Frustration of a contract for the sale of a flat

A contract for the construction and sale and purchase of an apartment is frustrated where some event not contemplated by the parties and not provided for in the contract makes performance of the contractual obligation radically different from that which the parties had contemplated at the time of the contract.

Wong Lai-ying v Chinachem Investment Co Ltd ([1980] HKLR 1, PC) concerned contracts under which a developer agreed to build flats within an agreed time-scale and then to sell undivided shares to the purchasers. A major landslip occurred. It was unforeseeable and delayed works at the site. They were completed more than two years after the latest possible time contemplated by the sale agreements. The foundations that had to be built were very different from those that had originally been contemplated. The Privy Council agreed with the Hong Kong Courts that the landslip was an event that frustrated the sale agreements. In the language of Lord Radcliffe in Davis Contractors v Fareham UDC ([1956] AC 696), performance of the contractual obligation had become radically different from that which was undertaken by the contract.

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