DOCTRINE OF FRUSTRATION

INTRODUCTION

Following the formulation and ratification of a contract by the parties to the contract, circumstances outside their influence can arise that frustrate the intent of their agreement making it impossible or even unlawful to carry out the object of the contract thereby rendering it void. This is known as “frustration of a contract” and is governed by the doctrine of frustration. The doctrine of frustration is not explicitly mentioned at any point in the Indian Contract Act of 1872 but the notion of it is envisaged in Section 56 of the Act which contains the provisions with reference to a contract to perform an impossible act. According to Section 56 of the Indian Contract Act, 1872- “A contract to do an act which, after the contract is made becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.”

CRITICAL ANALYSIS:

The Doctrine of Frustration is based on the maxim Lex non cogit ad Impossiblia which translates to ‘Law does not compel the impossible’. Whenever a contract is formulated between two parties, there is a fundamental presumption that the execution of the contract depends on the continued existence of the object of the contract and that any impossibility arising later in time due to unforeseen and uncontrollable circumstances then, the performance of the contract by the promisor will have to be excused. Such a condition is implied whenever a contract is formulated.

India well-codified the doctrine of frustration into the Indian Contract Act of 1872. It must be noted that in the second paragraph of Section 56 i.e., the section that contains the doctrine of frustration, there is the usage of the word impossible which is one of the most debated upon features of this doctrine. Various courts have deliberated on the interpretation of the word and it was finally decided that the word ‘impossible’ has been used to depict that it may not be literally impossible to execute an act but it may be impracticable and pointless from the point of view of the object and purpose that the parties had in sight. Therefore, if a completely untoward occurrence or alteration of circumstances completely upsets the foundation that the contract was formulated upon then the act can be deemed to be impossible to executed by the promisor. A very important aspect to this doctrine is the compulsory condition that the event that renders the performance of the contract needs to be out of the control of the promisor. This prevents the misuse of the provisions of this doctrine by malicious people. They cannot make use of self-induced frustration to absolve themselves of the responsibilities that they are bound by.

CASE STUDIES:

In this section certain cases will be reviewed where Section 56 of the Indian Contract Act of 1872 was invoked:

  1. KJS Ahluwalia and Ors. Vs. State of Odisha and Ors.[1]

In this case the appellants had excavated a substantial amount of iron ore and had stored this in the state-owned Mineral Block along with machinery and other materials. A lease was signed by the company with the Odisha Government Steel and Mine Department for a specific period of time to allow them to store the abovementioned items. Due to the onset of the pandemic caused by COVID-19, it became severely difficult for the appellant to move the items out of the storage before the expiry of the lease and they were being tried for the same. Their lawyer invoked Section 56 of the Indian Contract Act and also stated that the appellant did not plead impossibility of the event but pleaded improbability and relied on the definition of the word ‘impossible’ as given in Satyabrata Ghose vs Mugneeram Bangur & Co. & Anr.

This motion eventually allowed them to invoke a force majeure clause under the same section.

2. Sarika Sharma and Ors. Vs. State of Himachal Pradesh and Ors[2].:

In this case the petitioner is a liquor vendor and the respondent is the state of Himachal Pradesh. The object of the case revolved around the presence of a contract between the two parties in the form of the liquor license that the petitioner held and the reduction of a certain charge that would affect liquor vendors which was present in a newly formulated Excise Act. Also, the petitioners had a problem with the compensation being given under their license due to losses in revenue due to the pandemic. In this case it was held that “The doctrine of frustration excludes ordinarily further performance where the contract is silent as to the position of the parties in the event of the performance becoming literally impossible. However, a statutory contract in which a party takes absolute responsibility cannot escape from liability whatever may be the reason. In such a situation, events will not discharge the party from the non-performance of a contractual obligation. Further, in a case in which the consequences of non-performance of contract is provided in the statutory contract itself, the parties shall be bound by that and cannot take shelter behind Section 56 of the Indian Contract Act.” This allowed the case to be decided in favor of the petitioners thereby providing them relief during the pandemic.

CONCLUSION;

Incorporated under Section 56 of the Indian Contract Act of 1872, the Doctrine of Frustration provides relief to parties of a contract where the performance is unlikely because of some unforeseen and uncontrollable circumstance. The sanctity of contracts is questioned by the application of this doctrine. In order to justify the implementation of the doctrine under such conditions, English Courts established a variety of theories. Indian Law on the other hand was one step ahead of them and by codifying the doctrine under Section 56 of the Indian Contract Act, removed the need for establishment of theories to justify the application of the doctrine.

REFRENCES:

  1. Indian Contract Act, 1872, No. 09, Acts of Parliament, 1972
  2. Taylor v Caldwell, [1863] EWHC QB J1
  3. KJS Ahluwalia and Ors. Vs. State of Odisha and Ors , MANU/HP/1026/2020
  4. Sarika Sharma and Ors. Vs. State of Himachal Pradesh and Ors, MANU/HP/0304/2020
  5. Aditya Mehta, Frustration in the time of SARS-CoV-2, CYRIL AMARCHAND BLOGS,(April 29, 2020, 9:43 PM). https://corporate.cyrilamarchandblogs.com/2020/04/frustration-of-contract-in-the-time-of-sars-cov-2/
  6. Abhishek Arya, India: Doctrine of Frustration, MONDAQ, (June 29, 2015, 10:33 AM),https://www.mondaq.com/india/contracts-and-commercial-law/407868/doctrine-of frustration#:~:text=The%20doctrine%20of%20frustration%20is,or%20unlawful%20will%20become%20void.

2MANU/HP/1026/2020

[2] MANU/HP/0304/2020

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