of loss should lie. In pursuing this task, an obvious starting point will be to consider the parties’ own intentions in relation to the risk, which may be ascertained by reference to the terms of the contract. It can be assumed that rational individuals entering an exchange relationship will have made arrangements for events which create a risk of loss. Accordingly, those who are risk-averse may have made arrangements through the use of force majeure clauses, exemption clauses, the designation of a term as a condition or a warranty or a cancellation clause. These and other like devices serve to allocate the risk of loss according to the terms of the contract. If the other party is prepared to accept the risk, the reason may be that he believes he is in a better position to cover the risk by insurance or that he is less risk averse than the other party and is prepared to take the consequences if the risk does arise. Thus, it is important to construe the language of the contract, whether the problem is one of frustration or mistake. For example, if the parties make provision for an event which would not otherwise be regarded as a frustrating event, the court must ask whether the relevant provision is worded so as to cover the event in question. Similar issues also arise in relation to mistakes provided for in the contract. Thus, in William Sindall plc v Cambridgeshire County Council, it was held that where a seller of land had limited his liability

doi:10.4324/9781843141518-122

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of loss should lie. In pursuing this task, an obvious starting point will be to consider the parties’ own intentions in relation to the risk, which may be ascertained by reference to the terms of the contract. It can be assumed that rational individuals entering an exchange relationship will have made arrangements for events which create a risk of loss. Accordingly, those who are risk-averse may have made arrangements through the use of force majeure clauses, exemption clauses, the designation of a term as a condition or a warranty or a cancellation clause. These and other like devices serve to allocate the risk of loss according to the terms of the contract. If the other party is prepared to accept the risk, the reason may be that he believes he is in a better position to cover the risk by insurance or that he is less risk averse than the other party and is prepared to take the consequences if the risk does arise. Thus, it is important to construe the language of the contract, whether the problem is one of frustration or mistake. For example, if the parties make provision for an event which would not otherwise be regarded as a frustrating event, the court must ask whether the relevant provision is worded so as to cover the event in question. Similar issues also arise in relation to mistakes provided for in the contract. Thus, in William Sindall plc v Cambridgeshire County Council, it was held that where a seller of land had limited his liability

ABSTRACT

Another important consideration in the risk allocation process is who is the least cost avoider. A relevant factor in this regard is that one of the parties to a contract may have been in a better position than the other to prevent the risk of loss from materialising, in which case, rules of risk allocation may suggest that he is the person who should accept the risk of loss. Accordingly, it is said that a person who brings about a frustrating event through his own actions cannot rely upon the rules on frustration of contracts, on the basis that English law does not give relief in respect of ‘self-induced frustration’.4 Similarly, a person who could have performed his contractual obligations in some other perfectly reasonable manner may be required to accept the risk of loss and will not be able to treat the contract as frustrated when the manner of performance which he had contemplated is no longer possible. This principle is often reflected in the rule that an external event must frustrate the common intention of both parties to the contract.5