In our day-to-day life, we enter into contracts with one another in one way or the other. Sometimes, it is on the spot, and sometimes, we promise to do it in the future. We all know that the future is uncertain. This uncertainty in the contract sometimes leads to the impossibility of the performance of the promise. And thus, it can bring some loss or damage to either of the parties.
The word impossibility means that the performance of the promises of either party becomes difficult to perform or impossible.
Let us discuss more about this impossibility, which is provided in section 56 para 2 of the Indian Contract Act, 1872 as Doctrine of Frustration, which is also known as Doctrine of Impossibility.
Initial Impossibility, Subsequent Impossibility and Doctrine of Implied Term
Before discussing the Doctrine of Frustration, one must understand the concept of initial impossibility, subsequent impossibility, and the Doctrine of Implied Term. These are considered fundamental in understanding the origin and evolution of the Doctrine of Frustration.
Para 1: Agreement to Do Impossible Act
It provides that if there is an agreement to do an act that is impossible on the face, it is void. This is also known as Initial Impossibility.
Example: An agreement to discover treasure by magic is impossible in itself. Thus, it is void.
Para 2: Contract to Do Act Afterwards Becoming Impossible or Unlawful
It says that when two (for instance) parties enter into a contract to do an act, but if later, the performance of such contract becomes impossible, unlawful, or if some event arises which cannot be prevented by the promisor, then the contract becomes void due to impossibility or unlawfulness. This is also known as Subsequent Impossibility, i.e., an impossibility that arose later.
Example: James and Rosy contract to marry each other. But before the date of marriage, James died. Thus, here, the contract becomes void.
Note: Before the Doctrine of Frustration, there was the Doctrine of Implied Term, which came through Taylor vs Caldwell. But later, through the Indian case, Satyabrata Ghose vs Mugneeram Bangur & Co., the Doctrine of Frustration was propounded.
The Doctrine of Implied Term
According to the Doctrine of Implied Term, no express confirmation is required. It is a contract created by actions, behaviour, or circumstance that speaks for itself. It can also be said as Res ipsa loquitur, which means thing speaks for itself.
Example: X (a singer) contracts with Y to perform in a live concert in the ABC concert hall. Later, the concert hall was destroyed by fire due to a short circuit. Now, it is implied from the present circumstance that the subject- matter is itself destroyed, which makes the performance of the contract impossible. Thus, void.
Taylor vs Caldwell (1863): In this case, the Doctrine of Implied Term was propounded. According to this doctrine, if the subject matter of the contract is destroyed before the performance of the contract and the performance of the contract becomes impossible, then there is an implied term or condition that the parties shall be exempted or excused.
The Doctrine of Frustration: Section 56 Para 2
The Doctrine of Frustration means that the performance of the contract becomes impossible. When any such event or incident arises which makes the performance of the contract impossible, the contract becomes frustrated or impossible. And such contracts cannot be enforced as they are void.
After the contract is frustrated, both parties are discharged from their respective liabilities. And the rights that the parties already acquired before such frustration are left undisturbed. It is also known as the Doctrine of Impossibility.
Leading Case: Satyabrata Ghose vs Mugneeram Bangur & Co. (1954)
Through this case, ‘the Doctrine of Frustration’ was propounded. The Supreme Court observed that the performance of the contract becomes impossible. But afterwards, it can be performed when a suitable possibility or circumstance arises for such performance.
The court also held a Doctrine of Supervening Impossibility. The meaning of this doctrine is much wider. It covers initial impossibility, subsequent impossibility, and also the Doctrine of Frustration.
Essentials of the Doctrine of Frustration
The following are the essentials of the Doctrine of Frustration:
- There must be a valid contract.
- That after the contract is made, its performance becomes impossible.
- That such impossibility arises because of:
- (a) some act which the promisor could not prevent, or
- (b) by the act, which becomes unlawful.
Grounds of Frustration
1. Destruction of subject matter: The Doctrine of Impossibility applies where the actual and specific subject matter of the contract is destroyed. (Taylor vs Caldwell)
2. Changes in circumstances: When such circumstances arise, the performance of the promises of the contract is impossible or difficult in a manner and at the time considered. (Joseph Constantine Steamship Line Ltd. Vs Imperial Smelting Corporation Ltd. 1942: In this case, it was held that if there is a change in circumstances that causes the impossibility of the performance, the contract becomes void.)
3. Non-occurrence of the contemplated event: The event which was contemplated to happen becomes impossible to occur as a ground of frustration.
4. Death or incapacity of party: When the performance of the contract depends upon the existence of a given person, and if such a person dies or becomes incapable, it is a perfect ground for frustration.
5. Government intervention: Changes in policy that lead to the contract as void or illegal.
6. Intervention of War: Such difficult circumstances arise, making its performance impossible.
Cases That Are Not Covered by the Doctrine of Frustration
The following cases are not covered by the Doctrine of Frustration:
- Commercial hardship and difficulties
- Self-induced act
- Act of a third-person
- Executed contract
Hence, it can be said that the Doctrine of Frustration simply means the impossibility of the performance of the contract. The performance of the contract becomes impossible or frustrated. It occurs when such circumstances arise, which makes the performance of the contract impossible.
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