any money paid for rent for the period after frustration occurs is refundable to the tenant and no further rent is owed.

26. In general the authorities speak of two types of frustration:

• where the rental unit has been utterly destroyed or so seriously damaged that restoration will be very protracted and resumption of the tenancy is not reasonably foreseeable; or

• where an unforeseeable intervening event occurs that is not the fault of either party but so significantly changes the rights and obligations of the parties that it would be unjust to hold them to their contractual bargain.

27. With respect to the first definition of frustration, it cannot be said that the rental unit was utterly destroyed. It was not. It was seriously damaged but there is no question that the unit was capable of being renovated and restored in a relatively short period of time.

28. With respect to the second definition of frustration it cannot be said that the fire was unforeseeable. The Landlord and the Tenant had fire insurance for just such an eventuality. Tenant’s Responsibility as it pertains to the Doctrine of Frustration

29. Section 34 of the Act states:

34. The tenant is responsible for the repair of undue damage to the rental unit or residential complex caused by the wilful or negligent conduct of the tenant, another occupant of the rental unit or a person permitted in the residential complex by the tenant.

CET-67363-17 (Re), 2017 CanLII 93939 (ON LTB)

37. Section 19 of the Act states that the doctrine of frustration and the Frustrated Contracts Act apply to tenancy agreements. 38. I agree with the following as set out in Order CEL-55930-16-RV:

a) The doctrine of frustration (or impossibility of performance as it is also sometimes referred to) requires that a number of conditions be met before the doctrine will apply as identified in the Dictionary of Canadian Law, 3rd edition, pages 513-514.

b) First, an unexpected event that was not contemplated in the contract or foreseeable must occur.

c) Second, the unexpected event cannot be self-induced or the fault of one of the parties. A frequently quoted case on frustration states that the event cannot be the fault of either party (National Carriers Ltd. v. Panalpina (Northern) Ltd. [1981] All E.R. 161 (H.L.).

d) Third, the event must drastically change the nature of the contract so that it is impossible (not just difficult or expensive) to perform the obligations under the contract. The impossibility of performance must be of a long term nature and not temporary or transient.

e) The Court in Re S and J et al. 1982 CanLII 2014 (ONSC) quoted the case of Lord Shaw in Lord Strathcona Steamship Co. v. Dominion Coal Co. 1925 CanLII 330 (UK JCPC), (1926) 1 D.L.R. 873

…frustration can only be pleaded when the events and facts on which it is founded have destroyed the subject matter of the contract, or have, by an interruption of performance thereunder so critical or protracted as to bring to an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.

f) All the conditions must be met for the doctrine of frustration to apply. If it is determined that one condition does not apply, it is not necessary to do a further analysis of whether the other conditions were met.

39. The Landlords have not met the third part of the test for frustration of contract. While the repairs became protracted after the fire, resumption of occupancy of the rental unit was reasonably possible. The Landlords did not give the Tenant notice of termination after the fire occurred. The Landlords continued discussions with the Tenant during the repair period regarding continuation of the tenancy. On December 13, 2016, the Landlords presented a rent increase agreement to the Tenant to increase the rent by $25.00 per month in return for replacement of all cabinetry in the Tenant’ unit. In April 2017, the Landlords presented the Tenant with a “rental agreement renewal” which states that the rental unit was available to the Tenant as of June 1, 2017. This evidence does not demonstrate impossibility of performance.

40. Therefore the doctrine of frustration does not apply and the tenancy could not be considered ended when the fire occurred in July 2016.

SOT-65713-15 (Re), 2016 CanLII 44371 (ON LTB)

16. On November 10, 2015, the Landlord advised the Tenants by text that they needed to leave the property, due to frustration of contract. His text message stated:

You and all of the belongings need to leave the property. Our lease agreement expired on July 3rd the day of the fire. This is because the ‘frustrated contract act” came into play. …

As of right now you’re trespassing when you enter the property. I don’t want to call the police but I can if I have to. …

I expect everything in house to be gone by Monday I think that is ample amount of time.

45. Having said that, I also find, based on the Tenants’ evidence, that after the July 3, 2015 fire, the Tenants have also continued to occupy the residential complex for the purpose of storage of their belongings in the basement and the garage, and for the purpose of maintaining the school pick-up and drop-off routines of their children. The Tenants have continued to have keys to the residential complex and were free to come and go as they pleased. The Tenants spent Christmas Eve at the unit to allow their children to have Christmas at “their home”. The Tenants kept the utilities in their names and continued to pay for them until end of October 2015. I accept BB’s and JP’s evidence that the Tenants were present during some of their attendances at the home, for the purpose of repairs. The Tenants therefore have had effective continuous possession of the residential complex.

46. However, I find that the Landlord is not entitled to the rent arrears claimed under the L1 Applications, for the reason that the Tenants are entitled to 100% rent abatement due to the fact that the residential complex has not been habitable, as discussed below.

51. As held in File No. CET-10108-11, 2011 LNONLTB 214 (Ont. L.T.B.), which also involved a fire in the kitchen due to the fault of the tenants, “the fact that the fire was the fault of the tenants does not affect the landlord’s liability to repair”.

52. Section 20 of the Act requires that the Landlord provide and maintain a residential complex in a good state of repair and fit for habitation and for complying with health, safety, housing and maintenance standards.

53. “Good state of repair” requires that anything that is broken or damaged, be repaired. “Fit for habitation” means that the premises must be in compliance with health, safety, housing and maintenance standards.

60. The residential complex was rendered unfit for habitation by the fire, giving rise to the Landlord’s liability to repair. The Landlord understood this, hence, his initial agreement with the Tenants that there was no obligation to pay rent while repairs were undertaken.

61. The Landlord breached his section 20 obligation when he failed to restore the premises to a good state of repair within a reasonable period of time. Moreover, the evidence establishes that he made a conscious decision not to meet his obligation to complete the repairs, after misleading the Tenants into believing that the repairs would be performed.

62. The Tenants are entitled to 100% rent abatement due to the uninhabitable state of the premises from July 2015 to the present, and more specifically due to the absence of a functioning kitchen and the disrepair in the living room. The Upper Tenants shall be entitled to the return of the $800.00 paid and the Basement Tenants shall be entitled to the return of the $700.00 paid toward July 2015 rent for a total of $1,500.00.

69. I find that the Landlord and his agents substantially interfered with the reasonable enjoyment of the rental unit or residential complex and harassed, threatened and interfered with the Tenants during their occupancy, with reference to the following events:

- July 9, 2015 – The Landlord’s father entered the unit and was verbally abusive toward the Tenants, demanding that they remove all their belongings from the premises and accusing them of maliciously burning the house down.

- November 10, 11 and 12, 2015 - The Landlord sent text messages to the Tenants, demanding that they move out or he would call the police, stating that the Tenants were trespassing and he could kick them out and change the locks on them.

- November 21, 2015 – The Landlord sent RLB to tell the Tenants they must leave the house or he would call the police to have them removed.

- The Landlord’s delay of the repairs to the house.

76. There shall be an order terminating the tenancies under subsections 30 (1) and 29 (1) (e) of the Act based on the Landlord’s breach of his section 20 maintenance obligations and the Landlord’s substantial interference with the reasonable enjoyment, harassment and interference with the Tenants during their occupancy under subsection 29 (3) and (4) of the Act.

80. I consider the Landlord’s unyielding statement “The house will not be finished” and the long delay in the Tenants being able to move on, resume and re-organize their lives around a place they can call “home”.

81. The Board has jurisdiction to award damages for a Landlord’s breach of the Tenants’ contractual right to quiet enjoyment. The remedies available under section 30 (1) of the Act include “make any other order that it considers appropriate”. In Mejia v. Cargini, (2007) O.J. No. 437, the Divisional Court held:

Those cases and the grammatical and ordinary sense of the language giving the power to “make any other order that it considers appropriate” persuades us that the Tribunal has the power to award damages for the breach of contract of lease.

82. Having considered the Landlord’s refusal to comply with his statutory obligations and the impact of the Landlord’s conduct upon the Tenants’ well-being, I will award the Tenants a collective damages award of $1,500.00.

TEL-32649-12 (Re), 2013 CanLII 51226 (ON LTB)

1. The Residential Tenancies Act, 2006 did apply to this unit from June 1, 2012 until December 1, 2012. At that time the unit was deemed uninhabitable and the tenancy agreement became frustrated pursuant to the Frustrated Contracts Act and as permitted under section 19 of the Residential Tenancies Act, 2006 (RTA).

2. As a result of the lengthy period of time required to make repairs to the unit there is no foreseeable date that the Tenants would be permitted back into the rental unit. There is no requirement under the RTA for the Landlord to offer the Tenants first right of refusal when the unit does become habitable.

3. Based on the evidence provided and the fact this vacancy of the rental unit is not for a short period of time I have deemed the rental contract to be frustrated as of December 1, 2012.

TST-94030-18 (Re), 2018 CanLII 123261 (ON LTB)

21. I find that, based upon the evidence before me, I am in agreement with submissions of MJB on this point: what happened here is that the Landlord has illegally locked out the Tenant and may have subsequently done work on the complex to eliminate the units and ostensibly to convert it to a single family dwelling where the Landlord and his family now live. The Landlord, having violated the Act in respect to this tenancy; cannot benefit by his illegal lockout and changes to the building to say that the tenancy cannot continue because the unit, which it is his duty to maintain under s.20 of the Act – is no longer habitable or no longer exists. The Landlord has not legally ended this tenancy and per his obligations thereunder, shall provide the Tenant with a self-contained room of approximately 200 square feet with access to a kitchen and a bathroom in accordance with the timeline set out in the order below. While I have considered the aspect that this contract is frustrated, as contemplated under s.19 of the Act, as urged by MJB, I am not persuaded that at present, the unit no longer exists or is uninhabitable. Further, as also emphasized by MJB, the Landlord should not be permitted –through his own flouting of the processes of the Act – to avoid the “uncomfortable tenancy” by reason only of his own actions to illegally lock out the Tenant.

It is ordered that:

1. The Landlord shall immediately take all necessary steps –as required under s.20 of the Act – to restore the unit to habitable condition to allow the Tenant to recover possession of the rental unit on or before October 31, 2018 and to provide the Tenant with keys to the doors of the rental unit and the residential complex on or before that date.

2. The Landlord shall not re-rent the unit to anyone else.

3. If the Landlord does not allow the Tenant to recover possession of the unit on or before October 31, 2018, the Tenant may file this order with the Court Enforcement Office (Sheriff) starting November 1, 2018 so that the order may be enforced.

4. Upon receipt of this order, the Enforcement Office is directed to give possession of the unit to the Tenant on or after November 1, 2018.

5. The Landlord shall waive any claim against the Tenant for rent for the unit between March 1, 2018 and November 1, 2018.

6. The Landlord shall pay to the Tenant $6,000.00. This represents the costs that the Tenant has incurred or will incur in replacing property that was disposed of the Landlord and/or the Landlord’s agents.

7. The Landlord shall also pay the Tenant the amount of $1,000.00 for damages for pain and suffering.

8. The Landlord shall also pay the Tenant $50.00 for the cost of filing the application.

9. The total amount the Landlord owes the Tenant is $7,050.00.

10. The Landlord shall pay the Tenant the full amount owing by October 8, 2018.

11. If the Landlord does not pay the Tenant the full amount owing by October 8, 2018 the Landlord will owe interest. This will be simple interest calculated from October 9, 2018 at 3.00% annually on the outstanding balance.

12. The Tenant has the right, at any time, to collect the full amount owing or any balance outstanding under this order.

13. The Landlord shall pay to the Landlord and Tenant Board an administrative fine in the amount of $1,000.00 on or before October 9, 2018.

TEL-10643-10 (Re), 2011 CanLII 34537 (ON LTB)

13. The body of jurisprudence surrounding the common law doctrine of frustration of contract is vast. However, frustration of contract is generally understood to arise when an unexpected event occurs which no party to the contract contemplated at the time of entering into the obligation and the unexpected event makes the performance of the obligation impossible.

14. Professor Fridman in The Law of Contract 4th ed. Carswell at page 677 writes:

The key to both the understanding and the application of the doctrine of frustration in modern times is the idea of a radical change in the contractual obligation, arising from unforeseen circumstances in respect of which no prior agreement has been reached, those circumstances having come about without default by either party. What would appear essential is that the party claiming that a contract has been frustrated should establish that performance of the contract, as originally agreed, would be impossible. For example, if the subject-matter of the contract has been lost or destroyed, a court will be willing to determine that the contract is ended.

15. The complete destruction of the subject matter of the contract is not a pre-requisite for the doctrine to apply. For instance, frustration was held to have occurred in a case where the boiler of a ship exploded before the ship could commence service under a charter-party[1]. The same result occurred in a case where a ship was stranded for so long as to render her virtually non-existent as a carrier, although still identifiable[2]. However, in order to successfully invoke the doctrine of frustration in the case of a tenancy agreement there must be, at a minimum, serious damage that will require a prolonged period of repair. What constitutes serious damage and a prolonged repair period will turn on the facts of each case. Furthermore, as noted by Professor Fridman in the preceding excerpt, the event giving rise to the frustration cannot be self-induced.

16. Section 1 of the FCA defines “discharged” to signify “relieved from further performance.” In the case of a tenancy agreement, frustration operates to discharge the contractual obligation to provide a rental unit. Thus, the frustration serves to terminate the tenancy.

17. In the matter before me, unit 211 was deemed uninhabitable by municipal authorities. Six months after the laundry room explosion, the unit remained under construction and had yet to be approved for occupation by city officials. In the circumstances, it is reasonable to conclude that the original tenancy was frustrated by a catastrophic and unanticipated event.

TSL-55139-14 (Re), 2014 CanLII 78350 (ON LTB)

71. It is also clear that by removing landlord and tenant matters from the Courts and creating an administrative tribunal the Legislature intended that the Board would be a creature of statute only. It does not have residual common law or equitable powers. The Board will occasionally rely on general law including common law as a guide to interpretation of the Act. For example, the Board has used common law principles found in various estoppel doctrines to interpret and apply s. 23 of the Statutory Powers Procedure Act which gives the Board the power to prevent abuse of its processes. But using the common law as a guide to interpretation is not the same thing as using it to effectively oust the application of the Act.

72. I would also point out that the Act has carefully preserved and explicitly incorporates a way that tenancy agreements can be declared a nullity based on traditional common law principles. Section 19 says the doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements. Clearly this provision demonstrates that the Legislature contemplated when and in what circumstances the common law with respect to declaring tenancies a nullity would apply. Absent a similar provision saying the Board can declare agreements to be null and void in the face of fraud, I do not believe it can simply be read into the Act.