What is the doctrine of frustration of contract?
Meaning of Frustration of Contract: – The doctrine of frustration is a common law doctrine, codified in section 56 of the Indian Contract Act, according to which, an agreement to do an impossible act is in itself void. Further, it states that when a contract to do an act becomes impossible, or, by reason of some event which the promisor cannot prevent, it becomes unlawful, the whole contract becomes void when the act becomes impossible or unlawful.
The frustration of contract in the general scenario means defeated and the term has been widely used in agreements and contracts between parties. The word frustration is being used to deal with failure, which could not be accomplished due to any reason. In the law of contracts, principles of frustration have emerged as one of the most common issues that have come to deal with failed contracts.
As the parties with the general rules for contracting have an intention to fulfill their share and in case of a breach, the party is liable to recover damages for the breach. But the exception to this rule is in Section 56 of the Indian Contract Act, 1872.
Section 56 of the Indian Contract Act deals with the principle of frustration that cannot be executed. Under this principle, in the event of a breach of a contract, any liability under a contract is relieved and the contract will be deemed void.
Section 56 is based on the maxim “les non cogit ad impossibilia”, which means that the law will not force a man to do what he cannot possibly perform.
In which cases doctrine of frustration of contract is applied?
Doctrine of frustration of contract is applied is aaplied in following 2 cases: –
- If it has become impossible to perform the object of the contract or
- An event has occurred that is making the performance of the contract impossible beyond the control of the Promissor.
Illustration: –
- ‘A’, is a person who is a resident of India entered into a contract with ‘B’, a resident of China, for the export of 550 heavy trucks. Initially, 100 trucks were delivered, a war was later declared between India and China and the Indian government suspended all trade transactions with China. Now, this contract has become void.
- ‘A’ and ‘B’ contract to marry each other. ‘A’ dies before the time fixed for marriage and hence the contract between ‘A’ and ‘B’ will become void because one party to the contract has died.
What are the necessary conditions for the application of section 56?
Necessary conditions for the application of section 56 are as follows: –
- A valid and subsistence contract exists between the parties: – The existence of a valid contract is the most important condition for the application of section 56. A valid contract includes a contract entered into between competent persons and followed by some consideration.
- There must be some part of the contract which has not yet been performed: – Applicability in section 56 shall be only if there is some part of the contract which is yet to be performed and without executing it the ultimate purpose of the contract is not fulfilled.
- Performance in a contract becomes impossible after entering: – Another important condition for the application of section 56 is that it has become impossible to perform the contract after its entry and cannot be performed and hence the contract is void.
Generally, the frustration of contract can occur in the following cases
- Death or Incapacity of a Party: – Where a party to a contract has died after entering into a contract or the party is unable to make a contract, in such a case the contract will become void.
- Frustration by Law: – Where, a law comes into force after the formation of a contract, and the law made the performance of the agreement impossible, thus the agreement becomes void.
- Frustration due to Changes in the Circumstances: – This particular situation deals with cases where there was no physical inability to perform the contract, but due to change in circumstances, the main purpose for which the contract was entered into has been lost.
Difference between initial vs. subsequent impossibility
- Initial Impossibility
- The purpose of making any contract is that the contracting parties will fulfil their respective promises, and where the contract is impossible, the parties will never enter into the contract.
- Impossibility relates to cases where the contract was impossible to perform from the beginning.
- For example, if a married person, knowing that he cannot marry again, and he promises to do so, then he is obliged to compensate the other party.
- Subsequent impossibility
- It relates to cases where it was possible to perform while the contract was entered, but due to some event, the performance has become impossible or unlawful and hence it discharges the party from performing.
- For example, if A bought a ticket from B to watch a cricket match and he pays 50% as an advance. If the match is cancelled then A cannot recover from B as the cancellation of the match was beyond A’s control.
No frustration of executed contracts or mere likely delay in performance of the contract
The principle of frustration only applies in cases of subsequent impossibility and where the contract was impossible to perform from the beginning.
There is no application of this principle, moreover, this principle will not apply even in cases where the performance was delayed and the contract can still be performed.
The doctrine of frustration is applicable, and the performance must become unlawful or impossible.
The event should be such that the object of the contract has become impossible to perform. Merely a delay in performance does not amount to impossibility.
Where would the doctrine of frustration of contract, not be applicable?
The petitioner Housing Board has entered into a contract with the contractor for waterproofing work of houses. Petitioner had knowledge that said houses, where work was to be executed were in possession of the allottees.
It was held that mere denial by the allottees to allow work to be performed would not be such an impossibility as envisaged by Section 56 to render such contract void.
Case laws under Frustration of Contract
- Satyabrata Ghose vs. Mugneeram
In this case, Justice Mukherjee said that the basic idea on which the principle of frustration is based on the impossibility of performance of Contract and both the expressions frustration and impossibility can be used as synonyms.
- Robinson vs. Davison
In this case, the court held that if a party to the contract has died or the party is unable to make the contract, in such a case the contract will become void.
- Rozan Mian vs. Tahera Begum
In this case, the court held that if a law comes into force after the contract has been made, making the performance of the agreement impossible and thus the agreement becomes void.