As a general principle, contracting parties want to fulfill their obligations, and in the event of a breach, the party violating is obligated to compensate for the same. However, Section 56 of the Indian Contract Act of 1872 makes an exemption to this provision. Section 56 discusses the doctrine of frustration, which refers to activities that cannot be done. Under this concept, a promisor is absolved of all obligations under a contract if the contract is breached, and the deal is declared void.
The Supreme Court explained the doctrine of frustration in the case of Satyabrata Ghose v. Mugneeram, in which Justice Mukherjee held that the basic idea upon which the doctrine of frustration is based is that of the impossibility of contract performance, and the expressions of frustration and impossibility can also be used as synonyms.
Implementation of the Doctrine
The doctrine can be implemented in two cases- If the contract’s object has become impossible to execute, or if an event has occurred that makes contract performance impossible due to circumstances beyond the control of the promisor.
The conditions required for Section 56 to be applied-
- There is a legitimate and ongoing contract between the parties: – The existence of a legal contract is the first and most important need for the implementation of Section 56. A legal contract is one that is entered into between competent parties and is followed by some form of consideration.
- There must be some component of the contract that has yet to be executed: Section 56 will apply only if there is some part of the contract that has yet to be performed and the ultimate purpose of the contract is not satisfied until it is performed.
- The contract becomes impossible to execute after it is entered into: – Another significant criterion for the application of section 56 is that the contract becomes impossible to perform and cannot be performed after it is entered into, and so the contract is null and invalid.
When does frustration of contract arise?
- Death or incapacity of a party: If a party to the contract dies after entering into the contract or becomes incapable of fulfilling the contract, the deal is null and void.
- Frustration as a result of legislation: When a law enacted after the contract is formed renders fulfilment of the agreement impossible, and so the agreement becomes null and invalid.
- Frustration owing to a change in circumstances: This scenario deals with instances where there was no physical inability of contract fulfilment, but the fundamental objective for which the contract was made has been defeated due to a change in circumstances.
Initial vs Subsequent Impossibility
Initial impossibility: The goal of creating any contract is for the parties to keep their commitments, and if the contract is impossible to keep, the parties will never enter into it. The term “initial impossibility” refers to situations in which the contract was impossible to execute from the start. For example, if a married man pledges to marry again despite knowing that he cannot, he is obligated to pay the other party.
Subsequent impossibility: It deals with instances where the contract was feasible to fulfil when it was entered but the performance has become impossible or unlawful due to some occurrence, and therefore it releases the party from executing it.
The doctrine of frustration applies only in instances of subsequent impossibility and when the contract is impossible to execute from the start; otherwise, this doctrine is inapplicable.
Frustration is an act that occurs outside of the contract that makes the fulfilment of the deal impossible. After the parties have signed a contract, events beyond their control may arise that undermine the purpose of their agreement or make performance very difficult, impossible, or even unlawful.