IntroductionA contract is a starting point of any social structure.
It isthe fixing of rights and duties of parties by mutual agreement. Even in history,there has been various instances of the development of contracts. From thebiblical times of God making a covenant with the Jewish people to the morerecent time of the Declaration of Independence in 1776. The legal sanction ofcontracts has made it enforceable and the statues have various provisions bywhich contracts can be regulated. The law has also made provisions to deal withcontracts when they cannot be performed. The frustration of the contract happens when something occurswhich due to the radical change in the position of the parties rendering thecontract impossible or illegal.
As Lord Ruskin once put it, the doctrine of frustration is’not lightly to be invoked to relive contracting parties of the normalconsequences of imprudent bargains’1 Doctrine of FrustrationThe arising of certain set of circumstances which occur afterthe formation of the contract and is a result of no fault of the parties, andas a consequence renders the performance of the contract commercially orphysically impossible. The court recognizes these set of circumstances whichrelease the parties from further obligations. Therefore, the contact isdissolved by the operation of the doctrine of frustration. The purpose of the doctrine is to reduce or mitigate thecommon law approach of literal performance of absolute promises. It tries toencompass the difficulties that are posed in contracts where there issignificant change in circumstances. And due to the effect of frustration, itsscope must be limited so that this doctrine can be invoked in a limited sense. In Indian law relating to contracts, section56 of the Indian Contract Act deals with frustration of contract.
Various theories which have served as a juristic basis forthe doctrine of frustration has aided in softening of the rigors of theabsolute rule. There are four main juristic bases for the doctrine offrustration. The main theories area) impliedterm theoryb) basisor foundation of the contractc) justand reasonable solution and d) radicalchange in the obligation under the contract English Approach to Frustration of ContractThe English law being a follower of the Common Law tradition,has aided to a huge extend the development of Contract law. The English interpretationof the doctrine of frustration was very straight jacketed. In Paradine v. Jane2,the case that was before the court where a tenant of a land was disposed of itfor a period of 2 years by the kings enemies. His claim was that he did nothave to pay rent for the two-year period.
But the court was of the view thatthe agreement had to be honored and the rent was to be paid. There seem to be change in the way in which the courtsstarted interpreting this in Taylor V. Caldwell3.In the case the plaintiff and the defendants entered into a contract by whichThe Surrey Gardens and Music Hall was booked for various concerts and events.All the terms and conditions were laid down.
But as the date of the eventapproached there was a major fire, which resulted in the hall burning down. Thecourt stated that it was without the fault of either party and as a consequencethe act of one of the parties could not be complete as intended. Therefore, noaction would lie for breach of agreement to allow the defendants to use thesaid hall as the hall had burned down before the contract could be performed. In a case that happened subsequently, Krell v. Henry4,where one of the parties had owned a certain flat and gave it out on rent for afew days, as the Kings Coronation procession was to pass along the road wherethe flat was located. This purpose of viewing the procession as communicatedand a reasonably high rent was decided. Due to serious illness the processionas cancelled.
The party that owned the flat, demanded that the other party payfor the full amount as the contract was frustrated. The court of appeal upheldthe decision of the trial court that party that owned the flat could not demandthe remaining amount due because the contract was frustrated.Frustration of contract is something that happens in therarest of rare circumstances.
But that does not rule out or reduce the chanceof its occurrence. They are three titles under which that frustration can belooked at more closely. A) impossibility b) illegality c) Frustration ofPurpose. Indian Approach to Frustration of ContractThe law of contract in India does not attempt to regulate theconsequences especially financial which arise out of a discharge of a contract.Parties who want to be prepared for any unexpected event which may causehardship have the option of inserting a provision which would case forsuspension or adjustment of the contract, a force majeure clause in case ofsuspension and a hardship clause in case of adjustment.
The section is very different from the Common law approach toa large extent, the act attempts to lay does the positive rules of law which inthe view of the English Court lately have viewed it as the matter ofconstruction based on the true intention of the parties. In the Common Law approach,a person who makes a promise without qualifications is bound by that promise.In case the parties do not want the agreement to be unconditional, they havethe option of qualifying it with conditions. Sometimes these conditions neednot always been expressed as this can be inferred from the nature of thetransactions.
The Supreme Court in various cases has interpreted section 56of the Indian Contract Act. It has stated that the provision is exhaustive andthere is no need to travel outside the provisions5.When there are events which occur, and have such an impact that it strikes theroot of the contract, the court must take the step to declare the contract tobe frustrated. The various circumstances under which the contract was made, theknowledge of and the intentions of the parties contracting must be examined bythe court at length. In Satyabrata Ghose v.
Mugneeram Bangur & Co6,the court had made observations on the various theories that were to be thejudicial basis of the doctrine of frustration, but the root of it was the basison the impossibility of the performance of contract. It was also noted thatfrustration and impossibility of performance could be interchangeably used. Italso opined that the word ‘impossible’ that is used in section 56, unlike itsusage in English law, was not to be taken literally. The performance of theobjects of the contract and the supervening factors which result in its impossibilitywas to be the way in which it was to be read.
Also in another case of SushilaDevi vs. Hari Singh7,the impossibility contemplated by section 56, was not confined to somethingthat was humanely possible. In the case, there was a lease of property whichafter the partition had gone to Pakistan thus resulting in the contract to befrustrated. In India, the law which deals with frustration can be relatedto two section, S.32 and S.56. It has been held in various case law that the S.
56deals exhaustively with the doctrine of frustration and there is no need toextend it by borrowing analogies from English law. A contract which isfrustrated is distinctly different from the one which is void due to mistake.The contract is frustrated once the supervening event occurs and in the case ofmistake, the contract is void even from the very beginning. ConclusionTherefore, the performance of a contract and its subsequentdischarge due to factors that are beyond the parties are encapsulated in thedischarge of contracts. Section 56 of the Indian Contract act is very clear onthe way in which it deals with frustration of contracts.
The various cases thathave determined by the Supreme Court has aided in the the interpretation ofthis section and the concept of frustration of contract as a whole. It alsoreflects, the dynamism with which law needs to be enacted and enforced. TheCommon law was of the approach of literal application of contracts, but that resultedin genuine challenges faced by the parties in peculiar circumstances. This wascorrected by various judgements of the English courts. Indian law makers alsomade sure that when circumstances that occur which are beyond the control ofthe parties to a contract, they can be dealt with effectively without adverselyaffecting either of the parties. 1 The Nema (1982) AC 724, 7522 (1647) Aleyn 263 (1863) 3 B & S 826, Queen’s Bench4 (1902) 2 KB 740, Court of Appeal5Raja Dhruv Dev Chand v.
Raja Harmohinder Singh (AIR 1968 SC 1024)6 AIR1954 SC 447 AIR 1971 SC 1756