Doctrine of frustration ACCORDING to Section 56, an agreement to do an act impossible in itself is void (for example, an agreement to discover treasure by magic). Supervening impossibility or illegality refers to the intrusion or occurrence of an unexpected event or change of circumstances beyond the contemplation of the parties; such event or change of circumstances must be so fundamental as to be regarded by law as striking at the root of contract as a whole or the basis of the contract no longer exists. Subsequent impossibility in the UK is referred to as Doctrine of Frustration. A contract is deemed to have become impossible of performance and, thus, void under the following circumstances: a) destruction of the subject matter of the contract; b) by death or permanent incapacity of the parties (like insanity) where the contract is personal in nature; c)supervening impossibility or illegality, involving actions contrary to law or public policy; d) outbreak of war, war restrictions (avoidance of trading with alien enemy, and so on); e) imposition of government restriction or orders or acquisition by government; and f) non-existence or non-occurrence of a particular state of things. Apart from the above circumstances, impossibility does not discharge a person from the contract. He who agrees to do an act should do it unless impossibility arises in any of the ways mentioned above. . FRUSTRATION - MEANING, SCOPE AND APPLICABILITY Section 56 of the Indian Contract Act, 1872 stipulates: Agreement to do impossible act: An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss through non- performance of act known to be impossible or unlawful: Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise. Frustration may be defined as the occurrence of an intervening event or change of circumstances so fundamental as to be regarded by the law both striking at the root of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the agreement. If an event which could not be foreseen by both parties supervenes, frustration would apply. Section 56 of the Indian Contract Act, 1872 does not deal with the cases in which an event, the parties took it for granted will never happen does happen and makes the performance of the contract impossible. If it be held that this Section is exhaustive, no relief can be granted to any of the parties on the happening of such an event, but this would be against the very principle underlying the Section.(16) If the inability to perform the contract is due to the fault of one of the parties, he cannot successfully plead frustration. It is also true that if the parties expressly contract with reference to the occurrence of the supervening events, frustration is inapplicable. But there is another type of case outside these rules. The parties when they made the contract, may have foreseen the supervening event as probable, but may have made no express provision with respect to it. Here, if such event occurs, frustration can be pleaded.(17)
Posted on: Sun, 24 Aug 2014 15:41:08 +0000
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