Rolled Steel Products Holdings Ltd v British Steel Corporation [1985] is a UK case that dealt with the issue of whether a contract could be terminated due to a change in circumstances that made performance of the contract commercially unviable.
In the case, Rolled Steel Products Holdings Ltd (RS) entered into a long-term contract to supply British Steel Corporation (BSC) with steel. However, due to a decline in the steel market, RS found it increasingly difficult to fulfill its obligations under the contract. RS requested that BSC renegotiate the terms of the contract, but BSC refused to do so. RS subsequently terminated the contract, citing a “frustration of purpose” due to the change in circumstances.
BSC sued RS for breach of contract, arguing that the contract had not been frustrated and that RS had no legal basis for terminating it. The court held that the contract had indeed been frustrated, as the change in circumstances had made performance of the contract commercially unviable. The court noted that the doctrine of frustration applies when an unforeseen event occurs after the formation of the contract that renders its performance impossible or radically different from what was originally intended.
The case established the principle that a contract can be terminated due to frustration of purpose, which occurs when a change in circumstances makes performance of the contract impossible or radically different from what was originally intended. However, it should be noted that frustration is a high threshold, and not all changes in circumstances will be sufficient to frustrate a contract. The party seeking to rely on frustration must show that the change in circumstances was unforeseen and beyond their control, and that it has fundamentally altered the nature of the contract.