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Doctrine of Frustration Under Indian Contract Act
The general rule of contracts provides that the parties to a contract must fulfill their contractual obligations, and in the event of a breach, the party breaching the contract must compensate the other for the damages caused. The frustration doctrine is an exception to this norm.
What does Doctrine of Frustration Exactly Describe?
The doctrine of frustration, incorporated in Section 56 of the Indian Contract Act of 1872, provides a way out for the parties where performance has become impossible owing to any supervening event that is not their fault. The doctrine's application puts the contract's sanctity at risk in certain altered circumstances. English courts established various theories to justify the doctrine's application under certain circumstances.
However, Indian law, by codifying this concept in Section 56, eliminated the need for evolving and applying theories to justify the doctrine's application. Although the Indian legislature's vision is broad, it also included instances of initial impossibility in the preview of this doctrine.
So, in other words, the doctrine of frustration essentially concerns the impossibility of contract performance. It means that a contract cannot be carried out due to an incident beyond the parties' control. The performance of such a contract becomes frustrated, that is, complicated, impossible, or even illegal. Contracts can be cancelled due to unforeseen, impossible events or events beyond the parties' control.
Application of the Doctrine of Frustration
So far, the doctrine of frustration is only applicable in two cases.
If the contract's object has become impossible to perform
Outside the control of the promisor, an event has occurred that makes contract performance impossible.
Essential of Doctrine of Frustration
This is a null and void contract between the parties.
A part of the contract has yet to be performed.
That part became unlawful.
No one can prevent that impossibility.
Grounds of Impossibility
Major effects are −
Change of law
A contract will be null and void if circumstances arise that make performance of the contract impossible in the manner and time specified.
Destruction of subject matter
If the actual and specific subject matter of the contract has ceased to exist, the theory of impossibility applies with full force. A promise to let a music hall be destroyed was held to have been frustrated by the hall's destruction.
Non-occurrence of specific events
Sometimes the performance of a contract is entirely possible, but the value of the performance is destroyed due to the non-occurrence of a specific event contemplated by both parties.
Death of a promisor
A party contract is excused from performance if it depends on the existence of a given person and that person perishes or ceases to be willing to perform. Hence, if the nature or term of a contract requires the promisor to perform physically, his death or incapacity ends the contract.
Declaration of war
The inclusion of a declaration of war or warlike condition in the performance of a contract has often created difficult questions. With the Anglo-French war with Egypt, the supercase ended.
Effect of the Doctrine of Frustration
The contract is frustrated automatically − The general rule is that the occurrence of the frustrating event instantly ends the contract. The parties are not required to rescind the contract since the parties' obligations cease immediately once the contract is frustrated.
Further obligations are discharged − When the contract is said to be frustrated, both parties are released from any obligations.
Accrued obligations − The legal rights or obligations that existed before the frustrating event are undisturbed.
Consequences of Frustration of a Contract
When a contract is frustrated, all future obligations are automatically discharged, but obligations that were due to be performed before the contract's frustration remain. This means that expenses incurred or costs paid up to the point of frustration cannot be recovered, and payments due at that point are likely to stay due. As a result, a party may have paid for goods or services that it will not get, or it may have received goods or services for which it is not bound to pay. Several states, but not Queensland, have legislation in place to ameliorate such consequences.
Exceptions to Doctrine of Frustration
This doctrine would be invalid in the following circumstances −
In the case of self-induced frustration, A contract that has a provision in which the parties agree that the contract will still be effective despite such intervening circumstances
Govindbhai Govardhanbhai Patel vs. Gulam Abbas Mulla Allibhai, AIR 1954 SC 44, wherein the court opined on the term "impossible of performance" as mentioned in Section 56 and stated that the parties may be significantly relieved if the contract becomes impossible to perform or impracticable due to some reason beyond the parties' control.
The Hon'ble Supreme Court ruled in Ganga Saran vs. Firm Ram Charan Ram Gopal, AIR 1952 SC 9, that for the application of Section 56, Indian courts must look at the second part of Sections 32 and 56.
The second section of Section 32 deals with the contract being discharged by its own internal forces—that is, if such an impossibility was contemplated at the time of contracting. Section 32 would thus regulate such contract dissolution.
Section 56, on the other hand, deals with contracts that are discharged due to an external force, an outside impact, or a supervening impossibility—that is, an impossibility that was never in the parties' contemplation at the time of entering into the contract. Such contracts are said to be governed by Section 56.
When an unforeseeable event occurs that makes contract performance impossible, the doctrine of frustration comes into play. Contract frustration makes the contract void and releases the parties from all liability. This doctrine is an exception to the general principles of contract law under which compensation for breach of contract is usually given.
But so far, when the doctrine of frustration is applied, there is no fault on the part of the parties, and so the party should not be forced to compensate in such an event.
Frequently Asked Questions (FAQs)
Q1. What is doctrine of frustration in Section 56?
Ans. Section 56 is based on the maxim "les non cogit ad impossibilia," which states that the law will not compel a man to do what he cannot possibly perform.
Q2. What is doctrine of frustration in sections 32 and 56?
Ans. Section 32 deals with a contingent contract whose survival is contingent on the fulfillment of a condition. A contingent contract will dissolve if the condition is not met, but section 56 is enforced when a contract becomes impossible to fulfill because of an outside force.
Q3. What is the difference between force majeure and the doctrine of frustration?
Ans. If contract performance becomes impossible, the doctrine of frustration leads to contract termination, but force majeure provisions can either postpone or prolong the time for fulfilling contractual obligations.
Q4. What is the difference between a contingent contract and the doctrine of frustration?
Ans. Contingent contracts are contracts that become enforceable only if a certain event happens. Frustrated contracts, on the other hand, are those that become null and void due to the impossibility of performing the obligations.
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