Author: Yashraj Bais, student of B.A.LL.B(5yrs) course from Private Institution in Indore (M.P.)
What is Doctrine of Frustration:
The Doctrine of Frustration means the Contract has became void due to the impossibility of the act to be done for which it was actually contracted.Basically Frustration not only applies only to the Contracts which becomes “Physically Im-possible” to be performed but it also applies in such circumstances were the “Object of the contract has literally Failed” to be performed or materialized. Like in Krell v. Henry, 1903 Defendant hired a flat from the Plaintiff, for the Coronation Ceremony of the King, but the King could not come on that day due to his severe illness. The Defendant had paid a certain Rent as advance to the plaintiff, but after the failure of Coronation Ceremony, he refused to pay the arrears. The Plaintiff sued him for the recovery. It was held that as the real object behind the Contract was the “Coronation Ceremony of the King”, which served as the real foundation of the Contract between the parties, as it failed to be accomplished, so the plaintiff is not entitled to recover the Rent Arrears back.
Effect on Contracts:
The Doctrine of Frustration having wide reference and regards to the clauses and conditions of the particular Contract, discharges any one or both of the parties from their contractual obligations. Either party to the contract can initiate this clause in order to suspend or wholly terminate the contract if it becomes impossible to be materialized or performed. It is also pertinent to mention here that, the Frustration usually do not completely terminate the Contract, but the Contract remains suspended till it is impossible to perform the act in which the Promisor cannot do anything to prevent it, and if it is likely to be restituted than under such circumstances the Contract again becomes live after the end of the Frustration.
Section 56 of Indian Contract Act, 1872: The Provision widely envisages the following:
- Firstly, an Agreement to perform an impossible act is void-ab-initio, i.e. void since the inception of the Contract.
- Secondly, A Contract to do an Act which after the Contract is made becomes impossible or unlawful by some reason or event, becomes void after it becomes impossible to act further or illegal.
- Thirdly, If the Promisor since beginning was aware of the Non-performance or voidability of the Contract, which the Promisee was not knowing, than under such circumstances the Promisor must make a good compensation to the Promisee for the losses incurred and Non-performance of the Contract.
Examples:
(i) First Clause: Ram promises Shyam, to discover Treasure by Magic, the contract is void-ab-initio, since the Act is im-possible from the very beginning.
(ii) Second Clause: N promises Y to deliver a Merchandise at a Foreign Port, but soon after it, the Government of N’s Country declared war against the Y’s Country and all the transport system was collapsed, the Contract becomes void due to Non-Performance.
(iii) Third Clause: C promises K to deliver him 25 Pieces of Microwave Ovens at his Shop, despite of knowing that production of Microwave Ovens is prohibited in C’s State, which K wasn’t knowing. Now, C must make a good compensation to K for Non-performace of the Contract.
Some Important Case Laws:
- Satyabrata Ghose v. Mugneeram Bangur & Co. AIR 1954 SC 44: Hon’ble Supreme Court of India held that, it is very much clear from the use of word “Im-possible” in the Contract Act, 1872 that it is not confined only to the physical or literal impossibility of the Act, as sometimes the performance of an act may be possible to be physically performed but it may seem to be impracticable and useless from the point of view of “Object” and the “Purpose”, due to change in circumstances, to the parties so the word “Impossible” even covers that part in which the very object and purpose of the Contract becomes defeated, leading to the Failure in Performance of the Contract.
- Parshotam Das v. Municipal Committee, Batala AIR 1949– In the case, the Municipal Committee leased some Tonga stand to the plaintiff for Rs. 5000/-. But the plaintiff was unable to use them in the paucity of Tonga Drivers for a year and consequently he couldn’t realize anything from them. He sued the Committee for the refund of his money. It was held that the Tonga Stands were leased with an active assumption to be used by the Tonga Drivers and the plaintiff will gain money from the same. In the failure of the same due to paucity of the drivers, the Contract stands frustrated as the condition of the lease couldn’t be accomplished by both of the parties.
