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Impossibility Of Performance And Frustration Of Contract

This article deals with the Impossibility of performance and frustration of Contract. Section 56 of the Indian Contract Act, 1872 talks about the impossibility of the performance of the contract. The provisions contained in Section 56 are closely related to the English doctrine of frustration of contract. It includes both the initial and subsequent impossibility, Indian law of contract impossibility performance is wider than the English doctrine of frustration. The doctrine of frustration, on the other hand, applies when the contract's fulfilment is initially achievable but is frustrated by an extraordinary incident.

Define Frustration:

An agreement to execute an impossible act is invalid, reads section 56 of the Indian contract legislation. A contract to undertake an act that becomes impossible or unlawful after the contract is made because of an occurrence that the promisor could not prevent becomes void when the conduct becomes impossible or unlawful, according to subsection (2).

The term frustration denotes the occurrence of an unanticipated incident or change in circumstances that is so fundamental that it is viewed by law as striking at the heart of the contract and going beyond what the parties anticipated when they signed it. The provision goes on to explain that if it was feasible to execute the contract at the time it was made, but it becomes impossible to do so owing to an unanticipated incident, the contract would be regarded frustrated as well.

Impossibility of performance:

Impossibility of performance is a legal concept that allows one party to be released from a contract if unforeseen circumstances prevent the contract's performance.

There are two sorts of performance impossibilities:

  • Initial Impossibility:

    The objective of every contract is for the parties to fulfil their obligations, and if the parties will never enter into the contract because it is impossible to fulfil. In simple words, we can say that Initial impossibility deals with the cases where the contract was impossible to perform from the beginning only.

    For example; If a married man promises to marry again although he is unable to do so, he is required to compensate the other party.
     
  • Subsequent Impossibility:

    Subsequent impossibility is those contracts that deal with the cases where the contract was possible to perform when entered the contract, but due to some event, the performance became impossible or unlawful.
For example, If A buys tickets from B to watch a cricket match and pays half the price in advance. If the match is cancelled, A will be unable to reclaim from B because the termination was beyond A's control.

Examples of Impossibility of Performance

  1. One of the parties has been injured and is unable to perform the contract.
  2. Property that has been stolen or destroyed.
  3. Climate conditions
  4. Natural calamity
  5. The government enacts legislation making the act unlawful.

Frustration Doctrine Under the Indian Contract Act:

The Indian Contract Act, 1872, does not particularly define frustration of contract. Still, the doctrine is imaged in Section 56 of the Act, which states that an agreement to attempt an act that is impossible in and of itself is void. Further, a contract to try and do an act which, becomes insolvable, or, because of some event which the pledge could not help, unlawful, becomes void when the act becomes insolvable or unlawful.

As a result, irritation arises from the fact that the closure of an outside contract or comparable conduct renders contract completion impossible. After the parties have signed a contract, events beyond their control may occur. may do which frustrate the end of their agreement, or render it truly delicate or impossible, or indeed, illegal, to perform.

Specific Grounds for Frustration:

  1. Death or Incapacity of party:

    A party to a contract may be excused from performance if performance depends on the existence of that person or if the party becomes so ill that they'll be unable to perform their obligations. Thus, where a contract requires particular performance by the pledge, or incapability will put an end to the contract. In the case of Robinson v. Davison[1] , the plaintiff and thus the defendant's wife entered into a contract whereby the defendant's wife committed to play piano at the plaintiff's concert on a specific date. But because of unforeseen illness, she was unfit to perform at the musicale and this was informed to the complainants on the morning of the date of performance.

    This caused the musicale to be held up and caused losses to the complainant. The plaintiffs filed for breach of contract. The court quashed their claim and said that the contract was frustrated as she came ill without there being any mistake or negligence on her part. the character of the contract was such the terms required personal performance and incapacity by the means of illness put the contract to an end.
     
  2. Government, Legislative & Administrative Interventions:

    A contract after formation will be held frustrated if, Performance was feasible or legal at the time of entry, but after entering because of some Legislative or executive intervention the contract has come insolvable or unlawful. In various cases, the court has repeated over and over that when an owner of land ceases to be the owner anymore because of some policy of the govt. The contract of sale of a chunk of land now owned by the govt is frustrated thanks to the impossibility of performance.

    Similarly, within the case of Man Singh v. Khazan Singh[2], where certain parties agreed to trade of tress of a particular timber and also the government of Rajasthan passed an order which proscribed the slice of the tree in the tree. The contract was held frustrated because it became unlawful behind getting in a contract as a result of governmental order.
     
  3. Non-occurrence of Contemplated Event:

    Sometimes the performance of a contract is entirely possible but thanks to the non-occurrence of the event which forms the guts of the contract become frustrated. In Krell v Henry[3], an area was hired specifically to look at the king's coronation procession was held up, but the deal was not honoured. because the coronation was postponed. to urge such a result, one should show that the non-occurrence of the event was of such a nature that it forms the centre of the contract and non-occurrence uproots the very foundation of the contract.
     
  4. Change of Circumstance:

    Law has got to adapt itself to economic changes. Marginal price escalations are ignored. But when the costs rise out of proportion from what could have reasonably expected by the parties and make the performance so crushing to the contractor on border virtually on impossibility, the law would offer relief to the contractor in terms of price revision. This was recognised within the case of Easun Engineering Co Ltd v. Fertilizers and Chemicals Travancore Ltd[4]. during this case, there was a price hike of 400% of a specific sort of oil thanks to the outbreak of war within the geographical area.

    The plaintiff pleaded that this can be a mere case of business hardship and hence harm should be awarded for breach of performance. The court quashed this argument and said that the value escalated out of all proportions making things impossible for the respondents to produce the oil. Commercial Hardship is about not allowing a celebration to avoid the contract for lack of profitability. But an escalation of 400% within the prices makes the performance of the contract insolvable and hence the court held the contract frustrated. during this case had there been a mere marginal rise within the price's frustration couldn't be availed.

Case laws:
In the case of Satyabrata Ghose vs Mugneeram Bangur[5], In Calcutta, the Respondent's company held a big plot of property. It began a plan for the development of property for residential uses, dividing the area into various portions. For the sale of the various plots, the corporation entered into agreements with buyers and took a small sum of earnest money at the time of sale. The organisation was tasked with building roads and drainage that were required for residential use. The plots will be given out after the construction is completed and the buyers have paid the remaining balance.

On August 5, 1941, Bejoy Krishna Roy signed a contract with the company and paid Rs. 101 earnest money deposit. The appellant was appointed as the nominee for the above-mentioned territory on November 30, 1941. The land was subsequently requisitioned for military reasons by the Collector, 24 - Parganas, under Defence of India guidelines. As a result, the company chose to regard the agreement as terminated in November 1943 but provided the appellant with the option of returning the earnest money or paying the rest, with the company continuing to work after the war ended.

The Supreme Court ruled that the English concepts of Frustration of Contract on which the High Court's decision was based do not apply to the statutory provisions of the Indian Contract Act. It further stated that the contract's performance has not become impossible. The enterprise had not begun work when the land was requisitioned, so there was no interruption of activity, according to the Court. Second, there was no implicit time limit in the contract for the completion of the road and drain construction.

In another landmark case of the Sushila Devi vs Hari Singh[6], It was pointed out that the definition of impossible in section 56 of the Contract Act is not limited to what is not humanely possible. This was a case of a property lease in which, due to the unfortunate partition, the property in dispute, located in Gujranwala, was transferred to Pakistan's side, rendering the provisions of the agreement null and void.

Conclusion:
The doctrine of frustration, codified in Section 56 of the Indian Contract Act, 1872, gives parties a way out when performance is rendered impossible due to a supervening event that is not their fault. The doctrine's application calls into question the contract's righteousness in specific new circumstance.

English courts developed several theories to justify the doctrine's application in specific circumstances, however, Indian law has codified the doctrine in Section 56, eliminating the need to develop and apply theories to justify the doctrine's use. The Indian legislature's view is broad, which is why it included cases of initial impossibility in the foreshadowing of this theory. The provisions of Section 56 give a comprehensive list of the legal consequences of contract fulfilment.

End-Notes:
  1. https://www.gibsonsheat.com/Articles/Corporate++Commercial/Frustrated+Contracts.html
  2. https://indiankanoon.org/doc/1086927/
  3. https://www.lawteacher.net/cases/krell-v-henry.php
  4. https://indiankanoon.org/doc/63931/
  5. 1954 AIR 44
  6. AIR 1971 SC 1756

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