DISCHARGE OF CONTRACT BY IMPOSSIBILITY OR FRUSTRATION

Introduction

The Indian Contract Act came into effect on 1 September, 1872 which gives a legal effect to the contracts made between the parties. This helps in refraining people from entering into unnecessary legal contracts between the parties. So, it is an act which was in existence since long back i.e even before Indian getting Independence.

Discharge of contract

Discharge simply means to release, terminate or cancel something. So, the discharge of contract means to terminate or cancel the contract. Indian contract act gives us a detailed explanation on discharge of contract. Discharge of contract takes place in various forms. One of the forms by which the discharge of contract takes place is by impossibility or frustration.

Discharge of contract by impossibility of frustration

The second para of section 56 of the Indian contract act, 1872 states that “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, becomes unlawful, becomes void when the act becomes impossible or unlawful.”

Actually, there are two types of impossibilities. They are:

  1. Initial impossibility
  2. Subsequent impossibility

Initial impossibility [section 56]:

Section 56 of the Indian contract act, 1872 begins like “an agreement to do an act impossible in itself is void”.

For instance: ‘A’ promises ‘B’ to catch the moon and give to ‘B’.  But this is an impossible act at the initial stage itself. So, this is initial impossibility, which is void from the beginning itself.

An agreement to do an act that is impossible from the very beginning whether the parties were aware of such impossibility or not the agreement will be void. 

Subsequent impossibility [section 56]:

This means that at the time of entering into the contract, it was possible for the parties to perform the contract but due to some supervening reason or factors beyond the control of either of the parties the performance of the contract has become unlawful or impossible. Agreement of such a nature are frustrated and thus void.

For example:

A agrees to sell a tract of land to B but owing to some Governmental policy this tract of land has been taken by the government for some official purpose. The agreement stands frustrated and B cannot sue A for non-performance of his obligation as the performance of A’s duty has become impossible.

Doctrine of Frustration

 The doctrine of frustration applies in two scenarios, first where performance is physically impossible and second where the very object/reason why the parties entered into the contract has failed to materialise.

Special grounds for frustration

Death or incapacity of party:
The performance of the contract will be discharged if the performance depends on the existence of a person or if the party to the contract becomes incapable of performing it due to death or some illness etc.. in such case the contract need not be performed and it gets discharged

Case law: Robinson v. Davison

In this case, there was a contract between the plaintiff and the defendant, who is a singer, that she will sing at grand concert of the plaintiff. But on the day of the concert, she has become sick and they informed the plaintiff on the morning of the day of concert, due to which the plaintiff suffered loss.

   The plaintiff later filed for the breach of contract and the court rejected the petition saying that the contract requires the personal skill of the defendant which she was unable to perform due to sickness.  The court quashed their claim and said that the contract was frustrated as she became ill without there being any mistake or negligence on her part.

  1. Government , legislative and administrative intervention:

     A contract after formation can be held frustrated if, when the parties entered into the contract it was possible or lawful at that time. But, later due to some governmental intervention, the performance of the contract became impossible or unlawful. In various cases, the court has reiterated over and over that when a owner of a land ceases to be the owner anymore due to some policy of the government. The contract of sale of a piece of land now owned by the government is frustrated due to the impossibility of performance.

Case law:  Man Singh v. Khazan Singh

                     In this case, two parties entered into a contract to the sale of trees of a certain forest, which was lawful at the time of entering into that contract. Later, the  Government of Rajasthan passed an order which restricts people from cutting of the trees in that area. The contract was held frustrated as it became unlawful due to the governmental order.

  • Non-occurrence of contemplated event

Sometimes the performance of a contract is entirely possible but due to the non-occurrence of the event which forms the heart of the contract the contract becomes frustrated.

Case law: Krell v Henry

In this case, a room was hired specifically to view the king’s coronation procession but the contract was held frustrated as the coronation was postponed. To get such a result one has to show that the non-occurrence of the event was of such a nature that it forms the heart of the contract and non-occurrence uproots the very foundation of the contract.

  • Non- Occurrence of circumstance:

If two parties made a contract on the basis of a particular state of things and if the state of things changes, the contract becomes discharged.

For example: D and E entered into a contract to get married on 25 January 2021. But before the date of marriage, on 22 December 2020, E goes mad. So, in such condition, the contract becomes void.

5.       Destruction of subject-matter

The doctrine of frustration becomes applicable when the actual subject-matter of the contract has stopped to exist. Subject-matter of the contract is an essential thing without which a contract cannot be performed.

Case law: Taylor v Caldwell

In this case, a contract to lease out a music hall for a certain date was held frustrated due to the destruction of the hall. The performance of the contract became physically impossible due to destruction of the subject-matter hence the contract was held frustrated.

Conclusion

The Indian Contract Act, 1872 plays a major role in giving legal effects to the contracts. One of the most important ways by which a contract gets discharged is by impossibility or frustration of the contract. This is actually an exception to the general rule of contracts where compensation is provided in case of a loss. So, a contract gets frustrated if the performance of the contract becomes impossible, without the fault of either of the parties.

Reference

Impossibility of performance and frustration of contract – iPleaders

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