Frustration of Contract

Frustration arises where the employee cannot work due to circumstances beyond their control, and the employer is thereby no longer required to employ the employee. Furthermore it is no fault of either party.

What is it and when does it occur?

Examples of frustration of contract

Some examples of frustration can include the following although each case must be dealt with on an individual basis;

• Imprisonment
• Death of an employee
• An employee is unable to maintain professional qualifications integral to the performance of their role
• Changes in the law imposing new requirements for the job

What should you do as an employer?

Frustration brings a contract to an end immediately and automatically. There is no dismissal in law so no need for notice to be given by either party and employees would not have the ability to bring an unfair dismissal claim. While that may seem attractive to some employers, the Tribunals have understandably been reluctant to consider employment contracts as having been frustrated, as it potentially deprives an employee of the opportunity to challenge the termination of their employment.

As an argument of frustration is never guaranteed to succeed, it is always prudent for an employer to have a fair reason and follow a fair procedure so as to be able to defend an unfair dismissal claim (provided the employee qualifies to bring an unfair dismissal claim of course).

Is an employee walking out frustration of contract?

Employers need to be careful in this situation. When an employee walks out of an organisation it could be for a variety of reasons (disability or health related, implied resignation, frustration or AWOL) and you cannot assume that they have automatically frustrated the terms of their contract. Each of the reasons would need its own course of action and HR strategy and it would be important to find out what is happening before an employer acts or makes any assumptions.

We should follow the Queen’s example and invite to a private meeting and find out the issues and see if they can be resolved!


Case law

There is limited case law with regards to Frustration of Contract but in the case case of Warner v Armfield Retail Leisure (2012), Mr Warner had suffered a severe stroke and was therefore absent from work. After nearly a year, Armfield wrote to him to confirm the termination of his employment, enclosing his P45 and a cheque for the holiday pay owing to him.

Mr Warner brought claims for unfair dismissal, breach of contract and disability discrimination. He argued that he had been dismissed. Very unusually, Armfield argued that in relation to the unfair dismissal and breach of contract claims, the contract of employment had been frustrated, but that in relation to the disability discrimination claim, they accepted that he had been dismissed. The Tribunal accepted the frustration argument in relation to the unfair dismissal and breach of contract, but found that in relation to the disability discrimination claim there had been a failure on Armfield’s part to make reasonable adjustments.

The EAT said that while they accepted that frustration could apply to employment contracts in some circumstances, employers and employees would normally be expected to deal with issues of disability, sickness and other absence within the employment relationship (i.e. subject to the normal position of resignation and dismissal). However, they said that frustration was something that could apply to a disabled person, provided that as an additional factor the employer had to bear in mind the duty to make reasonable adjustments. In this case, Armfield were found not to have breached the duty to make reasonable adjustments.

The Warner case shows that frustration can sometimes be successfully argued, but that an employer’s conduct in the lead up to the termination of employment can still be the subject of a claim.

If in doubt contact us!