Herold & Kay

In the Federal Magistrates Court of Australia, Herold & Kay involved a dispute regarding a binding financial agreement made under the Family Law Act 1975. The husband, Mr. Herold, sought enforcement of the agreement against the wife, Ms. Kay, who argued that the agreement was unenforceable or impracticable due to unforeseen circumstances that occurred after the agreement was signed.

The central legal issues in the case were whether the doctrine of frustration applied to render the agreement unenforceable and whether the concept of "impracticability" under s.90UM(1)(f) of the Family Law Act encompassed the events that had transpired post-agreement. The court had to determine if the failure of Ms. Kay to secure necessary finance to meet her obligations amounted to an impracticability that justified setting aside the agreement.

The court examined the doctrine of frustration, distinguishing between mutual mistake and frustration. It noted that frustration occurs when an unforeseen event radically changes the nature of the contractual obligation, making performance a fundamentally different task. The court applied the principles outlined in Codelfa Construction Pty Ltd v State Rail Authority of NSW and the Davis Contractors Case, focusing on whether the contract, as truly construed, was wide enough to cover the new situation created by the frustrating event. The court found that the failure of Ms. Kay to secure finance was not due to default and did not foreseeably alter the fundamental nature of her obligations under the agreement.

Consequently, the application to enforce the financial agreement was dismissed, and the response was adjourned for further directions. This decision underscored the importance of distinguishing between events that are truly unforeseeable and those that could reasonably have been anticipated by the parties when entering into the agreement.