Metropolitan Water Board v Dick Kerr and Co Ltd [1918]

Court: House of Lords

Facts: The Metropolitan Water Board (C) hired contractors Dick Kerr (D) to build a reservoir over six years. However, after two years, the government used wartime powers to order Dick Kerr to stop work and sell its plant. Condition 32 of the contract allowed for time extensions in case of delay, "whatsoever and howsoever occasioned." C sought a declaration that the contract was still continuing despite the interruption.

Issue: Was the contract frustrated by the government’s order under wartime powers, or did Condition 32 allow for an extension of time to complete the contract?

Held: The House of Lords held that the contract was frustrated and therefore terminated.

Key Judicial Statements: Lord Finlay LC stated that the government’s order made it illegal to continue the works and caused an indefinite delay, fundamentally altering the nature of the contract. He explained that "Condition 32 does not cover the case in which the interruption is of such a character and duration that it vitally and fundamentally changes the conditions of the contract, and could not possibly have been in the contemplation of the parties to the contract when it was made" (p. 125–126).

💡 Leveluplaw: demonstrates how the doctrine of frustration can terminate a contract when unforeseen events, such as government orders during war, drastically and fundamentally alter the contractual obligations beyond what the parties initially contemplated.