BP Exploration Co (Libya) v Hunt (No 2) [1983]

Court: House of Lords

Facts: BP entered into a contract with Hunt for oil exploration in Libya. Following nationalization by the Libyan government, BP claimed frustration of the contract and sought compensation under the Law Reform (Frustrated Contracts) Act 1943, Section 1(3). BP was awarded $35.4 million in the High Court.

Issue: What is the proper measure for awarding compensation under the Law Reform (Frustrated Contracts) Act 1943?

Held: The House of Lords upheld the award of $35.4 million. The court emphasized judicial discretion in determining a just sum based on the value of the benefit obtained before frustration.

Key Judicial Statement: The two-step process for Section 1(3) involves assessing the value of the benefit conferred and awarding a just sum to prevent unjust enrichment.

💡 Leveluplaw: Under frustration, courts retain significant discretion in awarding sums to prevent unjust enrichment, following the Law Reform (Frustrated Contracts) Act 1943.