Application of Act

1   (1) Subject to subsection (2), this Act applies to every contract

(a) from which the parties to it are discharged by reason of the application of the doctrine of frustration, or

(b) that is avoided under section 11 of the Sale of Goods Act.

(2) This Act does not apply to

(a) a charter party or a contract for the carriage of goods by sea, except a time charter party or a charter party by demise,

(b) a contract of insurance, or

(c) contracts entered into before May 3, 1974.

Application of Act

2   This Act applies to a contract referred to in section 1 (1) only to the extent that, on the true construction of that contract, it contains no provision for the consequences of frustration or avoidance.

Government bound

3   The government and its agencies are bound by this Act.

Act applicable to part of contract

4   If a part of any contract to which this Act applies is wholly performed

(a) before the parties are discharged, or

(b) except for the payment in respect of that part of the contract of sums that are or can be ascertained under the contract,

and that part may be severed from the remainder of the contract, that part must, for this Act, be treated as a separate contract that has not been frustrated or avoided, and this Act, excepting this section, is applicable only to the remainder of the contract.

Adjustment of rights and liabilities

5   (1) In this section, "benefit" means something done in the fulfillment of contractual obligations, whether or not the person for whose benefit it was done received the benefit.

(2) Subject to section 6, every party to a contract to which this Act applies is entitled to restitution from the other party or parties to the contract for benefits created by the party's performance or part performance of the contract.

(3) Every party to a contract to which this Act applies is relieved from fulfilling obligations under the contract that were required to be performed before the frustration or avoidance but were not performed, except insofar as some other party to the contract has become entitled to damages for consequential loss as a result of the failure to fulfill those obligations.

(4) If the circumstances giving rise to the frustration or avoidance cause a total or partial loss in value of a benefit to a party required to make restitution under subsection (2), that loss must be apportioned equally between the party required to make restitution and the party to whom the restitution is required to be made.

Exception

6   (1) A person who has performed or partly performed a contractual obligation is not entitled to restitution under section 5 in respect of a loss in value, caused by the circumstances giving rise to the frustration or avoidance, of a benefit within the meaning of section 5 if there is

(a) a course of dealing between the parties to the contract,

(b) a custom or a common understanding in the trade, business or profession of the party so performing, or

(c) an implied term of the contract,

to the effect that the party performing should bear the risk of the loss in value.

(2) The fact that the party performing the obligation has in respect of previous similar contracts between the parties effected insurance against the kind of event that caused the loss in value is evidence of a course of dealing under subsection (1).

(3) The fact that persons in the same trade, business, or profession as the party performing the obligations, on entering into similar contracts, generally effect insurance against the kind of event that caused the loss in value is evidence of a custom or common understanding under subsection (1).

Calculation of restitution

7   (1) If restitution is claimed for the performance or part performance of an obligation under the contract, other than an obligation to pay money, insofar as the claim is based on expenditures incurred in performing the contract, the amount recoverable must include only reasonable expenditures.

(2) If performance under subsection (1) consisted of or included delivery of property that could be and is returned to the performer within a reasonable time after the frustration or avoidance, the amount of the claim must be reduced by the value of the property returned.

Calculation of restitution

8   In determining the amount to which a party is entitled by way of restitution or apportionment under section 5, account must not be taken of

(a) loss of profits, or

(b) insurance money that becomes payable

because of the circumstances that give rise to the frustration or avoidance, but account must be taken of any benefits which remain in the hands of the party claiming restitution.

Limitations

9   (1) An action or proceeding under this Act must not be commenced after the period determined under subsection (2).

(2) For the purposes of subsection (1), a claim under this Act must be a claim for a breach of the contract arising at the time of frustration or avoidance, and the limitation period applicable to that contract applies.