Krell v. Henry
Citation: Court of Appeal, England and Wales, [1903] 2 KB 740
Facts
Henry contracted to rent a flat in Pall Mall from Krell for two days in June 1902 for the specific purpose of viewing the coronation procession of King Edward VII, which was to pass along that route. The contract did not expressly mention the coronation. The King fell ill and the coronation was postponed. Henry refused to pay the balance of the rental fee, and Krell sued.
Issue
Whether a party is excused from performing a contract when the supervening event that frustrates the entire purpose of the contract, though not making performance impossible, was the foundation of the contract for both parties.
Holding
The Court of Appeal held that Henry was excused from paying. The cancellation of the coronation procession destroyed the foundation of the contract — the very purpose for which Henry had hired the rooms — and frustrated the contract even though the rooms remained available and physical performance was not impossible.
Rule
A party is excused from contractual performance when: (1) a supervening event occurs that was not the fault of either party, (2) the event was not reasonably foreseeable at the time of contracting, and (3) the event destroys the principal purpose of the contract, rendering performance valueless to the party seeking excuse.
Significance
The seminal frustration-of-purpose case, distinguished from impossibility by the fact that performance remained physically possible. Part of the “coronation cases” group. Teaches the doctrine of frustration of purpose and raises questions about the allocation of risk when an underlying assumption fails.