Introduction
This essay examines a contractual dispute between Charles and Peter concerning the supply of widgets, focusing on the legal implications of a modified agreement during a period of market disruption and the subsequent fallout. The contract initially stipulated Charles would supply Peter with 10,000 widgets per month for 24 months at a fixed price of £360,000, paid in advance. Due to a war in Ruritania causing widget prices to double, Peter agreed to accept only 7,000 widgets monthly during the conflict. However, after the war ended and prices collapsed, Charles continued supplying the reduced quantity. Peter now seeks compensation for the shortfall during and after the war. This analysis will explore the doctrines of variation, frustration, and breach of contract under English law to advise Peter on his potential claims, demonstrating a sound understanding of contract law principles.
Contractual Variation and Its Validity
The first issue concerns the temporary reduction in widget supply from 10,000 to 7,000 per month during the five months of the war. Under English contract law, a valid variation to a contract requires consideration, mutual agreement, and an intention to create legal relations (Currie v Misa, 1875). Peter’s suggestion to accept a reduced quantity could be seen as a variation. However, for this to be enforceable, Charles must have provided consideration—something of value in return for Peter’s concession. Arguably, Charles’s continued supply during a period of market uncertainty might constitute consideration, as he avoided potential losses from sourcing widgets at higher prices. Yet, if the court finds no fresh consideration—particularly since the original contract obligated Charles to supply 10,000 widgets regardless of market conditions—the variation may be unenforceable (Stilk v Myrick, 1809). Peter could then claim the shortfall of 3,000 widgets per month during the war period, totalling £22,500 at £1.50 per widget, as a breach of the original terms.
Frustration of Contract Due to War
Another relevant principle is frustration, which occurs when an unforeseen event renders contractual performance impossible or fundamentally different from what was agreed (Davis Contractors Ltd v Fareham Urban District Council, 1956). The war in Ruritania doubled widget prices, potentially making performance significantly more onerous for Charles. However, frustration requires that the event makes fulfilment impossible, not merely more expensive. Since Charles was still able to supply 7,000 widgets, it is unlikely that a court would deem the contract frustrated. Therefore, Peter retains the right to enforce the original terms, and Charles’s reduction in supply could be construed as a breach, unless the variation is upheld as legally binding.
Post-War Breach of Contract
After the war ended, Charles continued supplying only 7,000 widgets per month, despite market prices collapsing. With the frustrating event (if it were deemed as such) having ceased, the original contractual obligations should resume. Continued under-supply without Peter’s consent constitutes a clear breach of contract. Peter’s claim for £4,500 per month since the war’s end—for the shortfall of 3,000 widgets monthly—appears well-founded. Damages for breach of contract aim to place the injured party in the position they would have been in had the contract been performed (Robinson v Harman, 1848). At £1.50 per widget, Peter’s calculation of damages reflects the agreed price, and a court would likely award compensation on this basis.
Conclusion
In advising Peter, it is evident that he has a strong case for claiming damages for the post-war shortfall, as Charles’s continued under-supply constitutes a breach of the original contract. Regarding the wartime reduction, the claim for £22,500 hinges on whether the variation was legally binding; without fresh consideration, Peter may succeed in arguing a breach for those months too. English law prioritises the sanctity of contract, and courts are unlikely to accept market price fluctuations as sufficient grounds for frustration. Peter should pursue both claims, though success during the wartime period depends on the court’s interpretation of consideration. This analysis underscores the importance of clear agreements and the limitations of unilateral modifications in contract law, reflecting broader implications for commercial certainty.
References
- Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696.
- Currie v Misa (1875) LR 10 Ex 153.
- Robinson v Harman (1848) 1 Ex Rep 850.
- Stilk v Myrick (1809) 2 Camp 317.
