Desmond Aster, the proprietor of Sleet and Trumpet Real Estate wants to use Sydney Harbour Hotel’s conference centre for a series of seminars he is running for his staff.

Valerie Ewer, an employee of Sleet and Trumpet contacts Sydney Harbour Hotel and makes a phone booking for a conference room at $500 for the 1st October 2002.

The hotel manager makes the booking and adds he will be sending a booking slip to the estate agency which must be signed and returned with $200 as a holding deposit.

The slip is never signed but a delayed payment of $200 is eventually made (before 1st October 2002).

At 5.00 am on the 1st October 2002, an electrical fault causes a fire. The conference room is damaged and cannot be used. Desmond arrives at 10.00 am and is informed of the fire, he threatens to sue and Sydney Harbour Hotel requests that Desmond pay the remaining $300 they say is due under contract.

An offer was made by Sydney Harbour Hotel for a conference room at $500 for the 1st October 2002 at 10.00 am to Sleet Trumpet Real Estate. Acceptance and agreement of the terms was made by Sleet and Trumpet Real Estate when Desmond sent the $200 to Sydney Harbour Hotel.

So we must ask ourselves, is Desmond liable for the remaining $300 owed to Sydney Harbour Hotel? And is Sydney Harbour Hotel liable for refunding Desmond’s initial payment of $200?

If after the formation of the contract an unforeseen event occurs which affects the performance of the contract, “the contract is automatically terminated if the effect on performance is substantial, provided neither party was at fault”.

By frustration, parties are discharged from the obligation to perform, “or to be ready and willing to perform, their contractual duties”.

The Frustrated Contracts Act 1979 (NSW) s7 states “that a promise...