Sometimes circumstances change so much after a contract is made that it is impossible to carry it out. For instance, the subject matter of the contract may be destroyed, as where there is a contract to buy a painting, but before it can be handed over, it is stolen or destroyed by fire. If this happens without the fault of either party a court may find that the contract has automatically ceased ('become frustrated'). In that case neither party will be bound. The court must be satisfied that there is no provision in the contract that the contract should continue to bind even if such an event should occur.
The Frustrated Contracts Act 1988 (SA) provides that in some circumstances, partial frustration of a contract need not result in the failure of the whole contract. For example, when the circumstances constituting frustration make it impossible to fulfil a particular part of the contract, only that part is frustrated and there remains a part of the contract which can be fulfilled and which continues to bind the parties.
The Act does not apply to contracts to which the Crown is a party nor to contracts entered into before the Act came into force in 1988. Also specifically excluded are six other types of contract, including a contract for insurance and partnership agreements.
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