A CONTRACT is automatically terminated and the parties are discharged when it becomes impossible to perform. The doctrine of frustration is raised when a contract becomes impossible to perform after it was entered into due to circumstances or conditions beyond the control of the parties. There is relevant provision in the Contract Law stating that a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, or is unlawful, becomes void when the act becomes impossible or unlawful.
There is no need to terminate the contract, since frustration automatically terminates it upon the occurrence of the event causing it. The concept of frustration under the Cyprus law derives from the Indian Contract Law and is distinguished from the Common Law, even though its spirit is essentially the same. On the other hand, the law also provides that where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must pay compensation to such promisee for any loss which the promisee sustains through the non-performance of the promise.
The Rent Control Court recently examined the doctrine of frustration with regard to tenancies and in particular statutory tenancies. The demised premises were destroyed by fire and the landlord was claiming the payment of rents and the restoration of the damages to the premises. On the other hand, the tenant, who abandoned the tenancy, counterclaimed the return of the deposit and the rents he had already paid through standing orders.
The court decided the tenant did not keep the possession of the premises either physically or legally, since it was destroyed and he did not express any intention to return.The case did not concern temporary absence of the tenant from the premises, him having intention to return within reasonable time, giving him the protection provided by the Rent Control Law. The court noted that the continuous possession is the “price” of the statutory tenancy and if the statutory tenant is not in continuous possession, the statutory tenancy is lost.
In the aforesaid case, the premises were completely destroyed due to arson without any liability of the tenant and the court held that the tenant
ceased to be their statutory tenant. The doctrine of frustration is applicable when the incident is not attributed to any of the parties. The party
relying on the doctrine of frustration does not need to prove he did not cause the incident which led to the frustration of the lease; however, if the other party alleges self-inducement, he must prove it.
The court referred to case-law, where it was decided frustration terminates the agreement automatically at the time of the incident and none of the parties can raise any rights. The parties are free to include in their agreement a provision that a certain happening will not cause the frustration of the agreement. The tenancy agreement in the particular case did not include any provision regarding the continuance or the termination of the agreement and of the tenancy relation in the event of fire or any other occurrence. It included only relevant indirect provisions that the tenant at the delivery of the possession of the premises would restore them at their previous condition and that he had to return them in an excellent condition, fair wear and tear exempted. The court applying the above, decided that the claim of the landlord could not succeed, since the tenant was not in possession or use of the demised premises and the statutory tenancy was terminated and ordered the return of the deposit to the tenant.
George Coucounis is a lawyer specialising in the Immovable Property Law, based in Larnaca, Tel: 24 818288, [email protected], www.coucounislaw.com
