The term ‘frustration’ in any layman’s word refers to defeated, exasperated and what else? However, this term is widely used in agreements and contracts between parties. The term ‘frustration’ is used to refer to failed or unsuccessful transactions which could not be completed for some unforeseen reason. In the law of contracts, the doctrine of frustration has developed to be one of the most basic issues which have arrived to deal with failed contracts. The contract is termed to be frustrated when the performance of the contract that is obligated becomes impossible for unforeseeable circumstances. In this article, we have tried to throw light on the grounds for the frustration of the contract and the consequences of frustration.
What is the Doctrine of Frustration?
The basic rule of contracts mentions that the parties to the contract must fulfil their obligations under the contract and in case of breach of contract happens, the party who breached the contract has to pay for the damages to the other party; 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. It clearly means that the contract could not be performed by either of the parties for a reason that is beyond the limits of control by either ones to the party. The performance of such a contract becomes frustrated, in short it becomes impossible, complicated or illegal. The frustration of contract can be due to any unforeseen, impossible events and events out of control of the parties.
Doctrine of Frustration under Indian Contract Act, 1872
The Indian Contract Act, 1872 has nowhere explained any such concept of Doctrine of Frustration. However, Section 56 of the Indian Contract Act has preserved the Doctrine of Frustration. As per the Section, an agreement that is impossible to perform is itself void. In addition to that, it mentions that when a contract to perform an act becomes impossible or for some reason of some event, which neither the promisor nor the promisee can prevent, it becomes unlawful, and the entire contract becomes void. Section 56 is also based on the maxim “les non cogit ad impossibilia” which simply portrays that the law will not force or compel a man to do what he cannot possibly perform humanely.
In the case of Syed Khursheed Ali v. the State of Orissa, the honorable Court contended that the doctrine of frustration u/s 56 of the Indian Contract Act, 1872 is captivated in the event of succeeding unforeseen events for which, neither of the parties is accountable.
Essentials for Frustration of Contract
- 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.
- 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.
- 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.
Usual reasons for Frustration of Contract
There can be numerous unforeseen reasons for a contract to be impossible to perform but there are a few general and usual reasons for the same as well. They are as follows:
Death or incompetence of a party
When one party to the contract has died just after entering into the contract or when the party is simply incompetent and incapable of performing the contract, such a circumstance will lead to the void of the contract. (Read Robinson v. Davinson)
Frustration on account of Legislation
Where a law propagated after the contract is made, also makes the contract impossible to perform and hence makes the agreement null and void. (Read Rozan Mian v. Tahera Begum)
Frustration for change of Circumstances
This specific situation deals with the cases where there was no physical impossibility to perform the contract, but due to the change of circumstances, the primary objective for which the contract was entered has been defeated.
Initial Impossibility and Subsequent Impossibility
Initial Impossibility holds the object of making the contract where the parties to the contract would perform their respective promises and in cases where the contract is impossible to perform the parties would never enter into it in the first place. Initial Impossibility throws light on those cases where the contract was impossible to perform from the very beginning of the formation of the contract.
On the other hand, subsequent impossibility deals with the situations and cases where the contract was possible to perform at first when the contract was formed but due to some events, the performance became unlawful or impossible to act upon hence discharging or terminating the parties from performing it.
In a nutshell, the doctrine of frustration does not apply to those cases where the performance was impossible right from the formation of the contract as it is not even a contract but an agreement keeping it void ab initio for it being impossible to be performed in nature. The Doctrine of Frustration is applicable only in cases of subsequent impossibility. In addition to that, the doctrine of frustration will also not be applicable to cases where there was a simple delay in performance but the contract and the promise can still be performed.
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.
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