Do you want to know about the Doctrine of Frustration Under Section 56 of the Indian Contract Act 1872? If you want to know about it, you come to the right site and read the right article because here you are able to read about it and this information is according to Enter Slice website (the article written by Ashish M. Shaji) and iPleaders website (the article written by Vanshika Sharma and Shantanu Dhingra).
Doctrine of Frustration
Here is the explanation about what the Doctrine of Frustration is according to Enter Slice. The general rule of contracts states that the parties to a contract need to fulfill their obligations under the contract and if there is a breach, the party who breaches the contract must compensate the other for the damages caused. The doctrine of frustration is an exception towards this regulation.
Basically, the doctrine of frustration talks about the impossibility of performance of the contract. What does it mean? The meaning is that a contract is not able to be executed due to an incident out of the control of parties. This kind of contract is frustrated. It becomes complicated, impossible and illegal. It can happen because of any unforeseen, impossible events and events which are out of control of the parties.
The Indian Contract Act, 1872 does not interpret the term ‘frustration of contract’. But, it is important for you to know that this doctrine of frustration is immortalized under section 56 of the Act.
As explained in section 56, an agreement to do an impossible act is in itself void. Then, it is also explained that when a contract to do an act becomes impossible, or, by reason of some event which the promisor is not able to prevent, it will be unlawful, the entire contract is void when the act is impossible or unlawful.
The Conditions Needed to Prove Frustration of Contract
As explained on the Enter Slice site, if the following conditions are fulfilled, the frustration of the contract is able to be proved.
- There is a valid contract.
- There is a contract which is not done yet.
- The performance of the contract has been impossible.
- The impossibility has happened because there is an event which is uncontrollable by both the parties.
Grounds for Doctrine of Frustration
What are the grounds for the doctrine of frustration? According to the Enter Slice site, here is the grounds for the frustration of a contract.
- There is an impossibility of performance.
The doctrine of frustration comes from the impossibility to complete an activity. However, the principle is not able to be limited to physical impossibilities. In Satyabrata Ghose vs. Mugneeram Bangurn & Co & Anr., the word ‘impossible’ has not been utilized in section 56 of the Contract Act in the sense of physical or literal impossibility. It is not important that the performance of an act be impossible literally. However, it may be unpredictable and if an event totally changes the very foundation of the contract, it is able to be said that the promisor finds it impossible to do the act which he promised to do. So, when we say the object of a contract is lost, the contract is said to be frustrated.
- There is destruction of subject matter.
If there is the destruction of the subject matter of the contract, the doctrine of frustration is implemented. In the landmark judgement of Taylor vs. Caldwell, it was explained. Taylor had got into an agreement to perform at an event. However, on the day of the event, the hall where the event was held burned down. As you know that the burning of the hall depicts the impossibility to do the contract. It shows that the destruction of the subject matter of the contract will make the contract frustrated automatically.
- There is a death or inability of a party.
Let’s say that the contract demands the personal performance of the parties. So, the deaths or incapacity of the party will cause the contract void. The reason is because the contract is not able to be done anymore.
- There is frustration by legal or government intervention.
If a law is promulgated after a shape of a contract, making the performance impossible then the contract will be cancelled.
- There is frustration of contract because of the change of circumstances.
This condition happens when there is no physical impossibility of performance of the contract. However, because of change in circumstances, the primary reason for which the contract was shaped is defeated. The circumstances which changed dissolve the contract and the parties are absolved from the performance of the contract.
- There is the intervention of war.
The performance of a contract is difficult if there is the intervention of war. So, it can make the contract void.
The Effect of the Doctrine of Frustration
What are the effects of the doctrine of frustration? You may want to know about it. According to the Enter Slice website, here are the effects of the doctrine of frustration.
- The contract will be cancelled automatically. There is the general rule that the occurrence of the frustrating event will end the contract automatically. In this situation, the parties do not need to cancel the contract because the obligations of the parties are terminated immediately after the contract is frustrated.
- Further obligations are discharged. It is important for you to know that both parties are discharged from any obligations. It happens after the contract is said to be frustrated.
- Obligations are accrued. The legal rights or obligations which were already accrued before the frustrating event happened are left undisturbed.
The Difference Between Initial and Subsequent Impossibility
According to the iPleaders site, here is the difference between initial and subsequent impossibility.
The purpose of any contract is for the parties to fulfil their promises. Let’s say that the contract is impossible to do, the parties will never get into it. Initial impossibility refers to conditions where the contract was impossible to fulfill from the beginning.
In the second paragraph of section 56, the effects of the subsequent impossibilities on the performance of the contract are mentioned. If a contract is made between the parties, often it is possible to carry it out, but there is something which comes afterwards and it makes it hard or illegal to carry out the task. So, the contract is void. This case is a subsequent impossibility.