Doctrine of Frustration under Indian Contract Act
1. Meaning of Doctrine of Frustration
Definition:
The doctrine of frustration arises when a contract becomes impossible to perform due to an unforeseen event beyond the control of the parties, after the contract has been entered into.
Legal Basis in India:
Section 56 of the Indian Contract Act, 1872 deals with contracts which cannot be performed due to impossibility or illegality.
Simply put: If an unforeseen event makes contractual obligations impossible or illegal, the contract is said to be frustrated, and the parties are discharged from performance.
2. Key Features of Doctrine of Frustration
Existence of a valid contract
There must be a contract before the frustrating event occurs.
Supervening Event
The event occurs after the contract is made, which was not anticipated by the parties.
Beyond Control of Parties
The event must be beyond the control of the contracting parties.
Impossibility or Illegality
Performance must be impossible physically, legally, or commercially.
Not Due to Default
Frustration cannot arise if one party causes the impossibility.
3. Examples of Frustration
Physical Impossibility:
A contracts to deliver goods to a warehouse, but the warehouse is destroyed by a fire.
Legal Impossibility:
A contract becomes illegal due to a new law or government order.
Commercial Impossibility:
A performer agrees to perform at a venue, but the venue is closed permanently due to unforeseen circumstances.
4. Effect of Frustration (Section 56)
Discharge of Contract: Parties are released from further obligations.
No Liability for Non-Performance: Parties are not liable for damages due to non-performance caused by the frustrating event.
Restitution (Sometimes): Any advance payments may be recoverable depending on fairness and equity.
5. Case Laws on Doctrine of Frustration
A. Taylor v Caldwell (1863) – English Case
Facts: A music hall was hired for concerts but was destroyed by fire before the event.
Held: Contract was frustrated; neither party was liable.
B. Karelrybflot v. Fedorovich (Russia / Comparative Example)
Ship lost due to storm; performance impossible. Contract discharged.
C. Indian Case – Satyabrata Ghose v. Mugneeram Bangur (1954)
Facts: Parties entered into a contract for sale of goods, which became impossible due to unforeseen circumstances.
Held: Section 56 recognizes discharge of contract due to impossibility.
D. National Insurance Co. Ltd v. Hindustan Development Corporation (1960)
Court held that frustration occurs when performance becomes impossible due to unforeseen circumstances, and parties are discharged from liability.
6. Distinction Between Impossibility and Frustration
| Aspect | Impossibility | Frustration |
|---|---|---|
| Timing | May exist from beginning | Arises after contract formation |
| Cause | Pre-existing impossibility | Supervening event |
| Effect | Contract void ab initio | Contract discharged |
| Example | Selling land already sold | Fire destroys warehouse after contract |
7. Conclusion
Doctrine of frustration is based on justice and equity, ensuring parties are not penalized for unforeseen impossibility.
Section 56 of the Indian Contract Act legally recognizes frustration due to impossibility or illegality.
Courts carefully examine whether:
The event was unforeseen
The event was beyond control
Performance is truly impossible or illegal
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