#contract #frustration #law

Amalgamated Investment and Property Co Ltd v John Walker & Sons Ltd [1976] 3 All ER 509.

In this case, the defendants advertised a property as being suitable for redevelopment. The plaintiffs negotiated the purchase of the property and the defendants knew they intended to redevelop it, although it was clear that they would have to get planning permission. In their enquiries before purchase, the plaintiffs asked the defendants whether the building was designated as being of special architectural or historic interest to which they replied in the negative. However, unknown to the parties, officials at the Department of the Environment included the building on a list which was proposed to be listed under the Town and Country Planning Act 1971, as being of architectural or historic interest. The parties did not know this on 25 September when they entered their contract. On 27 September, the property was listed resulting in the property, now having no development potential, and being worth about £1,500,000 less than the contract price of £1,710,000. The plaintiffs brought an action for rescission on the ground of common mistake or, in the alternative, claimed that the contract was frustrated. It was held by the Court of Appeal that: (a) the doctrine of common mistake did not apply because the mistake did not exist at the date of the contract, the property not being under any fetter until a date after the date of contract; and (b) the doctrine of frustration did not apply since listing was an inherent risk of which every purchaser of property should be aware. It could not be said, therefore, that the performance of the contract that would be called for would, in consequence of the listing, be radically different from that which had been undertaken by the contract. The contract was, therefore, not frustrated