Reading time: 3 minutes

There are often many reasons as to why someone is unable to fulfil a contract. Maybe there has been an unforeseen event that now prevents them from doing what they were meant to do? Or maybe they didn’t really intend to do what they said?

These two types of scenarios are called frustration and misrepresentation. They are important legal concepts to be familiar with so you know your rights if it happens to you.


Frustration applies when the other party is unable to do what they promised in the contract. There needs to be a radical change from what the parties initially agreed to that makes performing the contract impossible. Generally, frustration only applies when an outside force is the cause of the other party being unable to meet their part of the contract.

Consider, by way of example, Codelfa Construction Pty Ltd v State Rail Authority of New South Wales. In this case, Codelfa was injuncted while building a railway. This meant that the length and amount of their shifts were reduced and that they could not fulfil the contract as it had originally been entered into by the parties.

The Court held that this amounted to frustration. The parties could not have contemplated the neighbours would seek an injunction. The situation was fundamentally different from that contemplated by the contract.


Misrepresentation applies when one party induces the other to enter into a contract based on something that they represented. This representation can be untruthful or truthful. If it is untruthful, it is called fraudulent misrepresentation. If it is truthful, it is considered innocent misrepresentation.

In Leason Pty Ltd v Princes Farm Pty Ltd, the seller misrepresented the horse’s pedigree in the auction brochure. The purchaser then sought to return the horse to the defendant. The auction house had mistakenly identified the horse’s pedigree, however, had not done so fraudulently. The Court held that where the contract is for a sale of goods, there could be grounds for cancelling the contract for innocent misrepresentation even after the parties fulfil the contract. This requires a close examination of each case’s factual matrix. Both parties were returned to the positions they were in before entering the contract.

In other instances, however, it can be difficult to establish this. More commonly, one or both parties have already met certain aspects of the contract and it is not possible to simply cancel it as if it had never existed. In this situation, it is possible to terminate the contract under the contract’s termination clause. The party can claim that the other party’s inability to fulfil what they had represented in the contract constitutes a breach. They can further claim for contractual damages because of what they have lost in fulfilling their side of the deal.


If you need assistance in understanding your options for terminating a contract, give us a call on 1300 544 755, and one of our contracts lawyers can provide you with tailored advice.


Construction Contract Essentials

Thursday 12 August | 11:00 - 11:45am

Understand how construction contracts are drafted and how to protect your construction business.
Register Now

Startup 101: Understanding Cap Tables and ESOPs

Thursday 19 August | 11:00 - 11:45am

Cap tables and employee share option plans are essential for fast-growing startups. Learn more with this free webinar.
Register Now

Expanding to NZ: Structuring Your Business For Success

Thursday 26 August | 2:00 - 2:45pm

Launching a business in New Zealand? Understand how to structure your business for success with this free webinar.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards 2021 Law Firm of the Year - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer