AMITY UNIVERSITY, DUBAI

FRUSTRATION OF
CONTRACT

ANJOOM ANVER
BBA LLB
 TABLE OF CONTENT
SL.NO TOPICS PG.NO

1 INDIAN CONTRACT ACT, 1872

2 THE DOCTRINE OF FRUSTRATION

3 DIFFERENTIATING BETWEEN
SECTION 56 AND SECTION 32 IN THE
INDIAN CONTRACT ACT
4 FACTORS AMOUNTING TO THE
FRUSTRATION OF CONTRACT

5 FACTORS NOT AFFECTING

FRUSTRATION

6 The Interplay between the Doctrine of

Frustration & Force Majeure Clause

7 FORCE MAJEURE CLAUSE IN COVID

8 CAN COVID-19 BE A FRUSTRATING

EVENT?

9 CONCLUSION

INDIAN CONTRACT ACT, 1872

The Indian Contract Act was enacted in 1872 and came into
force on 1st September 1872. The word ‘contract’ has been
derived from the Latin word ‘contructus’ which means ‘to
work on contract’. The law of contract is based on the
principle of ‘pacta sunt servanda’ which means ‘agreements
must be kept’.

The Indian Contract Act deals with two aspects. The first
aspect is the general principles of the law. Secs. 1 to 75 deals
with them. The second aspect is certain special contracts such
as indemnity, guarantee, bailment, pledge and agency. The
provisions relating to these contracts are contained in Secs.
124 to 238 of the Act.

Section 2(h) of the Indian Contract Act 1872 defines the term
‘contract’ as an ‘agreement enforceable by law’. As per
section 2(e) every promise and every set of promises forming
consideration for each other is called an agreement. A promise
is an accepted proposal1

OBJECTIVE

1. This project aims to have a complete study on who has the

capacity to contract.
2. To cover all the aspects of this topic.
3. To provide a case law and other suitable examples for
better understanding

CHAPTER 1: THE DOCTRINE OF FRUSTRATION

1
https://indiankanoon.org/doc/171398/
According to Section 56 of The Indian Contract Act, 1872
“Agreement to do impossible act. An agreement to do an act
impossible in itself is void.
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.
Compensation for loss through non-performance of act known
to be impossible or unlawful. Where one person has promised
to do something which he knew, or, with reasonable diligence,
might have known, and which the promisee did not know, to
be impossible or unlawful, such promisor must make
compensation to such promisee for any loss which such
promisee sustains through the non-performance of the
promise.”2
When the performance of the contract becomes impossible,
the purpose which the parties have in mind is frustrated. If the
performance becomes impossible, because of a supervening
event, the promiser is excused from the performance of the
contract. This is known as the doctrine of frustration under
English law, and is covered by section 56 of the Indian
Contract Act.
The doctrine comes within the preview of section 56 of the
Contract Act as it discharges the contract by reason of
supervening impossibility or illegality of the act agreed to be
done. A contract is also frustrated under section 32 when the
condition, on which the contract is contingent, is not fulfilled
or cannot be fulfilled because of impossibility Nevertheless,
2
https://indiankanoon.org/doc/171398/
the doctrine under Indian law is associated with section 56. As
section 32 only applies when contracts are discharged and
parties absolved of their obligations as per terms already
contained in the relevant contract. Section 56 applies when
contracts are discharged and parties absolved of their
obligations as a result of subsequent impossibility due to
outside forces and factors.3
In the case, Taylor v. Caldwell, the plaintiff (Taylor) and the
Defendant (Caldwell) got into a contract in which the
defendant allowed the plaintiff to use the Surrey Music
Gardens and Music Hall for certain four days to present a
series of four grand concerts, along with day and night fetes.
This was done with a rent or sum of 100 but due to an
accidental fire. The destruction was without fault of either
party and was so extensive that the concerts could not be
given.4
Plaintiff sued the Defendant for the breach of contract but it
was held that the contract had become impossible to perform
because of the destruction of the hall without any fault on the
part of the Defendant. The performance of the contract had
become impossible and, therefore, the defendant was not held
liable for the non-performance of the contract.

Therefore, when performance is rendered by intervention of

law invalid, or the subject-matter assumed by the parties to
continue to exist is destroyed, or a state of thing assumed to
be the foundation of the contract fails, or does not happen, or

3
https://www.lawteacher.net/free-law-essays/contract-law/the-doctrine-of-frustration-contract-law-
essay.php
4
https://lawlex.org/lex-bulletin/case-summary-taylor-v-caldwell/24748
where the performance is to be rendered personally and the
person dies or is disabled, the contract stands discharged.

CHAPTER 2: DIFFERENTIATING BETWEEN

SECTION 56 AND SECTION 32 IN THE INDIAN
CONTRACT ACT

Under the Contract Act, both sections 32 and 56 apply to

cases of frustration of contacts and it is important to
understand the difference between section 32 and section 56.
The parties may see an incentive to go under section 56
instead of section 32. This incentive is the compensation for
the loss-incurring party may receive for loss through non-
performance of act known to be impossible or unlawful.
under both sections 32 and 56, the contract can be discharged
on the impossibility of certain events in the future. Section 32
deals with a contingent contract, which is dependent on the
fulfilment of a condition for its survival. A contingent contract
will dissolve under its own force if the condition is not
satisfied, whereas, section 56 is attracted when a contract
becomes impossible to perform because of an outside force. 5

CHAPTER 3: FACTORS AMOUNTING TO THE

FRUSTRATION OF CONTRACT
Physical destruction of the subject matter, loss of the object,
subsequent illegality to perform, delay, death or incapacity of
5
https://web.iima.ac.in/assets/snippets/workingpaperpdf/8569076382020-10-01.pdf
the party in a contract requiring personal performance, etc.,
are some of the factors that attract the provisions of section
56. Some of the most common and prominent factors are
analysed below:
1. THE SUBJECT MATTER OF THE CONTRACT IS
PHYSICALLY DESTROYED: the destruction of a
specific subject which was essential for the performance
of the contract will render the contract frustrated.

2. LEGAL CHANGE RESULTING IN SUBSEQUENTLY

ILLEGALITY: a subsequent change in the law or in the
legal position, affecting a contract and prohibiting the
performance undertaken by the contract, is a well-
recognised ground for frustration under section 56. To
discharge the contract, the change in the law must be such
as to strike at the basis of the contract and not merely to
suspend the performance under it.

3. CHANGE IN CIRCUMSTANCES: The performance of a

contract may be possible to carry out physically but if it
has become redundant having regard to the object and
purpose of the parties, by an untoward event or change of
circumstances, then it must be held that the contract is
frustrated.
In India, impossibility does not mean just mere physical
impossibility to perform the contract, it also includes
situations were the performance of the contract may not
be literally impossible, but because of changed
circumstances, the performance would not fulfil the
object which the parties had in mind.
 In the case, Arti Sukhdev Kashyap v. Daya Kishore
Arora, there was allotment of plot by the Development
Authority with the condition that permission for sale
could not be granted before the expiry of 10 years.
Permission for sale was requested earlier than that and the
same was refused as there were no exceptional
circumstances for the same. It was held that since there
was no possibility of sale after 10 years, the contract had
not been frustrated6

4. DEATH OR INCAPACITY TO PERFORM: in case of

contract based on personal skill or confidence of the
parties, the death of a party in such a case, puts an end to
the contract, and therefore, the representatives cannot be
made liable to perform such a contract.
In Robinson v. Davidson, the defendant’s wife, who was
a piano player, promised to play piano at a concert on a
particular day but due to an illness, she was unable to
perform. It was held that the performance of the contract
depended on the continued good health of the defendant’s
wife and the contract was discharged due to her illness,
therefore, the defendant was not held liable to pay
compensation for the non-performance of the contract.7

CHAPTER 4: FACTORS NOT AFFECTING

FRUSTRATION
Certain factors do not amount to the frustration of contract
and are discussed below:
6
http://www.legalservicesindia.com/law/article/2127/4/-Doctrine-of-Frustration-Under-Contract-Act
7
https://www.coursehero.com/file/ppvtgc/The-court-held-that-the-contract-was-frustrated-RELATED-CASES-
Robinson-v/
1. INHERENT OR FORSEEABLE RISK a contract many
contain certain inherent or foreseeable risks which are
required to be considered while applying the doctrine. A
high degree of foreseeability has to be proved to exclude
the application of the doctrine. If the parties foresaw an
event before contracting, the contract should deal with that
event, if it does not there is a presumption that the parties
agreed that the event should not affect performance of the
contract.
It is also necessary that the event is not the fault of the
person seeking to rely on frustration. It must be an outside
event. For e.g., in the case Taylor v. Caldwell, the
accidental fire was not without fault of either party

2. DELAY IN PERFORMANCE: for the doctrine of

frustration to be applicable, it is necessary that the
performance should become impossible or unlawful.
Merely likely delay in performance does not leads to
impossibility
In the case, Satyabrata Ghose v. Mugneeram, the
Supreme Court established the scope of Section 56 of ICA
that impossibility as mentioned in the said Section is used
in a practical and not in literal sense. It also held that it is
not permissible to import English law to the statutory
provisions of ICA.8

3. EXECUTED CONTRACTS: The doctrine of frustration

comes into play when the obligation, which is yet to be
performed, has become impossible or impracticable to

8
http://www.legalservicesindia.com/law/article/2127/4/-Doctrine-of-Frustration-Under-Contract-Act
 perform. Section 56 covers case of executory contracts
only, and does not apply to executed contracts.
4. COMMERCIAL DIFFICULTY: a distinction is drawn
between the happening of an event which makes the
performance of the contract impossible, beyond the control
of the promisor, and an event which makes the performance
only difficult or more expensive. The nature and the terms
of the contract may help in deciding whether the
performance has become impossible, or merely
commercially difficult.
In the case, Punj Sons Pvt. Ltd. v. Union of India, it
was held in this case that there was a contract between
M.s. Punj Sons Pvt. Ltd. and the Union of India under
which the former agreed to supply to letter 8,420 milk
containers of 20 litres each. The coating was to be coated
with “hot dip coating”. The Coating was to be done by tin
ignots which was not available in the market. On the
release of quota by the director general of supplies and
disposals supply of tin ignots could be obtained by the
promisors, quota wasn't released, without any fault, they
were not able to perform the contract. It was held in this
case that the contract in this case had become impossible
of being performed and thus void. The promisors were,
hence not liable for non- performance of the same.
Merely because the procurement of the goods become
difficult due to the strike in the mill, or there is a rise in
the price, or a person will not be able to earn the expected
amount of profits, it is not enough to frustrate the
contract.9

9
http://www.legalservicesindia.com/law/article/2127/4/-Doctrine-of-Frustration-Under-Contract-Act
5. SELF-INDUCED FRUSTRATION OR CASES WHERE
THE FRUSTRATION COULD BE PREVENTED:
A party is excused of non-performance if it proves that:
(1) the non-performance was due to an impediment
beyond its control
(2) it could not have reasonably foreseen the
impediment at the time of the making of the contract
(3) it could not avoid or overcome the impediment or
its consequences
The onus of proving that the frustration was self-induced
is on the party who alleges the same. A party is not
required to prove affirmatively that the event occurred
without his fault. In the cases of self-induced
impossibility, which could have been removed by the
party himself, section 56 is not applicable and it will
amount to a breach of contract where the party
responsible for such breach is liable to compensate the
other party.

CHAPTER 5: The Interplay between the Doctrine of

Frustration & Force Majeure Clause
In Indian Contract Law, the presence of a clause dealing with
supervening events in the contract, ipso facto does not exclude
the possibility of application of the doctrine. In a number of
cases, Indian courts have analysed the scope of such clause to
determine if it covers the supervening event, which makes it
relevant to discuss the interplay between the doctrine and the
clause.
The term “force majeure” means an unavoidable accident or a
chance occurrence.
Force majeure clauses are contractual clauses which alter
parties' obligations and/or liabilities under a contract when an
extraordinary event or circumstance beyond their control
prevents one or all of them from fulfilling those obligations.
Force majeure includes other events as well, such as
malfunctioning of machinery or labour strikes, etc.
The court explained the scope of a force majeure clause:
McCardie J in Lebeaupin v. Crispin, has given an account of
what is meant by “force majeure” with reference to its history.
The expression “force majeure” is not a mere French version
of the Latin expression “vis major”. It is undoubtedly a term
of wider import. Difficulties have arisen in the past as to what
could legitimately be included in “force majeure”. Judges
have agreed that strikes, breakdown of machinery, which,
though normally not included in “vis major” are included in
“force majeure”. An analysis of rulings on the subject into
which it is not necessary in this case to go, shows that where
reference is made to “force majeure”, the intention is to save
the performing party from the consequences of anything over
which he has no control. This is the widest meaning that can
be given to “force majeure”.
The presence of the force majeure clause in the contract,
squarely covering the event that has happened, will eliminate
the application of section 56 in that particular case. However,
“the force majeure clause does not exhaust the possibility of
unforeseen events occurring outside natural and/or non-
natural events [mentioned in the clause]”. It means that even
though the parties have provided for the unforeseen events in
the form of force majeure clause, yet there is a possibility of
incompleteness of that clause. If such a clause has not
envisaged the extent of the circumstances which have actually
now interfered with the performance, then such intervening
circumstance may discharge the contract under section 56
despite the express clause.
It can be deduced from the above analysis that even though a
force majeure clause provides certainty to the contract, it is
not necessary that it covers all supervening events thereby
excluding the application of the doctrine.10

CHAPTER 6: FORCE MAJEURE CLAUSE IN COVID

the COVID-19 pandemic constitutes a force majeure will
depend on a contract's wording. It may be covered under
a force majeure clause if words such as 'pandemic',
'epidemic' or 'disease' are used.
Act of God' is often used in force majeure clauses, and it is
widely felt that the COVID-19 pandemic falls within the
ambit of this term. 'Act of God' has been legally defined
as: "such a direct and violent and sudden and irresistible act of
nature as the defendant could not, by any amount of ability,
foresee would happen, or, if he could foresee that it would
happen, he could not by any amount of care and skill resist, so
as to prevent its effect".
It has also been held to cover one-off events which "involved
no human agency". Acts of God have generally been confined
to natural disasters such as floods and earthquakes.
10
https://web.iima.ac.in/assets/snippets/workingpaperpdf/8569076382020-10-01.pdf
While it could be argued that COVID-19 is a factor of nature,
it seems unlikely that the courts would affirm that it is an act
of God because it has historically been applied to geographic
phenomena. Also, the nature of the pandemic may not be seen
as sufficiently direct or violent so as to make persons unable
to avoid its effect.
CAN COVID-19 BE A FRUSTRATING EVENT?
It may be found that The pandemic is a frustrating event
because of the level of disruption that it has caused to the
world's economy. It should be noted that parties which have
entered into contracts since the spread of COVID-19 began
may be unable to assert frustration because of foreseeability.
Even if the disease itself is not deemed to be enough to
frustrate a contract, the consequences flowing from it – such
as government curfews and shutdowns – will likely be seen as
enough to render carrying out a contract impossible. Many
commercial entities were forced to close pursuant to
emergency power orders and so performance of commercial
activity became impossible through no fault of their own.11

11
https://www.lennoxpaton.com/lxp-insights/covid-19-force-majeure-and-frustration-of-contracts/?
utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration
CONCLUSION
The doctrine of frustration, incorporated under section 56 of
the Indian Contract Act, provides a way out to the party(ies)
when the performance has become impossible, owing to any
supervening event, without their fault.
The Indian Law has, codified this doctrine in section 56,
obviated the need for evolving and applying theories to justify
the application of the doctrine.
while the doctrine of frustration has its roots under the
Common Law, the codification of the doctrine in section 56
and the development of the doctrine under the Indian law is
noteworthy and constant.
The doctrine of frustration comes into play when an
unforeseeable event occurs rendering the performance of the
contract impossible. The frustration of the contract makes the
contract void and it also discharges the parties from any
liability. This doctrine is an exception to the general principles
of contract under when compensation is usually given for
breach of contract.  But when the doctrine of frustration is
applied there is no fault of the parties and therefore, the party
should not be made to compensate in such an event