Paul Krell, Plaintiff
C.S. Henry, Defendant
The present case is concerned with the Doctrine of Frustration, under the Indian Contract Act, 1872. In several instances, unanticipated or unpredictable supervening circumstances arise, rendering contract compliance impossible through the fault of either party.
When a situation as such arises, the contract is known to be frustrated. The frustration of the contract occurs in the inadvertent extinction of both parties’ contractual duties, and as a result, the parties are discharged of their rights and obligations.
The first use of this Doctrine was made in the case of Taylor v. Cardwell in 1863 where a fire damaged an opera house that had been hired out for concerts. The Court in this case ruled that the contract was null and void since the material on which it was based, no longer existed.
The elements that must be fulfilled for the establishment of frustration of contract are as follows-
- A valid contract between parties must exist.
- The contract is yet to be performed.
- The performance of the contract becomes irrational or against the law.
- The inability to perform is caused by an occurrence over which neither party has control over.
The frustration of contract declares the contract null and void, and releases the parties from their contractual responsibilities However, Section 65 of the Act stipulates that when a contract becomes void, the person who got any benefit from it is bound to restore it or compensate the person from whom he obtained it from.
In 1902, after the demise of Queen Victoria, Edward VII was believed to ascend the throne as the next Monarch of the United Kingdom. The prince’s accession to the throne was scheduled for 26th and 27th June.
The ceremony of coronation is stated to be a national event, and the people of the country wanted to catch a sight of this momentous event. Like everyone else, Henry wanted to watch the coronation of the King, and he spotted an advertisement of Krell’s rooms that were up for rent on the same days of the event and he entered into a contract in writing with Paul Krell on June 20th to rent a flat in Pall Mall where the coronation process would pass by. Paul had left the country in the month of March 1902, and he had instructed his solicitor to rent his suite of chambers for not more than six months.
Henry requested Krell to let him rent the flat, told him that he would pay a sum of seventy-five pounds for the room, and sent him a deposit of twenty-five pounds, indicating that he would pay the outstanding amount on 24th June. In the contract that was made, there was no reference made to the coronation processor as to why Henry was renting the flat. But, before the coronation, the King fell ill, and the event was called off.
Due to this occurrence, Henry refused to make the payment of the remaining fifty pounds and contended that the rental of the flat, was for the purpose of watching the coronation and that was a condition precedent in the contract. Henry then filed a counterclaim for the refund of the twenty-five pounds he had deposited, but he later dropped the claim.
The trial court determined that there was an implicit condition in the contract that, if not met, the contract would be rendered invalid. The trial court ruled in favour of Henry, and Krell filed an appeal.
Was the defendant (Henry) obligated to pay the rent even though the procession did not take place? Or is one of the parties exempted from performing when the purpose of the contract is frustrated?
Rule of Law
A party’s responsibilities are discharged when a party’s purpose is frustrated without mistake by the occurrence of an event, the nonoccurrence of which was a fundamental premise upon which the contract was formed.
The case of Taylor v. Cardwell and The Moorcock were used to give the judgement. The defendant was not obligated to pay the rent even though the procession did not take place because, the purpose of renting the flat, which was to watch the coronation was frustrating.
Even though there was no mention of this in the written contract, both the parties had an understanding of why the defendant was renting the flat, and the price was fixed with the procession being noted as a prominent factor and therefore, it was implied in the contract that the procession would take place.
The only reason why Henry rented the flat was to watch the procession and it was his right to watch it. On the other hand, the sole sale to the defendant was of such right as the plaintiff had, and the contract required the plaintiff to part with nothing else.
There was certainly chance that the procession, the expectation, and whatever else gave the room a commercial worth would not take place for whatever reason; but that chance was transferred to the defendant by the contract, and by entering into the contract with the defendant, the plaintiff gave up his ability to rent out the room to anybody else: he transferred both the right and the risk.
There can be no implied condition in the contract that the goal of it is achieved and there can also be no implicit requirement for the defendant to be put in a position to observe the procession. According the theory of Taylor v. Cardwell, a contract of sale of a specific thing should not be perceived as a positive contract, but as pursuant to an implied term, that the stated thing remains relevant when the time arrives for performance, which should be precisely applicable.
The guarantee of the coronation and subsequent procession was the foundation of this contract. The parties agreed to the occurrence of a certain event, the existence of which provided the property a distinctive character and a commensurate value to the defendant; however, since the requirement of the defendant failed, the property lost its undesired value.
The quality of the premises that the plaintiff agreed the defendant should inhabit has changed to the point that it was no longer valuable. It was held that the Court could not infer an express requirement that the procession shall pass.
And it was said that nothing shall be inferred beyond what is required to give the contract the vigor intended by the parties at the time. There’s really no such need here and if anything, the implication is the opposite, because the amount was paid before the dates on which the defendant would be using the rooms indicating that the passing of the procession did not constitute the foundation of the contract, except in an ordinary sense.
The judgement was affirmed.
The contract is founded on the assumption that there will be a procession; that is, it is a contract based on the assumption that something will take place: there is a condition precedent that there will be a procession.
There would have been no contract if it had not been for the mutual anticipation of a procession on the specified dates.