Football Clubs enter into contractual Agreement regularly, such as Sponsorship agreement, Kit supply agreement, Broadcast deals, Transfer agreement. A contract is defined as an agreement between two or more contractual parties. It involves acceptance of an offer with an intention to enter into a binding legal relation and furnishing consideration for the goods or services rendered.
A contract is considered to be performed when all parties to it perform all obligations incurred while breach of contract, on the other hand, is when either of the party performs differently from the agreement or defectively or not at all. A contract is discharged by frustration when due to unknown circumstances or change of circumstances after the contract was made there is a breach which is not the fault of either of the parties but renders the contract impossible to perform anyway, depriving it of its commercial purpose.
Shannon King, a renown player of Tigers FC was sought out by Pharaoh FC. Tigers FC upon acceptance by Shannon commenced Negotiation on the terms of sale(transfer of Shannon) with Pharaoh FC. The sum of $180 million was agreed on, with a pre-payment of $100million and the balance of $80 million at the arrival of Shannon in good condition at Pharaoh FC home ground, Persia. Immediately the $100 million was deposited by Pharaoh FC, Shannon after bidding his farewell aboard an Aeroplane which will take him to Persia. Unfortunately, the Plane crashed and Shannon died. Tigers FC was unable to perform their obligation to deliver Shannon in a good condition to Persia while Pharaoh FC refused to furnish the balance of $80 million and the pre-payment of $100 million is being demanded to be returned by Tiger FC since there exist no goods in which consideration could be furnished.
Legal Effect of Contract discharged by Frustration
The contract has been frustrated as the ‘subject’ Shannon has ceased to exist due to unforeseen circumstances (Death) which makes performance impossible. The effect of this is automatically ruled by the Court as terminated at the advent of the frustrating event. Thus, parties to the contract are now considered as being discharged from any future obligations incurred under the contract. See the locus classicus case of Taylor v Caldwell1. Hence, no legal action can ensue for the performance of an action, denying both parties the enjoyment intended from the Contract. The Selling Club will lose a player without having any returns of the money invested on him while the Buying Club might not only lose a possible great investment but also the consideration already furnished. To prevent unfairness, laws have been made to govern contractual Agreement.
It should be noted that the destruction of the subject matter is not the only manner in which a contract can be Frustrated. There are:
Position of Law
The frustration of contract is an English/Common-lawdoctrine but due to its non-applicability in all country, there are other laws which govern it especially laws bylegislative bodies of Countries.
From the perspective of the harsh Common law which was in place before Equity, any loss resulting from frustration will lie where it fell. This is inequitable as a pre-payment paid by one party to the other cannot be recovered. This as seen in Chandler v Webster7. Following this principle,Pharaoh FC is unable to recover the pre-payment for the transfer of player under contract (which is deemed impossible). This is unfair to the payer who is furnishing consideration for services not performed.
The equitable principle which takes precedence over Common law is being applied to correct this unfairness in the later case of Fibrosa Spolka Akoyina v Fairbairn Lawson Combe Barbour Ltd4. Hence, the doctrine of frustration may avail parties where Common law is applicable in the Civil Court.
The Law Reform (Frustrated Contract) Act 1943, an Act of the British Parliament establishes the rights and liabilities of parties involved. The rigidity, harshness and unfairness of the Common Law are mitigated by this Act. It alters legal Consequences incurred on contract frustrated under the common law by distinguishing between obligations to pay money and other types of obligation that existed prior to the frustration.
Section 1 (2) makes money paid before the contract is discharged to be recoverable.
Section 1 (3) ensure that a just payment is paid by the payee for any benefit obtained before the frustrating events.
Applying this principle, Pharaoh FC will be able to recover the $100 million pre–payment. While any deal or other benefit that may have ensued as a result of signing in a renown player will be reasonably calculated and given to the Tigers FC.
FIFA’s Regulations on the Status and Transfer of Players (RSTP) June 2020 Edition(including COVID-19 temporary amendments)
Article 14 stipulates that termination of contract will only not warrant consequences if the cause is just while Article17 stipulates the consequences of terminating a contract without just cause as compensation and sanctions.
Though frustration is not expressly stated as a ground for the termination or failure to fulfil obligations under a football employment contract or transfer contract, it can be inferred from Article 14 that an unforeseeable event not prompted by either of the party can be seen as a just cause in terminating a contract without consequences.
In accordance with Article 14, Tigers FC shall not be sanctioned for the Breach of contract which is as a result of a just cause. That is an unforeseeable event which makes performance impossible.
In accordance with Article 27, Any matter not provided for in the Regulations and cases of force majeure shall be decided by the FIFA Council whose decisions are final.Therefore, to ensure justice is done, that one party does not bear all the loss, the case shall be taken up by Sport tribunals who will decide using their discretionary power and laws in that Jurisdiction. Thus, in jurisdictions where common law is practised, termination based on frustration may still be challenged in respect of football employment contracts and transfer contracts, especially where the dispute is before sports tribunals and not civil courts.
Though there has been no previous decision of FIFA where frustration was relied upon as just cause for termination, it is safe to conclude that the various amendment or suspension of certain provisions of theRSTP coupled with the laws put in place in different Jurisdictions can curb the Effect of a frustrated Contractual Agreement between Football Clubs and Professionals so that there is equity in sharing the loss.
On the other hand, FIFA’s Regulations on the Status and Transfer of Players (RSTP) should be explicitly expressed. An ambiguity of laws allows for injustice as they might be defined to suit individual mischief. Lastly, the Regulations should be reviewed to encompass recent based legal issues.
The author is an Associate Editor at The PALM