The outbreak of the Covid-19 epidemic in India has proven to be not only a
humanitarian disaster, but also a massive economic disaster. Restrictions on the
movement of people and products, except for those engaged in vital services,
have cast severe doubt on the ability of parties to fulfill their contractual
duties when they are not defined as essential services. Uncertainty about
contract fulfilment has led to parties imagining contract breaches and analyzing
their rights and remedies in response.
The Covid-19 pandemic has unquestionably been a long era of suffering. This loss
has taken on a humanitarian as well as a business and economic dimension. The
restriction of travel, combined with the loss of lives, is the primary
impediment to the fulfilment of economic commitments in the pandemic period.
It is not only harmful to the breaching party's financial and moral well-being,
but it is also dangerous to the party on the opposite side of the contract
Nonetheless, given the ambitious nature of legal professionals and scholars, the
principles of Force Majeure and Frustration of Contracts in the Indian Contract
Act,1872 provide much-needed relief.
In the event of Force Majeure or contract
frustration, unlike solitary and temporary events, COVID-19 is still going on
and is unprecedented in terms of instances that the legal sector has been aware
of in the past. To put it another way, a tsunami or earthquake is an event that
occurs just once in most cases, disrupting legally required operations. However,
the epidemic continues to elicit government-sanctioned limits and general
precautions, which may hinder transportation and full-time work, so breaching
Due to the COVID-19 pandemic, the concept of force majeure has become a
contentious matter. Due to delays in payments, completion of conditions
precedent, or any other requirements agreed upon by the parties to contracts,
the pandemic has resulted in the breaking of many contracts. Due to COVID-19,
contracting parties have been unable to fulfil their contractual commitments,
despite their best efforts, and have attempted to rely on force majeure to
protect their own interests.
The federal government released an office
memorandum on February 19, 2020, stating that supply chain disruptions caused by
COVID-19 should be considered a natural calamity, and force majeure clauses may
be implemented in such cases. Force majeure may be declared in cases where it is
regarded suitable, according to the office memorandum; nevertheless, it does not
apply in all scenarios and will only apply on a conditional basis.
The doctrine of frustration in section 56 of the Indian Evidence Act, 1872 and
the paragraph two of the said section enumerates the law relating to contract
termination due to the impossibility or illegality of the act agreed to be
performed. The phrasing of this paragraph is extremely generic, and even though
the visuals accompanying it aren't particularly cheerful, they can't be said to
contradict the general phrases used in the enactment. It is apparent that the
word impossible was not used in the sense of physical or literal impossibility
in this context.
The performance of an act may not be physically impossible, but
it may be impracticable and useless in terms of the object and purpose that the
parties had in mind; and if an unfavourable event or change of circumstances
completely upends the very foundation upon which the parties had built their
relationship, the parties relationship will be irreversibly shattered. Based on
their agreement, it is reasonable to conclude that the promisor finds it
difficult to perform the act that he pledged to perform. This has been the main
point to be decided in the case of Satyabrata Ghose vs. Mugneeram Bangur and
Company and ors.
Facts Of The Case
The facts giving rise to this appeal are largely undisputed, and the dispute
between the parties revolves around whether a contract for the sale of land to
which this litigation relates was discharged and came to an end due to certain
supervening circumstances that affected the performance of a material part of
it. It will be required to provide a brief narrative of the material facts to
grasp the merits of the debate.
The Defendant firm, which is the principal Respondent in this appeal, is the
owner of a huge plot of property in Greater Calcutta, near the Dhakuria Lakes.
The firm began a project known as Lake Colony Scheme No. 1 for the development
of this land for residential uses, and as part of the scheme, the entire area
was divided into many plots for sale, with offers from prospective buyers being
sought. The company's strategy appeared to be to enter into agreements with
several buyers for the sale of these plots of property and at the time of the
agreement, they received only a small amount of the consideration money as an
earnest deposit. The corporation agreed to install the toads and drains required
to make the lands fit for building and residential use, and the purchaser would
be required to complete the conveyance by paying the remainder of the
consideration money as soon as they were done.
One of the purchasers who entered a contract with the corporation for the
purchase of a plot of land covered by the scheme was Bejoy Krishna Roy, who was
Defendant No. 2 in the litigation and features as a pro forma Respondent in this
appeal. Also, the plaintiff appellant was made a nominee by the purchaser for
the purposes of the contract. By December 1941, three big chunks of the land
were requisitioned by the government for military purposes as part of the
requirement for the war.
As a result, the projected roads and sewers could not
be built while the war was still going on, and probably for many years after it
was over. In these conditions, the company decided to treat the sale agreement
with the addressee as cancelled and offer him one month from the date of receipt
of the letter to return the earnest money.
If the purchaser refused to treat the contract as cancelled, he could, if he so
desired, complete the conveyance within one month of receiving the letter by
paying the balance of the consideration money and taking the land in the
condition in which it existed at the time, the alternative offer. The company
promised to construct the roads and drains after the termination of the war. The
letter concluded by stating that if the addressee did not select one of the two
options, the agreement would be considered void, and the earnest money would be
The plaintiff refused to accept either of the two alternatives offered by the
company and brought a suit against the defendant company to which Bejoy was made
a party defendant. There was placed a two-fold declaration in which the
plaintiff asked firstly to make the contract between the two defendants subsist
and secondly, on payment of the consideration money stipulated in the agreement,
and in the manner and under the terms specified therein, the Plaintiff was
entitled to have a conveyance executed and registered by the defendant. Bejoy
did not file any written statement and was examined by the plaintiff as his
Under a certificate granted by the High Court under article 133(1)(c)
of the Constitution of India, the plaintiff has approached the Supreme Court of
India. The learned attorney general on behalf of the plaintiff has put forward a
three-fold contention in the plaintiff's support which form the basis of our
Brief Of The Judgement
Section 56 is found in Chapter IV of the Indian Contract Act, which deals with
contract performance, and it is intended to deal with one type of circumstances
in which contract performance is excused or dispensed with due to the contract
being void. Paragraph two of the section reads as a contract to do an act after
which the contract is made, becomes impossible or by some reason of some event
which the promisor could not prevent unlawful, becomes void when the act becomes
impossible or unlawful.
The phrasing of this paragraph is extremely generic, and even though the visuals
accompanying it aren't particularly cheerful, they can't be said to contradict
the general phrases used in the enactment. It is apparent that the word
"impossible" was not used in the sense of physical or literal impossibility in
this context. The performance of an act may not be literally impossible, but it
may be impracticable, and unless from the standpoint of the object and purpose
that the parties had in mind; and if an untoward event or change of
circumstances completely upends the very foundation upon which the parties
rested their bargain, it is very likely that the promisor finds it impossible to
perform the act that he promised.
When a contract becomes impossible to perform after it has been made due to
circumstances beyond the parties' control, the theory of frustration kicks in.
As a special case of impossibility, the doctrine is covered by Section 56 of the
Indian Contract Act. We conclude that the theory of frustration is a subset of
the law of contract discharge arising from the inability or illegality of the
conduct agreed to be performed, and hence falls under the ambit of Section 56 of
the Indian Contract Act.
It would be inaccurate to suggest that Clause 56 of the
Contract Act only applies in circumstances of physical impossibility, and that
when this section does not apply, English law rules on frustration can be
applied. It must also be ruled that, to the degree that the Indian Contract Act
deals with a specific issue, it is exhaustive on that subject, and it is
impermissible to import the principles contained therein. The decisions of the
English Courts have merely a persuasive value and may be useful in demonstrating
how the English Courts have determined cases in comparable circumstances to
those before our Courts.
The second contention raised by the Attorney-General can be disposed of in few
words. In English Law, the doctrine of frustration does not operate in cases of
contracts for sale of land. A contract for the sale of land does not constitute
any interest in the property that is the subject-matter of the contract,
according to Indian law, which is codified in Section 54 of the Transfer of
Property Act. As a result, the parties' obligations in a contract for the sale
of land are the same as in other regular transactions, and there is no reason
why the law of frustration should not apply to contracts for the sale of land in
India. As a result, the Attorney General's argument must be rejected.
As for the third issue raised by the attorney general, the contract in question
cannot be said to be an ordinary contract for sale, it was an integral part of
the development scheme started by the defendant company and is one of the many
contracts entered into with many different purchasers.
The background against
which the facts and circumstances of the case must be examined becomes extremely
important in the sense that because of the war in progress, firstly requisition
orders must be considered normal events and secondly, there were a lot of risks
and difficulties involved in carrying out the construction of drains and roads
because of which there wasn't any time limit fixed for the completion of the
The time factor becomes the crux of this issue as if there was a definite
time limit fixed in the contract for the completion of the construction
activities, then we could say that an indefinite delay would hamper the object
of the said contract.
Thus, the fundamental basis on which the contract rests is
not affected by the requisitioning orders. In conclusion, the events which have
happened doesn't make the contract impossible and it is not frustrated at all.
The judgement is passed in favour of the plaintiff and the appeal is allowed
Relevance Of The Judgement
Satyabrata Ghose vs Mugneeram Bangur and company and ors. is a landmark and the
first judgement to discuss force majeure and frustration of contracts. This case
was related to a contract for sale of land and the main point of dispute before
the court was if there existed certain supervening events that affected the
substance of the contract and if those conditions would lead to its discharge.
The Supreme Court decided the meaning of the word "impossible" in this case,
ruling that a performance does not have to be literally or physically impossible
to be considered impossible. Even if the occurrence of the event disrupts the
contract's core foundation, rendering the contract's object or purpose
meaningless, the performance will be judged impossible. However, opposite to the
reasoning the court in the said case held that this standard of impossibility
will not apply, and the appeal was allowed.
One more clarification was given by the court on the application of English rule
of frustration in India. According to the Supreme Court, the concepts of
contract frustration in English law, as articulated in the High Court's
decision, were not applicable to the statutory provisions of the Indian Contract
This decision established the standard of impossibility of performance, and
the decision has its implications even in the present times in the sense that
even if the circumstances created by the pandemic make contract performance
possible in some way but prevent the parties from achieving the contract's
object, it will still be considered a breach. For example, performance is not
difficult in a door-to-door sales service contract with a salesman under
lockdown with limited movement limitations because the salesmen can go
door-to-door. However, because he is a door-to-door salesman, people are
unlikely to engage the salesman to prevent catching COVID-19. In these cases,
the court will rule that the contract has been frustrated.
Critique And Analysis
Satyabrata Ghose vs Mugneeram Bangur and company and ors was a crucial
case in the history of the Indian Contract Act, 1872, particularly section 56 of
the said act and the doctrine of frustration or force majeure. This case that
has been commented upon in this project was done based on three research
questions chalked out at the start. The first of them that related to if the
word impossible in the second paragraph of section 56 can be said to only
meaning physical impossibility has been completely disregarded by the court in
this case where it said that this paragraph's terminology is quite broad, and
while the accompanying pictures aren't particularly cheery, they can't be
considered to contradict the enactment's basic terms.
In this context, the word "impossible" was not meant in the sense of physical or
literal impossibility. The performance of an act may not be literally
impossible, but it may be impracticable, and unless from the standpoint of the
object and purpose that the parties had in mind; and if an untoward event or
change of circumstances completely upends the very foundation on which the
parties rested their bargain, the promisor is very likely to find it impossible
to perform the act that he promised.
As for the second question that related to if English law of frustration caan be
applied in India, the court clarified that the principles of contract
frustration in English law, as stated in the High Court's ruling, were not
applicable to the statutory provisions of the Indian Contract Act, according to
the Supreme Court and that they only carry a persuasive value.
As for analysing our final and last research question in this commentary that is
if the contract of sale between the defendant's company and the plaintiff's
predecessor stands dissolved by frustration, the court ruled in the opposite and
said that the fundamental basis on which the said contract rests cannot be said
to be disturbed by the requisitioning orders passed by the government as these
were normal events in times of a war and that too there wasn't any definite time
limit fixed by the defendant to complete the construction activities so it can't
be said that there was any indefinite delay hampering the progression of the
- Force Majeure in times of Covid-19 - Adarsh Saxena et al.
- The Doctrine of Frustration and Force Majeure: Covid 19 - Vijay Pal
- Satyabrata Ghose vs Mugneeram Bangur and Co., 1954 SCR 310
- Case Analysis: Satyabrata Ghose v/s Mugneeram Bangur - Garima