Rayat college of Law
Law of contract
Project:
Doctrine of frustration
Submitted
To –Mr Sohnu By- Ashlyn Jain 2251
st
b.com llb (1 sem)
TABLE OF CONTENT
Introduction
What is impossible?
Why impossible?
Types of impossibility
Initial Impossibility
Subsequent Impossibility
Theory of Frustration
Doctrine of frustration
Grounds of Subsequent impossibility
Exceptions of Subsequent Impossibility
Effect of Subsequent Impossibility
INTRODUCTION
Parties to the contract perform their respective obligation. When
the performance of the contract become impossible, the purpose,
which the parties have in their mind, is frustrated. If the
performance become impossible, because of the supervening
event, the promisor is excused from the performance of the
contract. This is known as doctrine of frustration under English
Law and it covered by 56 of ICA.
What is impossible?
The definition of impossible is something that cannot be done,
that cannot be true, or it also is something or someone who is
hard to deal with.
Why impossible?
Section 56 is based on following maxims-
i. Les non cogit ad impossibilia – means law does not recognise
what is impossible.
ii. Impossibilium nulla obligitio est – means what is impossible
does not create an obligation.
So it will be unjust it law compel to do which is impossible, law
can‟t enforce impossibility.
Types of impossibility
In law of contract impossibility is of two types :-
Initial impossibility
Subsequent impossibility
INITIAL IMPOSSIBILITY
Impossibility existing at the time of making of the contract i.e. act
to be done under agreement is impossible in itself. So there is
impossibility from the very beginning.
There are two types of initial impossibility:-
1) Initial physical impossibility
2) Initial legal impossibility
I. Initial Physical Impossibility
Where initially it is impossible to perform the contract physically it
is known as initial physical impossibility. The agreement is void-
ab-initio. Hence the party shall have no right and duties.
For example :- A agrees to B to pay Rs 2 lakh if he discover
treasure by magic. This agreement is void as no one can discover
treasure by magic and it is initial physical impossibility.
Another example is A agree to pay B Rs 2 lakh if he can run at a
speed of 100 km/hour. This agreement is void as no one can run
at this speed at it is initial physical impossibility.
II. INITIAL LEGAL IMPOSSIBILITY
If it is impossible to perform the contract because it would be
unlawful to do that, the agreement is void. Such case also fall
under section 23 of Indian contract act which declares that every
agreement of which the object or consideration is unlawful is
void.
Like :-
Agreement of minor agreement
Agreement of polygamy marriage
Agreement of smuggling
Section 56 (1) provides that an agreement to do an act impossible
in itself is void.
Section 56 (3) compensation where the provision is aware that
performance is impossible/illegal and the promise is not
bound/jail. Where one person has promised to do something
which he known or with reasonable diligence might have known
and which the promise did not know, to be impossible or
unlawful, such promisor must make compensation to such
promise for any loss which such promise sustains through the
non-performance of the promise”.
For example :- A, a married man knowing that he can‟t marry
again. Promises to marry B he is bound to compensate B for any
loss (physical or mental) which she suffers due to the breach of
promise.
Subsequent impossibility.
Section 56(2) provides that a 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.
Section 56 (2) contract is valid initially but subsequently because
of some event the performance becomes impossible or unlawful
then it is known as subsequent impossibility and contract
becomes void.
Such event must be beyond the control of the parties otherwise
section 56 (2) will not be applicable i.e. A agreed to sell his car to
B for Rs 2 lakh by 31.3.2014. Before the time is fixed for the
performance, A sold the car to C, here the event of sale of the car
to C, was within the control of A, hence it is not impossibility and
the contract has not become void by it is breach of the contract.
i.e. A&B contract to marry each other before the time is fixed for
the marriage, A marriages to C. Here event of marriage of A&C
was within the control of A. Hence it is not impossibility but it is
breach of the contract.
Types of subsequent
Physical impossibility :-
A agreed to sell his car to B for rupees 2 lakh by 31.3.2014. before
the time is fixed for the performance, the car is destroyed in the
accident. The contract becomes void because of subsequent
physical impossibility.
Subsequent legal impossibility :- Where contract is valid
initially but subsequently because of change of law performance
become illegal then it is known as subsequent legal impossibility
and contact become void.
Theory of frustration :-
Origin of theory
Theory originated in England, in early days when a contract was made it was a
required to be performed whatever circumstances may be. There was no
excuse. No excuse was allowed by law. It is called absolute contact theory. It
was laid down in –
Paradine v. Jane.
It was a very harsh law. Later on this harsh, rigid law was modified, liberalised
by a case
Taylor v. Cardwell.
In this case Subsequent impossibility granted as an excuse. Which is known as
theory of frustration and also held that theory once a contract is always a
contract abolished.
Basis of the doctrine of frustration was explained by Mukherjee J. In the
Supreme Court decision of the Satyabrata Ghose v. Mugneeram 1954 S.C. and
declared that section 56 is a complete law on the matter of doctrine of
impossibility.
Impossibility divided into 3 part
Physical, legal, and practical impossibility
A. Physical impossibility
1. Destructiion of subject matter taylor vs Coldwell
2. Defence of promisor (Personal incapacity)
3. War-blockade
4. Terrorist activities
B. Legal impossibility
1. Change of laws
2. Government interference
(a) Property to be sold, acquired
(b) By Government for public purpose
(c) Contract becomes void
C. Practical impossibility
Promise can be performed physically or can be performed legally but there has
been change in the circumstances in such a way that on object of contract can’t
be achieved. So contract frustrate. This is called doctrine of Practical
impossibility.
In case Krell v. Henry, There was a contract between Landlord and a tenant to
take on hire upper portion of a flat to see a procession of a king. This object
was a term of contact so object was disclosed before date of taking procession
King fell ill and procession was cancelled. Tenant took plea that contract
become void because object of contract failed. Plea of subsequent Impossibility
taken. Plea of Landlord that
1. Act is physically possible as the flat is available.
2. Act is legally possible as there is no prohibition by Law
(So no subsequent impossibility – Physically possible and legally possible)
Court held that:- It is a case of practical impossibility. Contract becomes void. If
object of contract is disclosed to the parties it is made root of contract. If
circumstances changed and
frustrates the object then performance of act is physically possible legally
possible but practically impossible. This new theory propounded by Krell v.
Henry. This is called
Doctrine of Frustration.
Position of India
While defining „impossibilty‟ supreme court has already said in Satyabharata
Gosh v. Mangherams Bangur co. that Physically impossibility includes practical
impossibility also On this point Sc said s/56 is complete law on impossibility and
these is no need to borrow from English law.
It was confirmed by S.C. in case of Ganga Saran v. Ram Charan
There was a contract for supply of balwes of dhotis made of Victoria Mills,
Kanpur. After making of contract Victoria Mills closed. Seller took the plea of
practical impossibility. It is not said that Fresh manufactured dhotis to be given.
Dhotis made at any time to be given.
In principle S.C. agreed that practiclal ompossibilty applicable in India but not in
this case because there is no practical impossibility. Contract was for supply of
Victoria Mills dhotis so closure of Mills has no effect. Seller bound to supply
dhotis.
Purushottam Dass v. Batala Municipal Committee (P&H H.C)
Facts: Tonga stand given on contract by municipal committee to a person
charging rent on them. In this case tonga stands never used by tonga owner.
Not a single stood for 6 months.
Municipal committee asked for rent. Contractor took the plea of practical
impossibility i.e. object not achieved.It was implied in contract that tonga stand
will be used by tonga owner implied in contract.
But never used so object frustrated. Held case of practical impossibility.
It is not necessary that object should be disclosed it can be inherent.
Grounds of Subsequent
Impossibility/Illegality or
Doctrine of frustration
The performance of contract may become subsequently
impossible due to any of the following reasons:
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”. Example: A musical hall was agreed to let out on certain
dates, but before those dates the hall was destroyed by fire. The
contract was held to have become void on the ground of
impossibility of performance
(Taylor v. Caldwell (1663) 3B & S 826)
A person agreed to deliver a part of a specific crop of potatoes.
The potatoes were destroyed by a pest through no fault of the
party. The contract was well to be discharged (Howell Vs
Compland).
Contract divided in two part Special contract and General contract
Special Contract- Can‟t be enforce Contract because contract
based on Personal skills or talent, Knowledge
General contract- Can be enforcement against his legal heir
2. Change of circumstances:
A contract will state “where circumstances arise which make the
performance of the contract impossible in the manner and at the
time contemplated”. For Example A ship was chartered to lead a
cargo but on the delay before she could have proceeded to her
berth, an explosion occurred in the auxiliary boiler, which made it
impossible for her to understand the voyage at the scheduled
time. Where the impossibility of alteration of circumstances was
within the contemplation of the parties at the time of contract,
they can hardly complain of any such alteration.
3. Non- occurrences of contemplated
event:
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
Krell Vs Henry (1903), K.B 740, a contract to hire a room to view a
proposed coronation procession was held to have frustrated
when the procession was postponed.
4. Death or incapacity of party:
When the performer of contract depends upon the personal skill
or ability of the party, the contract stands discharged on the
death or incapacity of that person. For Example: A agreed to
perform a concert on a specific day. A fell seriously ill and so could
not perform at a concert on a specific day. It was hold that
contract is discharged at the ground of impossibility (Robinson Vs
Davison (1871) L.R Ex 269).
5. Change of law:
A contract will be dissolved when legislative or administrative
intervention has o directly operated upon the fulfillment of the
contract for a specific work as to transform the contemplated
conditions of performance. Where a vendor of land could not
execute the sale deed because he ceases to be the owner by
operation of law, it was held that the contract had become
impossible of performance. Another example: A agreed to sell his
land to B. Subsequently the land was acquired by the government.
Now A cannot perform his promise, the contract was held to
become void on the ground of impossibility.
6. Cessation of a state of things:
If a contract is entered into on the basis of the continued
existence or occurrence of a particular state of things, the
contract is discharged if the state of things ceases to exist or
changed. It should be noted carefully that the contract is
discharged only when the happening of the event was the basis of
the contract. Example: A and B contract to marry each other.
Before the time fixed for the marriage, A goes nod. The contract
becomes void.
7. Declaration of war:
If war is declared subsequent to the formation of the contract, all
pending contracts are either suspended or declared are void. If
the war is of a short duration, such contract may be revived after
the end of the war. For Example: A contracts to take in cargo for B
at a foreign port. A‟s government afterwards declares war against
the country in which the port is situated. The contract becomes
void when the war is declared.
Exceptions to Subsequent
Impossibility/frustration
1. Event could be controlled by Promissory S/56(2) self created
impossibility is no impossibility i.e. A to sell car at 1 December if
he sold it at 28 November. It will be self created so The
impossibility should not be by self-induced by the promisor.
2. Temporary acquisition of property is no impossibility
Satyabhrata Ghosh case Because property can be vacated by
Government after some time.
3. Section 56 does not apply to Statutory Contract Mary v. State of
Kerala SC held that section 56 can‟t be apply to statutory contract
4. Section 56 applies to Executory (future) and not to executed
(past) contract
5. Mere commercial Difficulty or Financial loss
6. Where an event which makes the performance only difficult or
more expensive it is not a ground of subsequent impossibility or
frustration rather it is covered under exception to section 56(2)
and does make the contract Void.
7. Delay in Performance does not amount to Impossibility
Where performance is delayed due to unavoidable reasons the
contract does not becomes void but the performance get delayed.
Effect of Supervising contract/
Subsequent
Impossibility/frustration
1) Contact becomes void –
Where the performance of the contract become subsequent
impossible or unlawful the contract becomes Void.
2) Compensation for non performance –
Where the promisor or alone known that the performance is
impossible or unlawful he must compensate the promisor for any
loss which he might have suffered on account of non
performance.
3) Benefit to be restored
when a contract becomes void any person who has received any
advantage. Such contract is bound to restored it or to make
compensation for it to the person from whom he received it- i.e. X
contract to sing for Y at concert for Rs 1000 which is Paid in
advance X is too ill sing X must refund the advantage of Rs 1000 to
Y.
Bibliography &
Webliography
BOOK-
Law of contract-- Dr Jyoti Rattan
WEBSITE
http://indiankanoon.org/
http://enterslice.com/
http://legalservicesindia.com/
http://lawstreetindia.com/
