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Answer
Brief Introduction of the Doctrine
Frustration
means when the contract is rendered impossible of its performance by the
external causes which are beyond the contemplation of the parties concerned. It
includes both: impossibility of performance of contractual obligations and Impossibility
of the fulfillment of the ulterior purpose for which the contract was entered
into.
Therefore,
when the performance of a contract becomes impossible, the very purpose which
the parties had in mind gets frustrated. ... This is known as the Doctrine of
Frustration. The frustration of contract can be due to any unforeseen,
impossible events and events out of control of the parties.
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Section 56 of ICA and Doctrine of Frustration
The ICA
does not define the term “frustration of contract”. However, the doctrine of
frustration is enshrined under section 56 of the Act. This section is based on
the maxim “les non cogit ad impossibilia” which means that the law will not
compel a man to do what he cannot possibly perform.
It speaks
about two impossibilities i.e. Initial and Subsequent Impossibility.
I.
Initial
impossibility, it basically signifies that ‘’An agreement to do something that
is intrinsically impossible is void’’.
For example, an
agreement to bring a person back to life who is dead, being impossible of
performance, is void.
II.
Subsequent
Impossibility: as the term itself suggests, ‘something that happens later’,
i.e. after the parties have entered into a contract. Sometimes, the initial
terms of the contract seems fine and feasible to perform, but subsequently,
because of the change in circumstances or factors, the performance becomes
impossible or unlawful.
For example, A contract is concluded
for the import of some goods, but suddenly the government, by issuing an order,
restrict import of such goods.
The Essential Conditions for Applicability of Section 56
- ·
Existence
of a valid and subsisting contract.
- ·
There
must be some part of the contract which is yet to be performed.
- ·
The
contract after it is entered into becomes impossible of performance.
- ·
The
impossibility is not induced by the promisor or due to his own negligence.
Generally, frustration of contract can be applied in the following cases:
1.
Destruction
of Subject-Matter
The
doctrine of impossibility applies where the actual and specific subject matter
of the contract has destroyed, or ceased to exist.
Case: Taylor V. Caldwell:
Facts: The
defendants entered into the contract with the plaintiffs to let the them operate
on their premises for a concert. Subsequently, before the scheduled concert,
the premise was destroyed by fire without any fault of either party.
It was held
that the contract was not absolute, because its performance depended on the
existence of the hall. The burning of the hall depicts the impossibility of
carrying forward the contract, now the contract is stands frustrated.
2.
Change
in Circumstances:
A contract
will frustrate where circumstances arise which make the performance of the
contract impossible, or defeat the purpose for which the contract was entered
into. This type of event include, but not limited to:
- A wholly abnormal rise or fall in price,
- A sudden depreciation of the currency,
- An unexpected obstacle to execution, or alike circumstances etc.
Case: Krell v Henry:
The
defendant agreed to rent a flat from the plaintiff for two days, on which days
it had been announced that the crowning would take place, and, therefore, a
parade would pass along that place. Some portion of the rent was paid before
the event. Later, the parade was dropped because the King was ill, the
defendant objected to pay the remaining amount.
It was held
that the performance of contract can’t be carried out because of changing
circumstances, hence the contract stands frustrated.
3.
Death
or incapacity to perform:
When there
is a contract that depends on the particular skill of the promisor, his death
or incapacity terminates the contract.
Case: Robinson V. Davison:
Plaintiffs
had entered into the contract with a famous pianist, that she will be
performing i.e. playing the piano at a concert organized by the plaintiff on a
particular day. On the morning of the said day, she apprised the defendant that
she was ill, and will not be playing the piano. The concert had to be postponed
and resulted in great loss for the plaintiff.
It was held
by the court that she had the option to not play if she was sick to do so.
4.
Government
or Legislative Intervention:
A contract will
be dissolved when legislative or administrative intervention has taken place,
it maybe because of formation of new law, or simply passing an executive order,
or passing of a judicial pronouncement.
5.
Intervention
of War:
Contracts
may also become impossible of performance owing to the prevalence of war
conditions and such contracts are void.
Example:
A contracts
to take in cargo for B at a foreign port. A's Government afterwards declares
war against the country in which the port is situated. The contract becomes
void. (Section 56 illustration (d) of the Contract Act)
Remedies:
The
remedies for the frustration of contract are given under sec 65 of ICA i.e.
restoration of benefits received, if any.
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