Frustration of Contact

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thereunder so critical or protracted as to bring to an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.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.

Ursus Transport Inc v Jeff Bryan Transport Ltd, 2014 CanLII 75306 (ON SCSM)

97. The Frustrated Contracts Act, R.S.O. 1990, c. F.34 as amended, allows for parties to a contract to build in provisions which survive the frustration of the original contract, and which impose ongoing obligations in the event of changed circumstances.

98. The contract in question here had no such provisions, and on its frustration it ceased to bind Jeff Bryan.

99. Justice Perrell in Dhillon v. PM Management Systems Inc., 2014 ONSC 5407 (CanLII), (2014) O.J. No. 4352 (Div. Ct.) said that:

When an uncontemplated event or circumstance occurs after the signing of a contract that without default of either party makes the performance of the contract impossible or would make performance a radically different thing than what was promised or intended by the parties or that strikes at the root of the agreement, both parties may be discharged from further performance and moneys paid may be restored to the party who paid them. See: Focal Properties Ltd. v. George Wimpey Canada Ltd. (1975), 1975 CanLII 49 (ON CA), 14 O.R. (2d) 295 (C.A.) aff'g. (1974), 1974 CanLII 530 (ON SC), 6 O.R. (2d) 3 (H.C.J.), aff'd on other grounds 1977 CanLII 22 (SCC), (1978) 1 S.C.R. 2; Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1976), 1975 CanLII 726 (ON CA), 9 O.R. (2d) 617 (C.A.); Dinicola v. Huang & Danczkzy Properties (1996), 1996 CanLII 8000 (ON SC), 29 O.R. (3d) 161 (Gen. Div.); Bothwell v. Murray, (2002) O.J. No. 3091 (S.C.J.); Davis Contractors Ltd. v. Fareham Urban District Council, (1956) A.C. 696 (H.L.); Frustrated Contracts Act, R.S.O. 1990, c. F.34.