The Doctrine of Frustration is an English contract law doctrine that acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible or radically changes the party’s principal purpose for entering into the contract. The doctrine of frustration is based on the maxim Lex non cogit ad Impossibilia. This signifies that the… Read More »
The Doctrine of Frustration is an English contract law doctrine that acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible or radically changes the party’s principal purpose for entering into the contract. The doctrine of frustration is based on the maxim Lex non cogit ad Impossibilia. This signifies that the law never compels us to do impossible acts. Doctrine of Frustration When contracts are entered between the parties,...
The Doctrine of Frustration is an English contract law doctrine that acts as a device to set aside contracts where an unforeseen event either renders contractual obligations impossible or radically changes the party’s principal purpose for entering into the contract. The doctrine of frustration is based on the maxim Lex non cogit ad Impossibilia. This signifies that the law never compels us to do impossible acts.
Doctrine of Frustration
- When contracts are entered between the parties, it imposes a contractual obligation on them for the performance of the contract. However, many times due to unforeseeable circumstances the performance of the contract becomes impossible. In such cases, the contract is said to be frustrating.
- The doctrine of frustration basically talks about the impossibility of the performance of the contract. It means a contract cannot be executed because of an incident beyond the control of the parties.
The doctrine of Frustration under the Indian Contract Act, 1872
The Indian Contract Act, 1872, does not define the term “frustration of contract”. However, the doctrine of frustration is enshrined under section 56 of the Act. According to section 56,
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.
Conditions required to prove frustration of Contract
- The existence of a valid contract between both parties is essential;
- The contract should not have been performed yet;
- The performance of the contract has become impossible;
- The impossibility has occurred due to the event being uncontrollable by both parties.
Reasons for the Frustration of Contract
1. Destruction of Subject Matter
The doctrine of impossibility applies with full force “where the actual and specific subject matter of the contract has ceased to exist”.
In the famous case of Taylor v. Caldwell (1863) 3 B&S 826, where Taylor had entered into an agreement to perform at an event, but on the day of the event, the hall where the event was to take place burned down. The burning of the hall depicts the impossibility of carrying forward the contract. This shows that the destruction of the subject matter of the contract will make the contract automatically frustrated.
2. Change of Circumstances
A contract will frustrate where circumstances arise which make the performance of the contract impossible in the manner and at the time contemplated.
3. Non-occurrence of a Contemplated Event
If the contract between two parties is based on an event, and that event becomes impossible to do, then the contract will become void.
4. Government, the administrative or legislative intention
The contract can be frustrated due to the law. If a situation arises that the legislation has passed the new laws in which the objective of your contract has become void, it will also lead to the frustration of the contract.
5. Death or incapacity of a party
It is essential that the parties must have the capacity to contract. Section 11 of the Indian Contract Act, 1872, defines the capacity to contract a person to be dependent on three aspects;
- attaining the age of majority,
- being of sound mind, and
- not disqualified from entering into a contract by any law that he is subject to.
But if either of the party dies or has become incapable of contact, the contract will automatically become void. In the case of Robinson v. Davison of 1872, the plaintiff hired the defendant who was a piano expert for her performance in the show. But on the day of her performance, she was ill. The court held that it is a contract of frustration because she was not at all aware that she would become ill on that specific day.
6. Intervention of War
The intervention of war makes the performance of the contract difficult, thereby making the contract void.
For example A, an Indian company enters into a contract with B, a Chinese manufacturer to sell 4000 pieces of crackers before Diwali. However, before the delivery could take place, war broke out between India and China resulting in India suspending the import of all Chinese goods. This is an example where the Doctrine of Frustration will be applicable.
Consequences of the doctrine of frustration
1. The Contract will become void:
The frustration of the contract makes the contract void automatically. There is no need for either party to resign from the contract.
2. End of rights:
When a contract becomes frustrated, the rights that have been given to both parties in that contract come to an end.
3. Discharge from obligation:
Frustration also ends up the remaining obligation of the parties.
4. Duty to repay the advance:
There can be a situation where one party has taken an advance from the other party, in that situation the advance amount should be paid back.
Case Laws
1. Satyabrata Ghose v. Mugneeram Bangur and Co. 1954 AIR 44, 1954 SCR 310
In this case, the defendant company promised to sell the plaintiff a plot of land after developing it by 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 of the Indian Contract Act.
2. Naihati Jute Mills Ltd. v. Khyaliram Jagamnath AIR 1968, SC 522
In this case, raw jute was to be imported from East Pakistan. The Jute Mill undertook to procure the necessary licence for importing jute from Pakistan and to hand over the same to the importer. The Mill stipulated to pay damages to the importer if it failed to procure the licence on or before a particular date. The Mill did not procure a licence as a result of a change in the policy of the Government of issuing the licence for importing Jute.
The Mill was held liable as the contention of the doctrine of frustration was rejected against the Mill because it took upon itself the burden to pay damages if it fails to procure a licence from Jute Commissioner.
Conclusion
When a contract is found to be frustrated each party is discharged from future obligations under the contract and due to this neither party may sue for breach. The frustration automatically brings an end to all the rights of both parties.
The doctrine of frustration is considered to be an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence it is put under the ambit of Section 56 of the Indian Contract Act, 1872.
