Table of content

1. Introduction
2. The doctrine of frustration of contract
 Evolution of doctrine
 Position of doctrine in India
 Essentials for frustration of contract
3. Specific grounds of frustration
4. Effects of Frustration
5. Difference between doctrine of frustration & breach of
contract
6. Conclusion
Introduction
Contract, in the simplest definition, a promise enforceable by law. The promise may be
to do something or to refrain from doing something. The making of a contract requires
the mutual assent of two or more persons, one of them ordinarily making an offer and
another accepting. The failure to perform the obligations can have consequences and
leads to breach of contract. However, the doctrine of frustration marks an exception to
this rule.
The Doctrine of Frustration commonly talks about the impossibility of performance of
the contract. A contract may be frustrated where there exists a change in
circumstances, after the contract was made, which is not the fault of either of the
parties, which renders the contract either impossible to perform or deprives the contract
of its commercial purpose. Where a contract is found to be frustrated, each party is
discharged from future obligations under the contract and neither party may sue for
breach.

The Doctrine of Frustration of Contract

Evolution of Doctrine of Frustration

The origin of the doctrine of frustration can be traced back to the principle of absolute
liability forming the basis of contracts in England. It is usually believed by the courts
that the parties to a contract must fulfil their obligations in any situation and are
absolutely liable for the same. This theory of absolute liability was laid down by the
court in the case of Paradine v. Jane1 . In this case, a person was sued for arrears of
rent. He argued that he was evicted and kept out of possession of the land which was
beyond his control. This is why he couldn’t receive the profits from the land from which
he anticipated that he would get the profit and pay the rent. However, he was still held
liable for not paying rent due to the theory of absolute liability.
In order to rectify and avoid the deficiencies of the theory of absolute liability, the
concept of doctrine of frustration was introduced. The court for the first time
recognised this doctrine in the case of Atkinson v. Ritchie2 wherein it was held that
loading of a British ship on a foreign port is impossible due to outbreak of war between
the two countries and hence, the contract is frustrated.

1
1647, EWHC KB J5
2
1809, 103 E.R. 877
Another big step was taken by the English courts in the development of the doctrine in
3
the case of Krell v. Henry . In this case, the defendant agreed to hire from the plaintiff a
flat for June 26 & 27, on which days it had been announced that the coronation
procession would pass along that place. A part of the rent was paid in advance. But the
procession having been cancelled owing to the King’s illness, the defendant refused to
pay the balance.
It was held that the real object of the contract as recognised by both contracting parties,
was to have a view of the coronation process was, therefore, the foundation of the
contract. The object of the contract was frustrated by non-happening of the coronation
and the plaintiff was not entitled to recover the balance of the rent. This case made the
doctrine applicable to those contracts where the primary and commercial object of
entering into a contract is destroyed.
Explaining the concept “frustration of the contract” in Cricklewood Property&
Investment Trust Ltd v Leighton’s Investment Trust Ltd 4 Viscount Simon LC said that it
means “occurrence of an intervening event or change of circumstances so fundamental
as to be regarded by the law both as striking at the root of the agreement, and as
entirely beyond what was contemplated by the parties when they entered into the
contract”. To the same effort is the following statement of Lord Wright, “The word
frustration is here used in a technical legal sense. It is a sort of shorthand, it means that
a contract has ceased to bind the parties because the common basis on which by
mutual understanding it was based has failed. It would be more accurate to say, not
that the contract has been frustrated, but that there has been a failure of what in the
contemplation of both parties would be the essential condition or purpose of the
performance”.
Position of doctrine in India
Indian law is mostly inspired by common law and eventually, it has inherited the concept
of absolute liability. So, the doctrine of frustration acts as an exception to the theory of
absolute liability. In India, the Indian Contract Act of 1872 deals with contracts and other
aspects related to it.
The Indian Contract Act, 1872 has nowhere explained any such concept of Doctrine of
Frustration. However, the Supreme Court of India held that the doctrine of frustration
comes into play in two types of situation, first, where the performance is physically cut
off, and, second, where the object has failed, and section 56 of Indian Contract Act 1872
will apply in both.
Section 56 :
1. Doctrine of initial impossibility - Section 56 first lays down the simple principle
that an agreement to do an act impossible in itself is void.

3
1903, 2 KB 740 (CA)
4
1945 AC 221 (HL).
 2. Doctrine of Subsequent Impossibility - The second paragraph of Section 56 lays
down the effect of subsequent impossibility of performance. Sometimes the
performance of a contract is quite possible when it is made by the parties. But
some event subsequently happens which renders its renders its performance
impossible or unlawful. In either case the contract becomes void.
Supreme Court in the case of Satyabrata Ghose v. Mugneeram Bangur & Co.5 observed
“This much is clear that the word ‘impossible’ has not been used here in the sense of
physical or literal impossibility. The performance of the act may not be literally
impossible but it may be impracticable and useless from the point of view of the object
and purpose which the parties had in view; and if an untoward event or change of
circumstances totally upsets the very foundation upon which the parties rested their
bargain, it can very well be said that the promisor finds it impossible to do the act which
he promises to do.”
Essentials for frustration of contract
1. There shall be an existing contract between the parties which is the principal
condition for the application of Section 56. It is to be kept in mind that a valid
contract is inclusive of a contract between competent and capable persons
followed by certain considerations.
2. There must be certain clauses to the contract that is yet to be performed. Section
56 of the Indian Contract Act, 1872 will only have its implications if there is some
part of the contract which is yet to be performed and if the same is not
performed then the primary purpose of the contract is not fulfilled.
3. Last but not the least necessary condition for the implementation of Section 56
is that after the contract has been entered into, has become impossible to
perform and cannot be performed by either of the parties in any humanely
possible way, therefore it stands as null and void.

Specific grounds of frustration

The principle of frustration of contract, or of impossibility of performance is applicable
to a great variety of contracts. It is, therefore, not possible to lay down an exhaustive list
of situations in which the doctrine is going to be applied so as to excuse performance.
The law upon the matter is undoubtedly in process of evolution. Yet the following
grounds of frustration have become well- established.
1. Destruction of subject matter - The doctrine of impossibilities applies with full
force “where the actual and specific subject-matter of the contracts has ceased
to exist”. A decision under Section 56 is that of the Madras High Court in V.L.

5
AIR 1954 SC 44 : 1954 SCR 310
 Narasu v. P.S.V.Iyer6 where a contract to exhibit a film in a cinema hall was held
to have become impossible of performance when on account of heavy rains the
rear wall of the hall collapsed killing three persons and its license was cancelled
until the building was reconstructed to the satisfaction of the chief engineer. The
owner was under no liability to reconstruct and it took him some time, by that
time the film would have lost its appeal.
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. Just Kapur of the Punjab and Haryana High Court in
Pameshwari Das Mehra v. Ram Chand Om Prakash7 explained the principle thus:
It is clear that if there is entirely unanticipated change of circumstances the
question will have to be considered whether this change of circumstances has
affected the performance of the contract to such an extent as to make it virtually
impossible or extremely difficult or hazardous. If that be the case, the change of
circumstances not having been brought about by the fault of either party, the
courts will not enforce the contract.
3. Non occurrence of contemplated events - Sometimes the performance of a
contract remains entirely possible, but owing to the non-occurrence of an event
contemplated by both parties as the reason for the contract, the value of the
performance is destroyed. In the case of Herne Bay Steam Boat Co. v. Hutton8
which also arose from the postponement of the coronation. The Royal Naval
Review was proposed to be held on the occasion. The defendant chartered a
steamboat for two to take out a party of paying passengers for the purpose of
viewing the naval review and for a day’s cruise around the fleet. But the review
was cancelled and the defendant had no use of ship. Yet he was held liable to
pay the unpaid balance of the hire less the profit which the plaintiff had made by
the use of ship in the ordinary course.
4. Death or incapacity of party - A party to a contract is excused from performance
if it depends upon the existence of a given person, if that person or becomes too
ill to perform. Thus, where the nature or terms of a contract require personal
performance by the promisor, his death or incapacity puts an end to the contract.
Robinson v. Davison9 is the well-known authority.
There was a contract between the plaintiff and defendant’s wife, who was an
eminent pianist that she should play the piano at a concert to be given by the
plaintiff on a specified day. On the morning of the day in question she became
too ill to attend the concert. The concert had to be postponed and the plaintiff
lost a sum of money.

6
AIR 1953 Mad 300.
7
AIR 1952 34,38.
8
1903, 2 KB 683 (CA).
9
(1871) LR 6 Exch 269: 40 LJ Ex 172
 The plaintiff’s action for breach of contract failed. The court said that under the
circumstances she was not merely excused from playing, but she also not at
liberty to play, if she was unfit to do so. The contract was clearly subject to her
well-being enough to perform: “The whole contract clearly subject to the
assumptions of the continuance of life, and on the conditions which existed at
the time. That assumption is made by both; it is really the foundation fails, the
whole contract must fail. Here the foundation was wanting for there was on Mrs.
Davison’s part an entire and total incapacity to do the contracted for.”
5. Government, administration or legislation intervention - A contract will be
dissolved when legislative or “administrative intervention has so directly
operated upon the fulfilment of the contract for a specific work as to transform
the contemplated conditions for a specific work as to transform the
contemplated conditions of performance.” Thus, where a vendor of land could
not execute the sale-deed because he ceased to be the owner by operation of
law, it was held that contract had become impossible of performance.The effect
of an administrative intervention has to be viewed in the light of the terms of the
contract, and ,if the terms show that the parties have undertaken an absolute
obligation regardless of administrative changes, they cannot be discharged. This
has been held by the Supreme Court in Naihati Jute Mills Ltd v. Khyaliram
Jagannath10. There was an agreement to purchase raw jute from the East
Pakistan.
The buyer was to supply the import licence within November, failing which it was
to be supplied within December at the pain of a little more price and if he failed in
December he was to pay the difference between the contract and market prices.
The buyer applied for a licence which was refused because he had stock in his
mill which was sufficient for two months. He applied again. He was advised this
time that the rules had been changed and to obtain a licence he must show that
he had used an equal quantity of Indian jute. Thus the buyer failed to supply the
licence and was sued for breach. He pleaded frustration caused by the change in
Government policy. But he was held liable. Justice Shelat pointed out that if the
Government had completely forbidden imports, Section 56 would have applied.
But the policy of government was that the licensing authority would scrutinise
the case of the Government was that the licensing authority would scrutinize the
case of each applicant on its own merit.
6. Intervention of war - war-Intervention of war or warlike conditions in the
performance of a contract has often created difficult questions. The closure of
the Suez Canal following the Anglo-French war with Egypt, for instance,
interrupted the performance of many contracts. One such case is Tsakiroglou &
Co Ltd v Noblee Thorl G m b H11. The appellants agreed to sell to the

10
1968 SC 528; (1968) 1 SCR 821,830.
11
1962 (AC) 63
 respondents three hundred tons of Sudan groundnuts c.i.f. Hamburg. The usual
and normal route at the date of the contract was via Suez Canal. Shipment was
to be in November/December 1956, but on November 2, 1956, the canal was
closed to traffic and it was not reopened until the following April. It is stated that
the appellants could have transported the goods via the Cape of Good Hope.
7. Application of leases - In India the question was considered by the Supreme
Court in Raja Dhruv Dev Chand v Raja Harmohinder Singh12 where SHAH J at
once observed that the courts in India have generally taken the view that Section
56 of the Contract Act is not applicable when the rights and obligations of the
parties arise under a transfer of property under a lease. It was one of the cases
arising out of the partition of the country into India and Pakistan. The lease in
question was that of an agricultural land for one year only. The rent was paid and
the lessee was given possession. Before the land could be exploited for any crop,
came partition which left the land in Pakistan and the parties migrated to India.
The action was to recover the rent paid. But no such recovery was allowed.
SHAH J pointed out that completed transfers are completely outside the scope
of Section 56. In a case before the Allahabad High Court, the shops of premises
which were leased out collapsed owing to their dilapidated condition and heavy
rain, requiring new construction, which was not taken to be a frustration of the
lease. Where a shop held under a lease was demolished by the Municipal
Corporation, it was the lessee who was held to be entitled to the vacant site as
also the materials recovered from the debris and he was entitled to be restored
to possession for that purpose as against the lessor who had evicted him.
On the other hand, where on account of an event beyond the parties' control, the
lessor is not able to transfer possession to the lessee; the lessee would be
entitled to take back his rent. Under a lease of land there is a transfer of right to
enjoy that land. If any material part of the property be wholly destroyed or
rendered substantially and permanently unfit for the purpose for which it was let
out, because of fire, tempest, floods, violence of any army or a mob, or other
irresistible force, the lease may at the option of the lessee be avoided.
This rule is incorporated in Section 108(c) of the Transfer of Property Act.
Where the property leased is not destroyed or rendered substantially and
permanently unfit, the lessee cannot avoid the lease because he does not or is
unable to use the land for purposes for which it is let out to him. In the
subsequent case of Sushila Devi v Hari Singh13 the Supreme Court held that an
agreement of lease ended by frustration where before completing it the parties
had to run away and could not go to Pakistan to give or take possession.

12
1968 AIR 1024, 1968 SCR (3) 339.
13
AIR 1756, 1971 SCR 671.
 14
The Jammu and Kashmir High Court allowed in Hari Singh v Dewani Vidyawati
the recovery of rent paid in advance under a lease which could not be completed
on account of partition. The recovery was allowed under Section 65 as benefits
received under a contract which became void.

Effects of frustration

The following are the effects or consequences of the doctrine of frustration:

 The doctrine terminates the contract automatically.
 It puts an end to the rights of parties to a contract.
 It discharges the parties from their obligations and duties.
 If the promisor knows that the contract or agreement is incapable of being
performed or he is likely to know the same, he or she must compensate the other
party for non-performance of the contract.

Applicability of Section 56
According to Indian law, contracts that already contain a clause addressing the
implications of specific unanticipated situations are exempt from the terms of this
section.
In the case of Delhi Development Authority v Kenneth Builders and Developers Ltd.15. It
was decided that if both parties agreed at the time of contract formation that any
supervening event would not influence contract performance, the defense under section
56 would not apply.
Section 56 is also based on the adage “les non cogitadimpossibilia” which essentially
states that the law will not force or compel a man to do something that he cannot
conceivably do in a humanitarian manner.
 Force Majeure clause: The Latin phrase “casus fortuitous” refers to unavoidable
events, and such clauses in a contract are sometimes referred to as force
majeure clauses. This provision is intended to relieve the party from any
approaching uncertainty that may affect the contract’s performance or from any
unanticipated incident over which the parties have no control.
Following the advent of the Covid-19 pandemic in 2020, various ministries invoked the

14
AIR 1960 J&K 91.
15
AIR 2016 SC 3026 (33)
Force Majeure provision by publishing an office memorandum declaring the Covid-19
situation a natural disaster and halting contract fulfillment for a reasonable period of
time.
The scope of this force majeure clause was considered by Justice McCardie in
Lebeaupin v Crispin16, and how it differs from a vis major clause. The judges explained
how the term “force majeure” has a broader meaning. The abrupt failure of machinery
and strikes are examples of situations that are not covered by the vis major clause (Act
of God), but are covered by the force majeure clause. The overarching goal of this
provision was to protect the performing party from circumstances over which he had no
control.

Difference between breach of contract and frustration of contract

S. Doctrine of Frustration Breach of Contract

No.
1. It arises when the contract When a party to a contract
cannot be performed or omits to do an act
becomes impossible to be enumerated in the contract
performed due to factors or does an act contrary to
outside the control of the contract, it leads to
parties to a contract. breach of contract.
2. No such liabilities are to be The party breaching the
paid if a contract is contract has to pay
frustrated. compensation to the other
party.
3. No remedies are available There are certain remedies
where the contract for the breach of contract.
becomes void due to the
doctrine of frustration.
4. Once the contract stands The parties can mutually
frustrated, the parties are decide to perform their
discharged from their duties as per the contract.
obligations.
5. The contract becomes The contract becomes
void due to the doctrine of voidable due to breach of
frustration. contract.
6. Where the contract One party can sue the
becomes incapable of other for breach of
being contract and it is contract.
clear that the parties are

16
1920, 2 KB 714
 discharged from their
liabilities, there is no need
to take the recourse of a
suit.

Conclusion
The Doctrine of Frustration being given a provision under section 56 of the Indian
Contract Act, 1872 gives cognizance to those cases and circumstances where the
performance of a contract has been frustrated and the performance of the same has
become impossible to be humanely performed by either of the parties for some
unwanted unforeseen reasons or circumstances. The Doctrine of Frustration is taken to
be an exception to the general rule which provides the concept of paying damages to
the party that has been breached.
but where one of the parties to a contract knew or was likely to know that the said act is
unlawful or impossible of being performed, the other party must be compensated. Also,
where one party has received any benefits due to the contract which later becomes
impossible then the party must return the benefits so received. It must be noted that the
courts in India have narrowed down the scope of the doctrine by excluding the cases
where the events that rendered the contract incapable or impossible of being performed
could be contemplated by the parties. It is suggested that the doctrine must be applied
to all the cases of impossibility and frustration for the expansion and development of
the doctrine.