Chandler v Webster 04 Feb 1904 [1904] 1 KB 493, CA Case Info

A room was hired to view a royal procession which was subsequently cancelled. The hirer had paid part of the fee. The court ruled he could not recover the sum paid and remained liable for the balance, establishing the harsh 'loss lies where it falls' principle.

Facts

The claimant, Mr Chandler, agreed to hire a room from the defendant, Mr Webster, for the purpose of viewing the coronation procession of King Edward VII on 26 June 1902. The total price for the hire of the room was £141 15s, payable immediately. The contract stated, ‘To view the Royal Coronation Procession. Room on the first floor at 7, Pall Mall. Price 141l. 15s.’ The claimant paid £100 of this sum in advance, leaving a balance of £41 15s. On 24 June, the procession was officially cancelled due to the King’s illness. The claimant sought to recover the £100 he had paid, and the defendant counterclaimed for the unpaid balance of £41 15s.

Issues

The central legal issues for the Court of Appeal were:

1. Following the frustration of the contract, was the claimant entitled to recover the £100 paid to the defendant before the frustrating event occurred?
2. Was the claimant still liable to pay the outstanding balance of £41 15s, which was due before the frustrating event occurred, but had not yet been paid?

Judgment

The Court of Appeal found in favour of the defendant on both the claim and the counterclaim, dismissing the claimant’s appeal. The judgment firmly established the principle that, upon frustration, the loss lies where it falls.

Collins M.R.

The Master of the Rolls, Lord Collins, held that the effect of frustration is not to void the contract from the beginning (ab initio), but to release both parties from any further performance from the moment of the frustrating event. Any rights that had unconditionally accrued to either party before that point remained enforceable. He applied the principle from the earlier coronation case of Blakeley v Muller & Co.:

Where, from causes outside the control of the parties, a thing which was the basis of a contract has ceased to exist, and both parties are excused from further performance of the contract, then… any loss lies where it falls.

In this case, the obligation to pay the full £141 15s arose when the contract was made. Therefore, the defendant’s right to that sum had accrued before the procession was cancelled. Consequently, the defendant could keep the £100 already paid and could sue for the unpaid balance.

The necessary implication is that the law is that the plaintiff has no right to recover the 100l. which he has paid, and the defendant has a right to recover the 41l. 15s. which the plaintiff has not paid.

Romer L.J.

Romer L.J. concurred, clarifying that the legal rights and obligations of the parties crystallised at the very moment the frustrating event happened. He reasoned that at the time the procession became impossible, the obligation on the claimant to pay the entire hire fee had already accrued. Therefore, the subsequent frustrating event could not discharge this pre-existing obligation. The defendant had an accrued right to the full sum, making the claimant’s claim for recovery and his defence to the counterclaim invalid.

Mathew L.J.

Mathew L.J. also agreed, emphasising that there had been no total failure of consideration at the time the payment was made or due. The contract was for the provision of a room, which remained available. The fact that the procession, the motive for the contract, would not occur did not retrospectively invalidate the accrued right to payment.

Implications

Chandler v Webster became the leading authority for the common law rule that ‘the loss lies where it falls’ in the doctrine of frustration. This decision was widely criticised for its potential to create harsh and arbitrary outcomes, as a party who had paid a substantial sum before a frustrating event could be left with no remedy. The perceived injustice of this rule led to it being judicially overturned nearly forty years later by the House of Lords in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32. In Fibrosa, the court held that money paid could be recovered where there had been a total failure of consideration. The law was then put on a statutory footing by the Law Reform (Frustrated Contracts) Act 1943, which provides a more equitable framework for apportioning losses, including allowing for the recovery of money paid and compensation for work done before the frustrating event. Therefore, while no longer good law on its central point, Chandler v Webster remains a landmark case for understanding the historical development of the doctrine of frustration in English contract law.

Verdict: Appeal dismissed. Judgment for the defendant on both the claim and the counterclaim.

Source: Chandler v Webster 04 Feb 1904 [1904] 1 KB 493, CA Case Info