The performance of obligation under a may be hindered by unexpected supervening events leading to contractual uncertainties. The doctrine of frustration paves the way for a just consequence of such an unfortunate event which has happened without any fault of the contracting parties. The doctrine fills the void in a contract regarding supervening events based on principal of fairness and equity. Considering the large implication on the obligation and binding nature of a valid contract it became important to analyse the factor that guide the court determine its application unlike common law the Indian contract law explicitly incorporates the doctrine of frustration under section 56 of the contract act however the evolution of this doctrine in India has been greatly influenced by English law.
A contract is an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. Execution of these obligations may be affected by unforeseen or supervening events which are unexpected or incapable of being known in advance by either of the parties and which ultimately discharge the parties from their contractual obligations.
It say that any act which was to performed other the contract was made become impossible or unlawful to perform.
Then such act which become impossible or unlawful to become void.
The doctrine of frustration is a doctrine of special case of the discharge of contract by an impossibility to perform it. The Indian Contract Act, 1872 in the contract act does not define the term frustration. The BlackLaw Dictionary defines frustration in relation to contracts as the doctrine that if a party principal purpose is substantially frustrated by unanticipated changed circumstances that party duties are discharged and the contract is considered terminated also termed as the frustration of purpose.
Definition of doctrine of frustration
A frustration of contract is a contract that subsequent to its formation and without fault of either party is incapable of being performed due to an enforcement event. Resulting in the obligation under the contract being radically different from those contemplated by the really an aspect or part the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the preview of section 56
Case law:- Satyabrata Ghosh v/s Mugneeram AIR (1954) S.C 44 (supreme court observed in regard this case was based on Templin steamship co. ltd v/s Anglo Mexican Petroleum product co. ltd)
In the above case the performance of the contract had become physically impossible because of the disappearance of the subject matter. but it is principal is not confined to physical impossibly. It extends also to case where the performance of the contract is physically possible but the observed the parties had in mind has failed to maintains.
Frustration of contract
- Personal contract:- personal contract by death the party or by permanent in capacity of parties that may be madness
2. Other contract:-
- Impossible in itself
- Supervening impossibility or illegality involving action contrary to law or public policy.
- Outbreak of wear, war restrictions legally to trade enemy.
- Destruction of subject matter by five explosive spoilage of dates by water and sewage due to sinking of ship
- Happening of event which rendered the contract impossible to performance but would not include hard and difficult case of abnormal rise or fair.
Essential of doctrine of frustration
a) These is void contract between parties
b) Some part of contract is yet to be performed
c) That part became unlawful
d) That impossibility cannot prevent by any party
Grounds of impossibility
- Change of law:- a contract will frustrate where circumstance arises which make the performance of the contract impossible in the manner and at time contemplated.
- Destruction of subject matter:- The doctrine of impossibility applies with full forces where the actual and specific subject-matter of the contract have ceased to exist. there a promise3 to let be out a music hall was held to have frustrated on the destruction of the hall.
- Non occurrence of specific events:-sometimes the performance of a contract remain entirely possible but owing to the non-occurrence of an contemplated by both parties at the reason for the value of the performance is destroyed.
- Death of a promisor:- a party contract is excused from performance if it is depends upon the existence of a given person if that person perish or becomes to will to perform. Thus where the nature or term of a contract requires personal performance by the promisor his death or in capacity puts an end to the contract.
- Declaration of war:- declaration of war or warlike condition in the performance of a contract has often created difficult question. The closure of the super case following the Anglo-French war with Egypt.
Interpreting of doctrine under a Contract Act
The doctrine of frustration has been well done codified in India under section ‘56’in the Contract Act, and this obviates the dependence on different theories to justify the application of the doctrine. It lays down a positive rule relating to the frustration of contract and does not leave the matter to be determined according to the intention of the parties or the choice of theory to be applied by the court. The relief under this section is given by the court on the ground of subsequent impossibility when it finds out that the whole purpose or the basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond the control of the parties.
Section 56 states that an agreement to do an act which becomes impossible or unlawful is void. A thorough explanation of the section can be sought from the celebrated and seminal decision of Satyabrataghose v/s Mugneeram Bangur and Co. In this case, the defendant company promised to sell the plaintiff a plot of land after developing by its constructing the roads and drains. However, some portion of the area comprised in the scheme was requisitioned for military purposes. The Supreme Court, while applying the doctrine, held that the requisitioning of the area had not substantially prevented the performance of the contract as a whole and therefore, the contract had not become impossible within the meaning of section 56.
While enunciating the law laid down under section 56, Mukherjee J. explained that the first paragraph of section 56 is on the same lines as of Common Law, which discharges the obligation to perform because of inherent impossibility attached to it. An illustration of inherent impossibility of provided therein as A agrees with B to discover treasure by magic. Such agreements are inherently impossible to be performed and therefore, they are void ab initio. The second paragraph has been in fertile source of litigation as the court has deliberated much on the interpretation of the word impossible. Mukherjee J. further state while referring to the second paragraph to section 56.
Frustration under section 56
There exist three basic conditions that are needed to satisfy the doctrine under section56 there must be a subsisting contract some part of the contract is still to be performed and performance has become impossible after the contract is entered into. Physical impossibility is not a prerequisite as already discussed. A radical change in the fundamental assumption, on the basis of which contract was entered into, is required to make the performance impracticable, illegal or impossible without the default of either of the parties. The determination of the degree of change in the obligation must be done by looking into the construction of the contract in the light of facts existing at the time of its formation.
Notwithstanding the subjectivity, the test for frustration is an objective test, because it is well settled that the supervening frustrating event immediately puts an end to an agreement, independently of the volition of the parties, without either party being conscious of the fact that what has happened has snapped their contractual bonds. Unlike cancellation of contract, the frustration of contract not determined at the volition of the party. While deciding whether or not the contract has been frustrated, the courts objectively look to the construction of the contract, the effect of the changed circumstances on the parties’ contractual obligations, the intentions of the parties and the demands of justice.
In satyabrata v/s mugneeram ( AIR 1954 S.C 44 )
In satyabrata v/s mugneeram ( AIR 1954 S.C 44 ) the supreme court have observed that various theories have been propounded regarding the juridical basis of the doctrine of frustration yet the essential idea upon which the doctrine is based on that of the impossibility of performance and frustration are often interchangeable expression also meaning of the term impossible was explained under section 56. The supreme court made it clear that unlike English la the word impossible has not been used in the sense of physical or literal impossibility. The performance of an act may be impracticable and useless from the point of view of the object and weather it form’s the biases of the contract rightfully has to be decided by the court. Also in Susila Devi v/s Hari Singh. It was observed that the impossibility contemplated by section of the contract is not confined to something which is not humanely possible. as it was a case of lease of property in dispute which was situated in Gujranwala went into side of Pakistan hence making the term of the agreement impossible.
Doctrine of frustration as enshrined in section 56 of the Indian contract act 1872 deals with those case where the performance of contract has been frustrated and the performance of it is has become impossible to perform due to any unavoidable reason or condition. This doctrine is treated as an expectation to the general rule which provides for compensation in case of breach of contract. But section 56 only deals with case of subsequent impossibility as opposed to case of initial impossibility.
The doctrine of frustration incorporated under section 56 of the Indian contract act provides a way out to the party when the performances has becomes impossible owing to any supervening events without their fault. factors and circumstances that the court consider while determining the applicability or non-applicability of section 56 has been dealt with in detail in this paper. When risk is inherent to contract frustration is self indicted the contract is an executed contract the contract can still be performed or the foundation of the contract is not substantially destroyed are example of factors that would not attract provision of section 56.
This article is authored by Navneet Bhardwaj, B.A. LL.B (Hons.) student at Starex University