Abstract:
The freedom of contract allows parties to decide on the terms of a contract
according to their own wishes. As a vitiating factor frustration of a contract
is used as a method for terminating a contract. The Sri Lankan law governing
doctrine of frustration is the Roman-Dutch law. However, as Judge
Weeramantry observes (Weeramantry, 1967), with the evolvement of time
both the common law and the civil law have come to similar terms with
regard to their effect relating to the doctrine, and the distinctions that remain
are purely theoretical. The judiciary has also been quite keen on adopting the
more readily available English doctrines as a whole and it can be seen that
the law now that governs the doctrine of frustration in practice is the English
law.
The English law relating to frustration has changed from one of strict
liability, where parties were held liable for their respective promises
irrespective of events making performance not possible to a more liberal one,
where parties were excused for events that resulted in non-performance,
which were beyond their control, through developments in the common law.
However, even with these changes in the common law it still yielded some
unjust results which resulted in an imbalance of the risk allocation of
frustrated contracts. The basic question then was to decide, who should bear
the loss resulting from an event that has rendered performance by one party
uneconomical (Posner and Rosenfield, 1977). To address these issues with
the recommendations of the Law Commission the UK introduced The Law
