Doctrine of Frustration: Sec. 56 of The Indian Contract Act, 1872
Doctrine of Frustration: Sec. 56 of The Indian Contract Act, 1872
Doctrine of Frustration: Sec. 56 of The Indian Contract Act, 1872
Introduction:
The foundation of the Contract Act is that the parties are bound to perform their contract. It is based on the Latin legal principle ‘Pacta Sunt Servanda’, which means agreements must be kept. However, oftentimes due to a supervening and unforeseeable event, the contract becomes impossible to perform or becomes unlawful. In such a situation, the law interferes. This concept is known as the doctrine of frustration.
In India, the Doctrine of Frustration is codified under Section 56 of the Indian Contract Act, 1872. It deals with contracts that are impossible to fulfil, or if performed, would undermine the basis of the law.
Section 56 of the Indian Contract Act, 1872:
This section lays down the foundation regarding the impossibility of performing. This section is divided into three firm parts. These are as follows:
Initial Impossibility:
The first paragraph of section 56 states:
‘Agreement to do impossible act.—An agreement to do an act impossible in itself is void.’
This means that the act in the contract was void or unlawful from the time it was formed. Such contracts are void ab initio (void from the start).
Subsequent Impossibility:
The second paragraph of this section talks about the foundation of the doctrine of frustration. It states:
‘Contract to do an act afterwards becoming impossible or unlawful.’
This means that due to an unforeseeable event, the contract became unlawful or impossible to perform. Such an event should not be a self-induced Impossibility which means that the event should be out of the control of the parties. Impossibility in this section does not always mean physical impossibility but also any situation that undermines the purpose of the contract or destroys its core.
There are specific grounds that the court recognises on which a contract can be frustrated. These are as follows:
i. Destruction of subject matter:
If the subject matter which is essential to perform the contract gets destroyed without the fault of any party, then that contract becomes void under the doctrine of frustration.
ii. Death or personal skill:
This is when the contract is dependent on the personal ability or talent of a person who is one of the parties to the contract, then upon his/her death the contract becomes void. In addition to this, if that person becomes mentally ill and is incapable of understanding the consequences of the contract, then also the contract becomes void.
iii. Change of Circumstances:
Many times the performance of the contract becomes impossible to perform due to changes in the situation. This makes the contract radically different and also destroys the basis of the contract.
iv. Government or Administrative order:
Government order and action can also make a contract void under this doctrine. If a contract is formed, but due to any new rule or law imposed by the government or any administrative body, the contract becomes illegal, then such a contract can be deemed unlawful. However, in such a scenario, one must note that such restrictions by the government should be permanent. Temporary restrictions are not considered impossible under this section until and unless the delay caused by this affects the contract severely.
v. Outbreak of War:
In case of war, contractual obligations may be discharged as the performance would either be unlawful or would be impossible to accomplish. War is considered an unforeseeable and supervening event as this event occurs beyond the control of the parties.
vi. Non - Non-Occurrence of Contemplated Event:
This is when a contract is dependent on the occurrence of a specific event. If that event doesn't happen, then the performance is impossible to complete, and the entire contract collapses.
Consequences of section 56:
The Last paragraph talks about the consequences. It states that:
'Compensation for loss through non-performance of an act known to be impossible or unlawful'
The doctrine of frustration is only applicable when the event is unforeseeable and out of the control of the parties. This means that parties didn't have the knowledge of the impossibility at the time of formation of the contract. If any party had the knowledge and still entered into the contract then they would have to compensate for the loss that was incurred by the other party who was innocent and had no knowledge. This protects the innocent party and also makes the guilty party liable.
Illustrations:
A contract was formed between Mr A, stating that he would transport 20kg of cotton to Mr B by ship. However, due to a hurricane, the ship sank in the middle of the ocean. This contract is void as its subject matter was destroyed.
Mr Z, a renowned musician, entered into a contract with Mr R, agreeing to perform at his wedding. On the wedding day, Mr Z had a sudden heart attack and died on the spot. The agreement was frustrated as it was dependent on personal skill.
Mr D had organised a birthday party for his daughter in a banquet hall. However, a day before the function, the government passed an order for curfew in the city. The contract is void as its performance is unlawful.
A promise B that would bring his dead son back to life. This agreement is void as the performance is impossible from the time of its formation.
Ms R had rented a room to witness the light show at the Eiffel Tower. However, due to technical issues, the event was cancelled and postponed. The contract may be frustrated as the core purpose was to watch the light show.
Case Laws:
Taylor v. Caldwell (1863):
This English case law became the basis upon which the doctrine of frustration stands. A music hall, which was booked for a concert, was burned the day before the event. This made the event impossible.
Satyabrata Ghose v. Mugneeram Bangur & Co.(1954):
This is a landmark judgment for Section 56 of the Indian Contract Act. A large plot was taken by the plaintiff for the purpose of Construction. However, later the land was temporarily requisitioned by the military during World War II. Defendant claimed that the requisition delayed the work and the contract was frustrated. The Supreme Court held that the impossibility under Section 56 should be practically impossible to perform and was not only limited to literal meaning.
Naihati Jute Mills Ltd v. Khyaliram Jagannath (1968):
Naihati Jute Mills Ltd had contracted with Khyaliram Jagannath that they would purchase 2000 bales of cotton from them. After the contract was made, the government released a control order which raised the price of Jute. The Naihati Jute Mills claimed that this government order made the contract impossible. However the apex court held that the commercial hardship cannot amount to frustration. Frustration should make the performance either impossible or unlawful.
Krell v. Henry (1903):
A man had rented a flat in London for few days to witness the king’s coronation. However the king fell sick and the event was postponed. The court in this case held that the contract was void and frustrated as its sole purpose of forming was destroyed.
Real Life application:
The Doctrine of frustration has a significant practical application in the real world. These can be listed as follows:
Covid-19 pandemic:
During Covid- 19 pandemic, the government had order curfew in the cities. This made many contracts impossible to accomplish as transportation and traveling was banned by the government. Thus made the contract frustrated and void.
War:
During Indo- China war, the export and import from China was banned. This made international contract with china for export and import of good impossible to complete. Thus the all contract of Indian seller of Chinese products got frustrated and void.
Entertainment industry:
An example for this would be that an actor signs a contract for an advertisement but dies before the advertisement could get shoot. In such case the contract would get dissolved as the actor was hire for the specific skill and talent that he possess.
Construction contracts:
‘A’ had signed a contract to construct a house on a barren land for 'B’. However before the construction could get complete the government passed an order which made the construction illegal. This made the contract frustrated and was deemed void as Construction on that land was unlawful.
Conclusion:
Doctrine of frustration codified under Section 56 of Indian Contract Act, 1872 serves as a shield that protects parties. It balances the obligation to perform with the practical situation of unforeseeable events. It protects parties from getting unlawfully penalised for the acts that were beyond their control or intent. It makes the contract void the second it becomes frustrated and doesn't compel the parties to perform impossibility. It plays a crucial role in contracts used for governmental, commercial and personal purposes. Today this doctrine has taken its refined shape through numerous judgement and theoretical framework.
Disclaimer: This article is intended solely for educational and informational purposes. It does not constitute legal advice and should not be relied upon as such. While every effort has been made to ensure the accuracy, reliability, and completeness of the information provided, ClearLaw.online, the author, and the publisher disclaim any liability for errors, omissions, or inadvertent inaccuracies. Readers are strongly advised to consult a qualified legal professional for guidance on any specific legal issue or matter.
Introduction:
The foundation of the Contract Act is that the parties are bound to perform their contract. It is based on the Latin legal principle ‘Pacta Sunt Servanda’, which means agreements must be kept. However, oftentimes due to a supervening and unforeseeable event, the contract becomes impossible to perform or becomes unlawful. In such a situation, the law interferes. This concept is known as the doctrine of frustration.
In India, the Doctrine of Frustration is codified under Section 56 of the Indian Contract Act, 1872. It deals with contracts that are impossible to fulfil, or if performed, would undermine the basis of the law.
Section 56 of the Indian Contract Act, 1872:
This section lays down the foundation regarding the impossibility of performing. This section is divided into three firm parts. These are as follows:
Initial Impossibility:
The first paragraph of section 56 states:
‘Agreement to do impossible act.—An agreement to do an act impossible in itself is void.’
This means that the act in the contract was void or unlawful from the time it was formed. Such contracts are void ab initio (void from the start).
Subsequent Impossibility:
The second paragraph of this section talks about the foundation of the doctrine of frustration. It states:
‘Contract to do an act afterwards becoming impossible or unlawful.’
This means that due to an unforeseeable event, the contract became unlawful or impossible to perform. Such an event should not be a self-induced Impossibility which means that the event should be out of the control of the parties. Impossibility in this section does not always mean physical impossibility but also any situation that undermines the purpose of the contract or destroys its core.
There are specific grounds that the court recognises on which a contract can be frustrated. These are as follows:
i. Destruction of subject matter:
If the subject matter which is essential to perform the contract gets destroyed without the fault of any party, then that contract becomes void under the doctrine of frustration.
ii. Death or personal skill:
This is when the contract is dependent on the personal ability or talent of a person who is one of the parties to the contract, then upon his/her death the contract becomes void. In addition to this, if that person becomes mentally ill and is incapable of understanding the consequences of the contract, then also the contract becomes void.
iii. Change of Circumstances:
Many times the performance of the contract becomes impossible to perform due to changes in the situation. This makes the contract radically different and also destroys the basis of the contract.
iv. Government or Administrative order:
Government order and action can also make a contract void under this doctrine. If a contract is formed, but due to any new rule or law imposed by the government or any administrative body, the contract becomes illegal, then such a contract can be deemed unlawful. However, in such a scenario, one must note that such restrictions by the government should be permanent. Temporary restrictions are not considered impossible under this section until and unless the delay caused by this affects the contract severely.
v. Outbreak of War:
In case of war, contractual obligations may be discharged as the performance would either be unlawful or would be impossible to accomplish. War is considered an unforeseeable and supervening event as this event occurs beyond the control of the parties.
vi. Non - Non-Occurrence of Contemplated Event:
This is when a contract is dependent on the occurrence of a specific event. If that event doesn't happen, then the performance is impossible to complete, and the entire contract collapses.
Consequences of section 56:
The Last paragraph talks about the consequences. It states that:
'Compensation for loss through non-performance of an act known to be impossible or unlawful'
The doctrine of frustration is only applicable when the event is unforeseeable and out of the control of the parties. This means that parties didn't have the knowledge of the impossibility at the time of formation of the contract. If any party had the knowledge and still entered into the contract then they would have to compensate for the loss that was incurred by the other party who was innocent and had no knowledge. This protects the innocent party and also makes the guilty party liable.
Illustrations:
A contract was formed between Mr A, stating that he would transport 20kg of cotton to Mr B by ship. However, due to a hurricane, the ship sank in the middle of the ocean. This contract is void as its subject matter was destroyed.
Mr Z, a renowned musician, entered into a contract with Mr R, agreeing to perform at his wedding. On the wedding day, Mr Z had a sudden heart attack and died on the spot. The agreement was frustrated as it was dependent on personal skill.
Mr D had organised a birthday party for his daughter in a banquet hall. However, a day before the function, the government passed an order for curfew in the city. The contract is void as its performance is unlawful.
A promise B that would bring his dead son back to life. This agreement is void as the performance is impossible from the time of its formation.
Ms R had rented a room to witness the light show at the Eiffel Tower. However, due to technical issues, the event was cancelled and postponed. The contract may be frustrated as the core purpose was to watch the light show.
Case Laws:
Taylor v. Caldwell (1863):
This English case law became the basis upon which the doctrine of frustration stands. A music hall, which was booked for a concert, was burned the day before the event. This made the event impossible.
Satyabrata Ghose v. Mugneeram Bangur & Co.(1954):
This is a landmark judgment for Section 56 of the Indian Contract Act. A large plot was taken by the plaintiff for the purpose of Construction. However, later the land was temporarily requisitioned by the military during World War II. Defendant claimed that the requisition delayed the work and the contract was frustrated. The Supreme Court held that the impossibility under Section 56 should be practically impossible to perform and was not only limited to literal meaning.
Naihati Jute Mills Ltd v. Khyaliram Jagannath (1968):
Naihati Jute Mills Ltd had contracted with Khyaliram Jagannath that they would purchase 2000 bales of cotton from them. After the contract was made, the government released a control order which raised the price of Jute. The Naihati Jute Mills claimed that this government order made the contract impossible. However the apex court held that the commercial hardship cannot amount to frustration. Frustration should make the performance either impossible or unlawful.
Krell v. Henry (1903):
A man had rented a flat in London for few days to witness the king’s coronation. However the king fell sick and the event was postponed. The court in this case held that the contract was void and frustrated as its sole purpose of forming was destroyed.
Real Life application:
The Doctrine of frustration has a significant practical application in the real world. These can be listed as follows:
Covid-19 pandemic:
During Covid- 19 pandemic, the government had order curfew in the cities. This made many contracts impossible to accomplish as transportation and traveling was banned by the government. Thus made the contract frustrated and void.
War:
During Indo- China war, the export and import from China was banned. This made international contract with china for export and import of good impossible to complete. Thus the all contract of Indian seller of Chinese products got frustrated and void.
Entertainment industry:
An example for this would be that an actor signs a contract for an advertisement but dies before the advertisement could get shoot. In such case the contract would get dissolved as the actor was hire for the specific skill and talent that he possess.
Construction contracts:
‘A’ had signed a contract to construct a house on a barren land for 'B’. However before the construction could get complete the government passed an order which made the construction illegal. This made the contract frustrated and was deemed void as Construction on that land was unlawful.
Conclusion:
Doctrine of frustration codified under Section 56 of Indian Contract Act, 1872 serves as a shield that protects parties. It balances the obligation to perform with the practical situation of unforeseeable events. It protects parties from getting unlawfully penalised for the acts that were beyond their control or intent. It makes the contract void the second it becomes frustrated and doesn't compel the parties to perform impossibility. It plays a crucial role in contracts used for governmental, commercial and personal purposes. Today this doctrine has taken its refined shape through numerous judgement and theoretical framework.
Disclaimer: This article is intended solely for educational and informational purposes. It does not constitute legal advice and should not be relied upon as such. While every effort has been made to ensure the accuracy, reliability, and completeness of the information provided, ClearLaw.online, the author, and the publisher disclaim any liability for errors, omissions, or inadvertent inaccuracies. Readers are strongly advised to consult a qualified legal professional for guidance on any specific legal issue or matter.
Introduction:
The foundation of the Contract Act is that the parties are bound to perform their contract. It is based on the Latin legal principle ‘Pacta Sunt Servanda’, which means agreements must be kept. However, oftentimes due to a supervening and unforeseeable event, the contract becomes impossible to perform or becomes unlawful. In such a situation, the law interferes. This concept is known as the doctrine of frustration.
In India, the Doctrine of Frustration is codified under Section 56 of the Indian Contract Act, 1872. It deals with contracts that are impossible to fulfil, or if performed, would undermine the basis of the law.
Section 56 of the Indian Contract Act, 1872:
This section lays down the foundation regarding the impossibility of performing. This section is divided into three firm parts. These are as follows:
Initial Impossibility:
The first paragraph of section 56 states:
‘Agreement to do impossible act.—An agreement to do an act impossible in itself is void.’
This means that the act in the contract was void or unlawful from the time it was formed. Such contracts are void ab initio (void from the start).
Subsequent Impossibility:
The second paragraph of this section talks about the foundation of the doctrine of frustration. It states:
‘Contract to do an act afterwards becoming impossible or unlawful.’
This means that due to an unforeseeable event, the contract became unlawful or impossible to perform. Such an event should not be a self-induced Impossibility which means that the event should be out of the control of the parties. Impossibility in this section does not always mean physical impossibility but also any situation that undermines the purpose of the contract or destroys its core.
There are specific grounds that the court recognises on which a contract can be frustrated. These are as follows:
i. Destruction of subject matter:
If the subject matter which is essential to perform the contract gets destroyed without the fault of any party, then that contract becomes void under the doctrine of frustration.
ii. Death or personal skill:
This is when the contract is dependent on the personal ability or talent of a person who is one of the parties to the contract, then upon his/her death the contract becomes void. In addition to this, if that person becomes mentally ill and is incapable of understanding the consequences of the contract, then also the contract becomes void.
iii. Change of Circumstances:
Many times the performance of the contract becomes impossible to perform due to changes in the situation. This makes the contract radically different and also destroys the basis of the contract.
iv. Government or Administrative order:
Government order and action can also make a contract void under this doctrine. If a contract is formed, but due to any new rule or law imposed by the government or any administrative body, the contract becomes illegal, then such a contract can be deemed unlawful. However, in such a scenario, one must note that such restrictions by the government should be permanent. Temporary restrictions are not considered impossible under this section until and unless the delay caused by this affects the contract severely.
v. Outbreak of War:
In case of war, contractual obligations may be discharged as the performance would either be unlawful or would be impossible to accomplish. War is considered an unforeseeable and supervening event as this event occurs beyond the control of the parties.
vi. Non - Non-Occurrence of Contemplated Event:
This is when a contract is dependent on the occurrence of a specific event. If that event doesn't happen, then the performance is impossible to complete, and the entire contract collapses.
Consequences of section 56:
The Last paragraph talks about the consequences. It states that:
'Compensation for loss through non-performance of an act known to be impossible or unlawful'
The doctrine of frustration is only applicable when the event is unforeseeable and out of the control of the parties. This means that parties didn't have the knowledge of the impossibility at the time of formation of the contract. If any party had the knowledge and still entered into the contract then they would have to compensate for the loss that was incurred by the other party who was innocent and had no knowledge. This protects the innocent party and also makes the guilty party liable.
Illustrations:
A contract was formed between Mr A, stating that he would transport 20kg of cotton to Mr B by ship. However, due to a hurricane, the ship sank in the middle of the ocean. This contract is void as its subject matter was destroyed.
Mr Z, a renowned musician, entered into a contract with Mr R, agreeing to perform at his wedding. On the wedding day, Mr Z had a sudden heart attack and died on the spot. The agreement was frustrated as it was dependent on personal skill.
Mr D had organised a birthday party for his daughter in a banquet hall. However, a day before the function, the government passed an order for curfew in the city. The contract is void as its performance is unlawful.
A promise B that would bring his dead son back to life. This agreement is void as the performance is impossible from the time of its formation.
Ms R had rented a room to witness the light show at the Eiffel Tower. However, due to technical issues, the event was cancelled and postponed. The contract may be frustrated as the core purpose was to watch the light show.
Case Laws:
Taylor v. Caldwell (1863):
This English case law became the basis upon which the doctrine of frustration stands. A music hall, which was booked for a concert, was burned the day before the event. This made the event impossible.
Satyabrata Ghose v. Mugneeram Bangur & Co.(1954):
This is a landmark judgment for Section 56 of the Indian Contract Act. A large plot was taken by the plaintiff for the purpose of Construction. However, later the land was temporarily requisitioned by the military during World War II. Defendant claimed that the requisition delayed the work and the contract was frustrated. The Supreme Court held that the impossibility under Section 56 should be practically impossible to perform and was not only limited to literal meaning.
Naihati Jute Mills Ltd v. Khyaliram Jagannath (1968):
Naihati Jute Mills Ltd had contracted with Khyaliram Jagannath that they would purchase 2000 bales of cotton from them. After the contract was made, the government released a control order which raised the price of Jute. The Naihati Jute Mills claimed that this government order made the contract impossible. However the apex court held that the commercial hardship cannot amount to frustration. Frustration should make the performance either impossible or unlawful.
Krell v. Henry (1903):
A man had rented a flat in London for few days to witness the king’s coronation. However the king fell sick and the event was postponed. The court in this case held that the contract was void and frustrated as its sole purpose of forming was destroyed.
Real Life application:
The Doctrine of frustration has a significant practical application in the real world. These can be listed as follows:
Covid-19 pandemic:
During Covid- 19 pandemic, the government had order curfew in the cities. This made many contracts impossible to accomplish as transportation and traveling was banned by the government. Thus made the contract frustrated and void.
War:
During Indo- China war, the export and import from China was banned. This made international contract with china for export and import of good impossible to complete. Thus the all contract of Indian seller of Chinese products got frustrated and void.
Entertainment industry:
An example for this would be that an actor signs a contract for an advertisement but dies before the advertisement could get shoot. In such case the contract would get dissolved as the actor was hire for the specific skill and talent that he possess.
Construction contracts:
‘A’ had signed a contract to construct a house on a barren land for 'B’. However before the construction could get complete the government passed an order which made the construction illegal. This made the contract frustrated and was deemed void as Construction on that land was unlawful.
Conclusion:
Doctrine of frustration codified under Section 56 of Indian Contract Act, 1872 serves as a shield that protects parties. It balances the obligation to perform with the practical situation of unforeseeable events. It protects parties from getting unlawfully penalised for the acts that were beyond their control or intent. It makes the contract void the second it becomes frustrated and doesn't compel the parties to perform impossibility. It plays a crucial role in contracts used for governmental, commercial and personal purposes. Today this doctrine has taken its refined shape through numerous judgement and theoretical framework.
Disclaimer: This article is intended solely for educational and informational purposes. It does not constitute legal advice and should not be relied upon as such. While every effort has been made to ensure the accuracy, reliability, and completeness of the information provided, ClearLaw.online, the author, and the publisher disclaim any liability for errors, omissions, or inadvertent inaccuracies. Readers are strongly advised to consult a qualified legal professional for guidance on any specific legal issue or matter.