MED Word of Advice frustrated contracts in disaster zones

Issue 30 – August 2011

Have you bought goods and services that you now cannot access or use because of earthquakes, floods, or other natural disasters? Any agreement to buy goods or services is a contract. Normally if you break a contract you have to pay the other person for damages (or costs). But since it's not anyone's fault that a natural disaster occurred, different rules apply.

If your contract doesn't have a 'force majeure' or 'act of God' clause then the Frustrated Contracts Act 1944 may apply. A contract is frustrated if it becomes impossible to carry out or becomes significantly different from what you agreed to.

Visit the Ministry of Consumer Affairs website to read about what happens when a contract becomes impossible to perform (www.consumeraffairs.govt.nz/news-1/word-of-advice/2011/frustrated-contracts-in-disaster-zones).

Summarised from the July 2011 Business Update, Ministry of Economic Development.

Published in business and ICT.