Doctrine of Frustration of Contract

Doctrine of Frustration of Contract

A situation in which one party in a contract fails to break or refuses to fulfil the terms and conditions of the valid contract is called the breach of contract. But the frustration of a contract is different from the breach of contract

Under the doctrine of frustration of contract, the purpose of the contract becomes impossible to do. It can be possible that the object or consideration of the valid contract become unattainable. 

The frustration of contract Indian contract act cannot be done due to the act of parties in the contract.

Les non cogit ad impossibilia

The law cannot compel a person to do which he can’t do

Any agreement that has fulfilled the essential elements of a valid contract is known as a contract. There are various types of contracts given under contract law. These contacts can be oral or written contracts. But in a situation where either the object, consideration or any other things mentioned under the contract becomes impossible without the mistake done by either of the parties is known as the frustration of the contract.

There can be two situations that can make your contract void:

  • A contract that is impossible from the very beginning
  • A contract that becomes impossible subsequently

Any contract between two parties that was possible at the time of contract but become impossible subsequently is called frustration of contract. 

Any impossible situation which has occurred due to the act or omission of the parties doesn’t come under the doctrine of frustration.  

Let’s take an example of the frustration of a contract. Amit makes a contract of sale with Sumit that he will purchase his goods in rupees of 5000 which are coming in the ship. Sumit accepted the proposal. But the ship sinks in the water and all the goods are drawn into the water. Now Sumit cannot fulfil his promise due to the accident that occurred with his goods. It is not the fault of Sumit. It is an example of the doctrine of frustration. 

The doctrine of frustration under the Indian contract Act

There is no definition of frustration of contract as given under the Indian Contract Act 1872. However, section 56 of the Indian Contract Act says that if the obligations given to the party becomes impossible, the contract will become void and it is known as the doctrine of frustration.

It is a basic rule of the valid contract that both the parties have to fulfil their promises made to each other. But when a situation arises that the promises made by the party become impossible, it will be considered that the contract has been frustrated. 

The frustration of the contract talks about the impossibility of the contract. It is a situation where the party cannot do anything to fulfil the promise made by him. 

Restitution under frustration

Section 56 of the Indian contract act 1872 deals with the restitution under frustration or agreement which has become impossible. 

But if there is a situation that one party has given something in advance to the opposite party and now the contract has been frustrated, the party who has taken the advance here’s to return that advance to the party.

Taylor versus Caldwell (1863)

It was the first case of the doctrine of frustration in which the apex court has given a landmark judgment. In this case, the plaintiff has taken a music hall on rent from the defendant. But before the day of the music performance, the music hall burnt out. The singer filed the case in the court and the judges said that there was no act or omission done by either of the parties which made the contract impossible. The court applied the doctrine of frustration and asked the music hall owner to give back the advance money.

Reasons for the frustration of contract

There can be many reasons for the frustration of the contract. These reasons can be following:

Destruction of subject matter

If the subject matter of the contract has become impossible, it will become the frustrating contract

For example, A offers B to purchase his horse for the race. B accepted his offer. But the horse dies before the race. The subject matter of the contact was a horse who had died. 

Supervening illegality

If any situation arises which makes the contract illegal, it will become a frustrated contract.

For example

Two persons from different countries made contact with each other, but before the performance of the contract, the countries started the war against each other. 

Death or incapacity of a party

You must be aware of the fact that the parties must have the capacity to contract. But if either of the party dies or has become incapable of contact, the contract will become void. 

There is a famous case of Robinson vs Davison in 1872. The plaintiff hired the defendant who was a piano expert for her performance in the show. But on the day of her performance, she was ill. The court held that it is a contract of frustration because she was not aware that she would become ill. 

Non-occurrence of the event

If the contract between two parties based on an event at that event becomes impossible to do, then the contract will become void. 

Krell Vs Henry 1903

The facts of the case are that the defendant took a house on rent on the roadside because the coronation of a new king was on that road. But before the day of the coronation, the king became ill. The court applied the doctrine of frustration and held in this case that it was not the mistake of the defendant that the event had become impossible. 

Change of circumstances

If there are any changes in the circumstances which made the contract void it also comes under the doctrine of frustration. The Supreme Court of India held in a judgment that the change of circumstances will depend upon case to case.

It should be kept in mind that the party must not be at fault for making the contract frustrated. 

For example

Aman makes a contract with Rakesh that he will take his car on rent. Rakesh agrees to this. But before one day of the performance, Rakesh’s wife got in an accident and he took her to the hospital. 

Frustration by legislation

The contract can be frustrated due to the law. If a situation arises that the legislation has passed the new laws in which the objective of your contract has become void, it will also lead to the frustration of the contract. 

For example

You have made a contract with your friend that you will buy his 50-year-old bike for 5000 rupees next month. But the legislation passed after one week that the person cannot buy or sell a vehicle that is older than ten years. 

Conditions required to prove frustration of contract

There are the following conditions which should be there if you are going to prove the frustration of the contract:

A valid contract

The contract between two or more parties must be valid. A contract in which the party didn’t give their free consent, unlawful consideration, etc. cannot be considered a valid contract. 

The contract must fulfil the essential elements of a valid contract.

The contract is not performed

The promise made by the parties should not be fully performed yet. There must be some part of the contract which is still pending. 

Impossibility of contract

After the making of a valid contract, the contract should become impossible during the time of the performance of the contract. In simple words, the performance of the contract must be impossible.

Event uncontrollable by parties

Any event or situation which has made the contract impossible should not be controllable by either of the parties. If any of the parties can control that event which is making the contract impossible, the contract will not come under the doctrine of frustration. 

Consequences of the doctrine of frustration

Once the contract has been frustrated the following consequences will happen:

The contract will become void

The frustration of the contract makes the contract void automatically. There is no need for either party to resign from the contract. 

End of rights

The rights given to both parties in a contract that has become frustrated will end.

Discharge from obligation

There will be no obligation remaining from the side of either party.

Duty to repay the advance

If any of the parties have taken the advance from the second party, that money should be repaid.

Difference between the breach of contract and frustration of contract

Breach of contract vs frustration of contract

S NoBreach of contractFrustration of contract
1Breach of contract is an outcome of an act or omission done by either of the parties.The doctrine of frustration applies in a situation where the situation becomes impossible without any act or omission done by either of the parties.
2The party at the fault is liable to pay the compensation.There are no liabilities of the parties.  
3There are remedies for breach of contractThere is no remedy for it.
4The parties can mutually decide to perform the contract.Even mutually, the parties are unable to perform the contract obligations.
5The contract becomes voidable contract at the option of one partyThe contract becomes void.
6The plaintiff can file litigation in court. If the situation is clear that the other party cannot perform his part, then there is no need to go to Court.

Conclusion

The doctrine of frustration comes into existence when any circumstances happen which make the performance of the contract impossible. It is the situation that makes the contract void and discharges the parties from their liability towards each other. 

It is an exception for the breach of contract because the parties do not have to pay the compensation to another party if the performance of the contract has become impossible. 


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