Sums paid and payable before frustration, and expenses (LR(FC)A 1943 s.1(2))

Section 1(2) of the Law Reform (Frustrated Contracts) Act 1943 provides that all sums paid before the time of discharge are recoverable, and sums payable before that time cease to be payable. Under the proviso, if the payee incurred expenses before discharge in or for the purpose of performance, the court may, if it considers it just having regard to all the circumstances, allow the payee to retain or recover the whole or any part of the sums paid or payable, not exceeding the expenses incurred. Applying this, the £3,000 due on 1 June ceases to be payable and the £4,000 deposit is prima facie recoverable. The owner incurred £1,500 of expenses, so the court may allow it to keep up to £1,500 of the sums paid or payable if just. Ngozi will therefore recover between £2,500 and £4,000, depending on the court's view.

Why A is wrong: The Act replaced the old common law position for contracts within it; sums paid are recoverable and sums payable cease to be payable.

Why B is wrong: Sums payable before the time of discharge cease to be payable under s.1(2), even if they had already fallen due.

Why C is wrong: The proviso to s.1(2) lets the court allow the payee to keep or recover sums up to the amount of its expenses, if just.

Why E is wrong: The expenses allowance is capped at the expenses incurred, £1,500 in total; the owner cannot keep that and recover the £3,000 as well.