What is the Doctrine of Frustration?

The doctrine of frustration is explained in Section 56 of the Indian Contract Act, 1872. It states that if an act, required by a contract, becomes unlawful or impossible to perform due to unforeseen circumstances, and the person responsible cannot prevent it, then the contract becomes void.

Origin of the Doctrine

The idea comes from Roman law. In Roman times, if something essential to the contract was destroyed without the fault of the person responsible, they were excused from performing the contract. For example, if someone promised to deliver a slave and the slave died before delivery, the promise was no longer valid.

Doctrine of Frustration as an Exception to General Rule

In general, contracts must be followed, and breaching them means paying for damages. The doctrine of frustration is an exception to this rule. It applies when something extraordinary happens, making it impossible or illegal to fulfill the contract.

Conditions for Applying Section 56 of the Indian Contract Act

1. Existence of a Contract: A valid and ongoing contract must exist between the parties.
2. Incomplete Performance: Some obligations under the contract must still need to be fulfilled.
3. Subsequent Impossibility: After the contract is formed, its performance becomes impossible.
4. Uncontrollable Events: The impossibility arises from events the promisor couldn’t prevent.
5. No Promisor’s Fault: The promisor must not have caused the impossibility through negligence or intentional actions.

Judicial Interpretation

• Industrial Finance Corporation of India Ltd. v. Cannanore Spinning & Weaving Mills Ltd.: The doctrine of frustration is recognized under the statute as part of “force majeure.” This includes situations where non-performance occurs due to uncontrollable and unforeseeable events.
• Satyabrata Ghosh v. Mugneeram: The Supreme Court clarified that frustration is grounded in the impossibility of performance. The terms “impossibility” and “frustration” are often used interchangeably.

Grounds for Frustration of Contract

1. Destruction of Subject Matter: If the core item or property in a contract is destroyed, the contract cannot be performed. For example, in Taylor v. Caldwell, a concert hall burned down, making it impossible to hold the event.
2. Death or Incapacity of a Party: When a party to a contract dies or becomes unable to fulfill their obligations, the contract is void.
3. Change in Law: If a new law or regulation makes the contract's performance illegal, the contract is void.
4. Changed Circumstances: Even if performance isn’t physically impossible, circumstances might render the contract’s purpose meaningless. This defeats the contract's intent.
5. War or Political Events: Hostilities between countries, such as war, can make a contract void due to impossibility. For instance, a trade agreement between businesses in warring nations.

Difference Between Impossibility and Frustration

Frustration happens when completing a contract is still technically possible, but doing so would lead to excessive difficulty or go against the contract’s main purpose. This might occur because of unforeseen events that make the agreed purpose of the contract unachievable or irrelevant.

On the other hand, Impossibility arises when fulfilling the contract becomes physically or legally impossible after it has been signed. This can result from events like natural disasters or changes in the law, which make it unfeasible to perform the required duties.

Conclusion

The doctrine of frustration plays a vital role in contract law by providing an exception to the general rule of strict performance. Rooted in Roman law and codified in Section 56 of the Indian Contract Act, 1872, it ensures fairness when unforeseen and uncontrollable events render a contract’s performance impossible or purposeless. By voiding such contracts, the doctrine protects parties from undue hardship while maintaining the principle that legal obligations must be met unless extraordinary circumstances arise. Judicial interpretations and case laws have further clarified its application, making it a crucial safeguard in contract law