The Test For Frustration In Contract: Emerging Trends For Force Majeure In India


With the increase in working population, contracts have attained a heavy thrust in the recent times. One enters into contracts with the belief that the other party will perform its obligations and if it happens otherwise, he/she takes the legal recourse. Both parties mutually decide their impending obligations with their freewill. However, in some instances, the performance of obligations on either or both of the parties becomes impossible due to a supervening event.

To tackle such a situation, contract law came up with the Doctrine of Frustration. Under this doctrine, a party who is yet to perform its part of contract is granted relief if the performance becomes impossible due to an event which is out of control of parties. If there is a fundamental change from the circumstances in which the contract was made, the contract can be considered frustrated if the very basis on which the contract was made has altered.


All agreements are meant to be honored (Pacta sunt servanda), and until 1863, the law was such that the parties had to absolutely perform the obligations of the contract without any excuse. This was based on the principle that a party is bound to make good any contract which it has entered into and it should not merely be discharged of performing it on the basis of accident or inevitable necessity as it could have provided against it in the contract itself.[1] However, in 1863, an exception to this was introduced in Taylor v Caldwell.[2] The exception was the doctrine of frustration.

Doctrine of frustration is after applied when an event occurs after the formation of contract and makes it impossible to fulfill the terms and obligations given in the contract or modifies the obligation to perform into a totally different one from that decided at the time of making the contract.[3] Earlier the doctrine was confined to discharge of maritime contracts by “frustration of adventure” but now it is applied on all contracts that have been rendered impossible of performance by supervening events.[4] To impose just and reasonable solution in case of significant change in circumstances due to an external event, courts had to evolve certain criteria or tests which would help determine whether a contract in a particular situation stood frustrated or not.

First paragraph of section 56 of Indian Contract Act is about “initial impossibility” of an act, meaning that the parties knew at the time of making the contract that the act in question is impossible to perform. The second paragraph talks about “subsequent impossibility” meaning the act becomes impossible after the contract has been made. However, the word ‘impossible’ in this paragraph has been interpreted differently at different times.


The Supreme Court laid three essential conditions that have to be fulfilled to apply Section 56 in “Industrial Finance Corporation of India Ltd. versus The Cannanore Spinning & Weaving Mills Ltd. & others.”[5] They were:

1. A valid contract should subsist between the parties.

2. There should be some part of the contract that has not been performed.

3. The contract after it has been made becomes impossible to perform.

Some grounds where doctrine of frustration is applied are well established. They are:

1. Destruction of Subject Matter:[6] When the subject of the contract disappears, the contract gets frustrated. It is basically “physical impossibility.”

2. Change of Circumstances:[7] In “P.D. Mehra & Sons v Ram Chand Om Prakash”,[8] the court said that it will not enforce the contract if there arises an unanticipated change in circumstances to such an extent that it has become extremely difficult for the parties to perform their obligations.

3. Change in Law:[9] The parties are discharged of liability when there is administrative or legislative intervention due to which the performance of contract becomes impossible.

Besides these three; death or incapacity, non occurrence of a specific event, war etc., can also lead to frustration of contract.[10] There is a need to clearly define the word ‘impossible’ in Section 56 of the Indian Contract Act so that decisions are not left to the interpretation of judges.


Force majeure means “superior or irresistible force.”[11] Many contracts provide for the discharge of obligations in case of force majeure events. It is provided with the intention to save the parties from consequences of uncontrollable events.[12] Force Majeure is used in situations independent of the will of the man and which is beyond his control.

In case law, “Gujarat Urja Vikas Nigam Ltd. v Solar Semiconductor Power Company Ltd. and Ors.,” the court didn’t allow relief to the petitioner though the event was beyond the control of the parties. Through this we can infer that when a force majeure clause covering major contingencies is already provided for in a contract, the court is likely to deny the claims that rise before it.

If the court doesn’t give relief when force majeure clause exists, then there might develop a misconception of considering force majeure and vis major being the same. However, both are different from each other.


Force majeure has a wider scope and an extensive meaning than vis major. Act of God includes circumstances which were unforeseeable and those which could not have been resisted by human care and skill.[13] These include natural calamities outside the control of human beings. On the other hand, force majeure is applied to discharge parties from consequences of all events that are beyond its control.[14] In this context, it becomes necessary to look at Justice Hidayatullah’s observation in Dhanrajamal Gobindram v Shamji Kalidas[15] where he said “The expression ‘force majeure’ is not a mere French version of the Latin expression ‘vis major.’ It is undoubtedly a term of wider import. Difficulties have arisen in the past as to what could legitimately be included in ‘force majeure.’ Judges have agreed that strikes, breakdown of machinery, which, though normally not included in ‘vis major’ are included in ‘force majeure’.”

Thus, it can be concluded that force majeure has a much wider scope than vis major.


Doctrine of frustration since its evolution has passed different tests at different times. Frustration is theoretically based on the “implied term” test which basically means that there is an implied term in every contract regarding the situation which would discharge liability of the parties. However, objections have been raised to this test saying that there would be a very rare case in which there is common intention of the parties to terminate the contractual obligations with happening of a specific event and even if they had foreseen it they would have introduced some reservations or compensation with regard to the same.[16]

The theory of “disappearance of foundation of contract” has also been used to justify the doctrine but determining the foundation of contract at first place has been challenging for the courts.

The test of “radical change in obligation” which discharges the parties of obligation when there is a substantial change in the in circumstances has been able to resist the objections. It was affirmed in “National Carriers Ltd. v Panalpina (Northern) Ltd.” where the House of Lords said that it would be unjust to hold parties to their obligations in a whole set of new circumstances. This phrase has been added to in the English law on frustration of contract to remove ambiguity.[17]


The doctrine of frustration protects the parties from unjust and unreasonable actions that could be taken against them. Though objections have been raised against the doctrine, it still holds great significance in contract law and serves well in upholding the principle of equity. Force majeure is helpful to the parties in cases where they have done no wrong and hence is an important principle of contract law. It is much wider in ambit as compared to vis major which applies only to acts of God.

The word ‘impossible’ has raised much ambiguity and hence the courts need to interpret Section 56 in a wider sense. There might be cases where parties use frustration as a defense for their breach due to this ambiguity. The Indian Contract Act also needs to define the term ‘impossible’ as it has been used in Section 56 so that courts’ discretion at categorizing a particular contract as frustrated or non frustrated can be limited. Alternatively, instead of defining the word ‘impossible,’ the phrase “essentially different from what was contemplated” can be added in second paragraph of Section 56 after the word ‘impossible’ so that some kind of ambiguity over the interpretation of the section can be removed.

[1] Anson, Law of Contract (29th edn, Oxford 2010) 475

[2] [1863] 3 B&S 826

[3] Joseph Chitty, Chitty on Contracts (Volume 1, 32nd edn, Sweet and  Maxwell 2015) 1671

[4] Anson, Law of Contract (29th edn, Oxford 2010) 473

[5] [2002] 5 SCC 54

[6] Avtar Singh, Law of Contract (9th edn, Eastern Book Company 2005) 341

[7] Ibid. 343

[8] AIR 1952 Punj. 38

[9] Anson, Law of Contract (29th edn, Oxford 2010) 483

[10] Avtar Singh, Law of Contract (9th edn, Eastern Book Company 2005) 346, 351

[11] Black’s Law Dictionary 774 (4th edn, 1968)

[12] Pollock and Mullah, The Indian Contract and Specific Relief Acts (Volume 1, 15th edn, LexisNexis 2017)  893

[13] Pollock and Mullah, The Indian Contract and Specific Relief Acts (Volume 1, 15th edn, LexisNexis 2017)  894

[14] Ibid. 893

[15] AIR 1961 SC 1285

[16] Joseph Chitty, Chitty on Contracts (Volume 1, 32nd edn, Sweet and  Maxwell 2015) 1677

[17] Allen and Overy, ‘Basic Principles of English Contract Law’ (2016) Advocates for International Development

About Authors – This article has been co-authored by Arshdeep Singh and Kartik Garg. Arshdeep Singh is a second-year B.A.LLB (Hons.) student at Rajiv Gandhi National University of Law, Punjab. Criminal law and Constitutional law are his areas of interest. Kartik Garg is a second-year B.A.LLB (Hons.) student at the National Law School of India University, Bangalore. His keen interest lies in the field of human rights law and contract law.

Also Read – Can an Individual Contract terms affect the Defence under a Force Majeure?

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