Discharge of a contract by frustration (and the related concept known to lawyers as "supervening impossibility of performance") are important in employment law. There is no dismissal if an employment comes to an end by reason of frustration of contract and hence the ex-employee can have neither a right to unfair dismissal compensation nor to redundancy pay (subject to statutory exception for redundancy pay if the contract has been "frustrated" by death of the employer).
An example of this rule in operation is provided by Hogan v Cambridgeshire County Council EAT on 26th July 2001. In that case a legal executive's claim that she had been unfairly dismissed was not allowed on the basis that her contract had been "frustrated" as a result of her absence through ill-health. It may be relevant that the tribunal concerned (Bury St Edmunds) noted that although Ms Hogan reckoned she was too ill to come into work she nevertheless felt well enough to apply to join a 3-year degree course at Huntingdon Regional College. This fact, while not relevant to the frustratation question, may perhaps indicate that the tribunal was not well disposed to her claim of unfair dismissal.
Frustration occurs if an event occurs, not reasonably foreseeable when the contract was made and not under the direct control of either party, which renders impossible further performance of the contract in the way envisaged by the parties to it. The contract is then discharged by operation of law (see Paal Wilson & Co AS v Partenreederei Hannah Blumenthal [1983] 1 All ER 34).
Apart from death (of employer or employee) the following are examples of situations which could lead to discharge of an employment contracts "by frustration":