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Doctrine of Impossibility

A contract is an agreement to be fulfilled by the parties to the contract and a contract to be valid must be capable of being performed. But sometimes the performance of a contract is or becomes impossible due to its own nature or due to some circumstances which are beyond the control of the parties (ultra vires) which renders the performance of contract impossible and the purpose of the contract ceases to subsist.

Like most of the laws in India, Indian Contract Act 1872 is also influenced by English laws, as, Section-56 (i.e.) an agreement to do an impossible act.

This section talks about two Impossibilities (i.e.) Initial Impossibility and ‘Subsequent Impossibility.’ ‘Initial impossibility’ implies that the impossibility exists at the time of the formation of the contract which may be known or unknown to the parties. If it is known to the party then the agreement is void ab initio. For example, discovering treasure through magic.

In case of Subsequent Impossibility the performance of the contract is possible at the time of the agreement, but subsequently the performance becomes impossible or unlawful due to some events which are beyond the control of the parties. For example, A agrees to sell his land to B. Later on the land was acquired by government. The contract becomes void on the ground of impossibility.

Evolution of the Doctrine of Impossibility or Frustration?
The origin of this doctrine is Rome as its application was seen in the ‘Roman Contract Law’ where the parties were discharged from the contract because the purpose of the contract has become impossible.

The origin of ‘Doctrine of Impossibility’ is closely related to the English Rule: Subsequent Impossibility of performance cannot be a valid defence in cases of breach of an obligation under the contract. This rule was laid down in Paradine vs. Jane 82 Eng.Rep. 897(1647). So, before we dwell into the rationale of a judgment let’s have a look on the facts of the case: Paradine (Plaintiff) sued Jane (Defendant) under a lease for three years for unpaid rent. Defendant pleaded that due to invasion by the German Prince; he was forced out of possession and therefore he was unable to take the benefits. So, he refused to pay Plaintiff rent for the duration he was forced out.

However, the court gave judgment in favour of the Plaintiff and the defence was not held valid; as obligation under the contract was absolute with no exceptions. The judge held that liability under the contract should be followed under all circumstances.

This Doctrine of Impossibility was evolved as a reflection of the aforementioned case. There were cases where the contract couldn’t be performed due to circumstances through no fault of the defendant, and the rigidity of the English rule was found to be unreasonable, unfair, therefore an exception to the rule was need of the time.

Salient Features of the Doctrine of Impossibility

  1. There must be a valid and existing contract between the parties;
  2. There must be some part of the contract yet to be performed;
  3. That part of the contract, which is yet to be performed, should become impossible or unlawful; and
  4. That the impossibility should be by reasons of some event which the promisor could not prevent.

Causes of Subsequent Impossibility or frustration

  1. Destruction of subject-matter of contract:
    If the subject matter of a contract is destroyed after the formation of the contract without any fault of the parties, the contract is discharged and no party is liable. Case: Taylor vs. Caldwell, (1863, 3 B & S 826)
     
  2. Death or personal incapacity of the party:
    When the performance of a contract is based on the personal skill, ability or qualification of a party, then such contract becomes discharged on the death, incapacity or illness of that party. A contract for personal service cannot be performed by an agent or a legal representative.
     
  3. Non-occurrence of contemplated event:
    A contract becomes void on the ground of frustration if the expected event which is the foundation of the contract, is cancelled.
    Case: Krell vs. Henry (2 K.B. 740, 1903)
     
  4. Government, Administrative or Legislative intervention:
    Sometimes, a contract is lawful at the time of its making. However, it may become unlawful due to a subsequent change in law or government policy. Contract is discharged by impossibility of performance.
     
  5. Intervention of War:
    If a war is declared after the formation of a contract; all pending contracts with the residents of enemy country is either suspended or declared as void. If war is of a short duration, it may be revived after the end of the war. However, if the war continues for a long period, contract will be discharged on the ground of impossibility.

Cases in which there is no Supervening Impossibility

  1. The mere fact that performance is more difficult or expensive than the parties expected does not frustrates the contract.
  2. Performance cannot be excused on the ground of commercial impossibility. A contract, therefore, is not discharged for frustration merely because expectation of higher profit is not realized; or the necessary raw material is available at very high price.
  3. Strikes, lockouts and civil disturbance like riots do not terminate contracts unless there is clause in the contract providing for or performance in such cases.

Effects of Supervening Impossibility:

  1. Contract becomes void.
  2. Restoration or refund of benefit received.
  3. Innocent promisee entitled to compensation.

Landmark Judgments
English Case Laws
  1. Krell vs. Henry (2 K.B. 740, 1903)

    Facts: Paul Krell (Plaintiff) and C.S. Henry (Defendant) entered into a contract to rent a flat to defendant to watch the coronation of the King. Defendant was incited to contract by an announcement through the window of Plaintiff’s flat renting windows to view the coronation. But the contract did not have any explicit reference to the coronation. Since the King became ill, the coronation never took place, therefore, defendant refused payment. Plaintiff sued for the existing amount which is due under the contract. Defendant denied liability, and instead claimed for the 25 pounds previously paid on the ground that the coronation did not take place, and, hence there was a total failure of consideration for the contract entered into. The lower court established, there was an implicit condition in the contract that the coronation should take place and found that Defendant’s counterclaim was valid. Plaintiff appealed.

    Held: Defendant’s purpose of entering into the contract was to watch the coronation of the King. This purpose was recognized by both of the parties and considered as the foundation of the contract.

    Parol evidence is acceptable to show that the subject of the contract, which was flats to view the coronation of the King, was known by both of the parties, in order to decide whether the object of the contract was frustrated by the non-occurrence of the coronation. Therefore, the court excused Defendant from performing, under the contract and Plaintiff’s claim is dismissed.
     
  2. Taylor vs. Caldwell, 1863, 3 B & 826

    Facts: Taylor (Plaintiff) and Caldwell (Defendant) entered into a contract, in which, defendant agreed to grant the plaintiff use The Surrey Gardens and Music Hall on four certain days. But before the conclusion of first contract, the concert hall was destroyed by fire. The destruction was without fault of either party and was so huge that the concerts could not be held.

    Held: The Defendant was discharged from performing because it was found that his failure to perform was not a breach of the contract as the destruction of concert hall by fire was not foreseeable by the Defendant. Therefore, the destruction of the hall without fault at the part of any of the party excuses both parties from performing the contract.

Indian Case Laws
  1. Satyabrata Ghose v Mugneeram Bangur and Company & Anr., AIR 1954 SC 44

    Facts: The defendant company launched a scheme to develop the land into a housing colony. The plaintiff was granted a plot on payment of advance money. The company committed to constructing the roads thereby making it suitable for residential purposes. The purchaser was to pay the remaining amount to complete the conveyance. Meanwhile, a large area of the land was taken over by the State during the Second World War for war purposes. The company attempted to revoke the contract on the ground of subsequent impossibility.

    Held: The court dismissed the defendant’s suit. The requisition orders were temporary in nature and no deadline was mentioned in contract for construction. However, it was obvious for some restrictions to be in effect during the war, thereby causing delay in the project. Therefore, this delay doesn’t affect foundation of the contract.
  2. Sushila Devi vs. Hari Singh, AIR 1971 SC 1756

    In this case it was observed that the impossibility viewed by section 56 of the Contract Act is not limited to something which is not humanely possible. This was a case of lease of property, which after the unfortunate partition, the property in dispute, situated in Gujranwala, and went onto the side of Pakistan, therefore making the terms of the agreement impossible.

Force Majeure, COVID-19 and the Doctrine of Impossibility

The term ‘force majeure’ means an unavoidable accident or a chance occurrence. This clause is included in a contract to avoid uncertainties when any supervening event occurs and parties cannot be blamed. However, even if, this clause provides certainty to the contract it is not guaranteed that it will cover all supervening events. Due to COVID-19 pandemic accompanied by social distancing, quarantines, mass closings of business, etc., have hampered many pre-pandemic contractual obligations difficult or impossible to perform. In such a situation force majeure clause may excuse certain type of contractual performance and might mitigate some economic losses.

However, if force majeure clause fails to provide the desired relief then in such a situation, businesses may be forced to rely on the barely used legal doctrine of impossibility as defense against difficult pre-crisis contractual obligations. This may be applied where contract signed ceases to exist due to unforeseeable supervening event without the fault of either party.

Critical Analysis
An agreement enforceable by law is known as ‘contract’. Contract functions as a means of social benefit which can be either subjective or objective. Contract also regulates the transfer of risk which is inherent in any contractual relationship. However, doctrine of impossibility comes into the picture where one party fails to perform his contractual obligation as a result of any subsequent event or if one of the parties knows that contract entered into is void ab initio which renders it impossible.

If the foundation of the contract is frustrated due to the subsequent events such as destruction of subject matter, death or incapacity, change in legislation or intervention of war then it will work as a good defense as against the plaintiff. For example, if we look into the case of Krell vs. Henry as mentioned above there the court clearly excused the defendant from performing the contract as the foundation of the contract became impossible whereas if we see the Indian case of Satyabrata vs. Mugneeram there the court dismissed the defendant’s suit on the ground that delay in construction doesn’t affect the foundation of the contract. These two cases show that a contract becomes impossible to perform only when the foundation of the contract become impossible. However, this doctrine may be regarded as the most socially utilitarian solution.

Conclusion
The Doctrine of Frustration came into being to deal with certain circumstances, where the contract is frustrated without the fault of the either party. The law is dynamic and builds according to the wants of the society. May be, to an extent doctrine of impossibility brings clarity on the conflicting situations: the supremacy of contract which supports the principle of absolute liability and the principle of impossibility that a contract is discharged when the purpose of the contract has been destroyed by the change of circumstances. Written By: Bhagyashikha Saptarshi

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