Frustration of Contracts

FRUSTRATION OF CONTRACTS

Party A decides to sell his product to Party B and they make a contract for the sale and delivery of the said product. After the contract is made, however, the government introduces a rule that prohibits people from delivering non-essential goods due to the pandemic and so, Party A cannot fulfil his contractual obligation of delivering the product to Party B.

This is an example of frustration of contract wherein frustration is defined as the inability to perform one’s contractual duties due to an unforeseen change in circumstances which was not either of the parties’ fault and this change in circumstance can render a contract null and void because it deprives the contract of its commercial purpose.

Section 56 of the Indian Contract Act. 1872 deals exclusively with frustration of contracts and lays down that frustration may be the reason for acts that cannot be performed. It is based in the maxim ‘Les non cogit ad impossibilia’ which means that law cannot compel someone to do something impossible.

The frustration doctrine was highlighted in the landmark case of Satyabrata Ghose v. Mugneeram wherein it was held that the fundamental rule upon which the doctrine of frustration rests is the impossibility of contractual performance due to some unpredictable change in situation.

It is vital to note that this doctrine can only be applied in select cases and the two main scenarios include:

  1. Wherein the object of the contract has been deemed impossible to perform
  2. An external event beyond the control of the parties has occurred and due to this, performance of the contract has become subsequently impossible.
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For example, A agreed to marry B and signs a contract for the same however, B dies two days prior to the wedding, the contract is thus frustrated.

The conditions that must be fulfilled in order to apply Section 56 are:

  1. The existence of a valid and legal contract between the parties – Wherein both the parties are of legal age, the object of the contract is legal and the performance of the contract at the time at which it is being signed must be possible.
  2. Some part of the aforementioned contract must be left unfulfilled because if all the contractual obligations mentioned in the contract are already fulfilled, it would inevitably lead to the successful discharge of a contract and so the doctrine of frustration cannot be applied in such cases.
  3. It is vital that at the time of signing the said contract, the parties must be able to perform their contractual duties without much difficulty and the object of the contract should be performable. Only if the performance becomes impossible after signing the contract can the doctrine of frustration be applied.

The usual cases wherein Frustration of Contract can be applied are as follows:

  1. When one of the parties to the contract dies or becomes mentally incapable of fulfilling his contractual duty and in such cases, the contract is rendered void. Such as in the case of Robinson v. Davison in which a pianist was contracted to perform on a specific day however, the contract was frustrated as he was too ill to perform on the said day.
  2. Frustration through virtue of law:- where, a regulation promulgated after the agreement is made, makes the performance of the agreement impossible and thereby the agreement turns into void ( Rozan Mian v Tahera Begum).
  3. Frustration due to alternative situations:- This unique state of affairs works with those instances in which there has been no bodily impossibility of overall performance of the agreement, however because of the change in situations, the principle purpose for which the contract changed into entered has been defeated.

There exist two types of impossible situations wherein the doctrine of frustration may be applied and these are as follows:

  1. Initial Impossibility:- The object of making any settlement is that the parties to contract could perform their respective guarantees, and where the contract is impossible to perform the parties would in no way enter into it. Preliminary impossibility offers with those cases where the settlement turned into not possible to carry out from the very starting. as an example, if a married person understanding that he cannot marry again promises to do so, then he is sure to compensate the opposite party.
  1. Subsequent impossibility :- It deals with cases wherein the settlement was made when it was viable to carry out the contractual duty however it turned into an impossibility after the agreement was made. Due to a certain event, the overall performance has emerged to be not possible or illegal and consequently it discharges the party from performing it. As an example, If A bought Tickets from B for watching a sports match and he pays 50% as an advance. If the match is cancelled then A cannot get compensation from B because the cancellation of the match becomes past the control of A.

It is vital to note that the doctrine of frustration cannot be applied in cases where the performance of the contract has merely become difficult and not impossible. If there exists a method wherein the contractual duty may be performed then the same must definitively be completed. Only in cases where there is absolute and undeniable impossibility can doctrine of frustration be used.

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Doctrine of frustration as enshrined in section 56 of the Indian Contract act 1872 speaks of those instances in which the performance of contract has been frustrated and the performance of it has become impossible to carry out due to some unavoidable purpose or situation. This doctrine is treated as an exception to the overall rule which offers for reimbursement in case of breach of agreement. However section fifty six handles only cases of subsequent impossibility rather than cases of initial impossibility.

Thus, Frustration of Contracts proves to be an undeniably vital part of Contract aw as it forms one of the exceptional situations wherein a contractual duty may be completely excused with no repercussions.

Author: Keerthana R,
Christ University 2nd Year, Law Student

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