Loss lies where it falls CASES

In English law, loss lies where it falls expresses that, when a contract is discharged without fault (most notably by frustration), each party generally bears the losses already incurred unless statute or contract reallocates them.

Definition and principles

At common law, frustration ended the contract prospectively: sums paid and benefits conferred before the frustrating event were not automatically recoverable, and sums that had fallen due remained payable. This allocation reflected the idea that, absent breach or an agreed risk-sharing clause, each side shoulders its own pre-frustration losses.

Key cases

• Chandler v Webster (1904): established the strict common law position—payments made were not recoverable and sums due remained payable when the contract was frustrated.
• Fibrosa Spolka v Fairbairn (1943): recognised recovery where there was a total failure of consideration, softening Chandler’s effect.
• Gamerco SA v ICM/Fair Warning (1995): applied the Law Reform (Frustrated Contracts) Act 1943, under which courts may adjust losses and order repayment of pre-payments to achieve a just result.

Practical implications

• Use clear risk-allocation clauses (force majeure, deposits, staged payments) to avoid default outcomes.
• On frustration, consider the 1943 Act’s discretionary regime, which may override the common law allocation.
• Outside frustration, the phrase reminds parties that, without breach or agreement, the law will not re-distribute ordinary commercial losses.