Any legal agreement between parties is founded on the basis of contracts. But, at times, there is a circumstance where a performance of the contract is no longer possible. Where such situations arise under the Doctrine of Frustration, it is a created exception to the general rule and brought under the Section 56 of Indian Contract Act, 1872. It is a provision that excuses parties from compliance with any part of the contract where a regard prevents its performance.
The Doctrine of Frustration affords where something is done in one set of facts to the surprise of the parties, and they confront circumstances outside their control by attempting to further perform, but in a changed situation, which is different. The Doctrine of Frustration is explored in detail in this article, along with its legal implications under section 56 of Indian Contract Act, 1872 and with the practical examples.
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Section 56 of the Indian Contract Act, 1872
An agreement to do an act impossible in itself is void. it means a contract for a contract to do, or not do a thing, which after the contract is made and without the fault of the promisor, becomes impossible or unlawful by reason of some event occurring.
In simpler terms, it admits that in case the performance of an act in a contract becomes impossible after the contract is made, the contract becomes void. In the event there is an unforeseen occurrence which it makes physically or legally impossible to perform the contract.
Section 56 describes, the basis of such a contract is based on mutual consent and assumes that all agreed upon tasks are possible. The law relieves parties of further obligations under such a contract if this assumption is frustrated by circumstances beyond the control of the parties who are obliged to them.
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Application of Doctrine of Frustration
The Doctrine of Frustration under Section 56 of Indian Contract Act, 1872 applies when there is-
Impossibility of Performance: So, there is an event that you didn’t even go under the circumstance that your contract makes impossible for you to perform the contract both physically and legally.
Supervening Event: An event supervening on the contract (an event which occurs after the contract is made and which makes it impossible to perform the contract) prevents the perfect of the contract. The subject matter may be destroyed, the law changed or other unforeseen factors.
Unforeseen events by Parties: Frustration must be caused by the event the parties had not contemplated when making the contract. It is very important to note that to be a 'lawful frustration' of the event, the event causing frustration must be outside the parties' control and not the result of their negligence or fault.
Types of Frustrations under Section 56 of Indian Contract Act, 1872
Frustration of contract can be classified into two broad categories under Section 56 of the Indian Contract Act:
1. Physical Impossibility: Thus, if the execution of the contract becomes physically impossible because the subject matter of the contract has been destroyed or as a result of any other event rendering its performance physically impossible.
Example: two parties agree to sell a particular painting, and the building in which the painting was kept, collapses by an earthquake, such a contract is frustrating. Once the subject matter no longer exists, the contract is void.
2. Legal Impossibility: Frustration of this sort involves change in law rendering the performance of the contract illegal or impossible. Example: Goods are imported under a contract and banned by the government later. Legal restrictions prevent it being performed.
Understanding through examples of Frustration under Section 56
Let’s dive into the illustrations of Section 56 of Indian Contract Act, 1872, for a better understanding:
Destruction of Subject Matter: Consider a case where the car destroyed in an accident is part of a contract for its sale, which has not been delivered. The act of the subject matter of the contract no longer exists then the contract becomes void. In this case, that is physically impossible to achieve the contracting performance.
Change in Law: A good is produced by a company and it enters into a contract with another country to import the goods into the country. But because government policy is different now, those goods are now illegal to import. In these circumstances, the contract is void since no longer legal service can be performed.
Death or Incapacity of a Person: The personal service of a certain person (singer or whatever) on a contract is frustrated, if that person dies before satisfying what contractual obligation required him or her. Due to the contract being based on the personal performance of that person it cannot get performed.
Natural Disasters: An agreement can be frustrated when the location mentioned in the contract has been destroyed and cannot be restored due to a natural disaster such as an earthquake, flood or the like. If the place were destroyed or impossible to be renewed for the performance of the contract, it would be impossible to perform the contract as foreseen at the first place.
Impossibility Due to Government Action: Consider a contract to perform or other event in a public space. The contract is impossible to perform if there is an unlawful ban of gatherings, because of, for example, government regulation or a new law. But frustrated because those legal restrictions have come to cancel out the event.
Read more about Types of Contract under Indian Contract Act, 1872.
Exceptions of Doctrine of Frustration
The Doctrine of Frustration sees cases cured only where performance becomes impossible, and not in all cases. The following are some limitations of this doctrine:
Temporary Impossibility: There is an impossibility, however, it is temporary, therefore, it does not fall under the Doctrine of Frustration. Let us take for example a contract where an event is postponed because of bad weather but can still be rescheduled; in such a contract the contract will not be frustrated.
Self-Imposed Impossibility: If the impossibility is attributable to acts of the party, the contract will not be frustrated. For example: if one of the parties intentionally brings about the destruction of the substance covered by the contract, the contract will not be declared void.
Contracts on personal capacity: The loss resulting from frustration of a contract made for the personal services of one person where the person, who entered into such a contract on account of sickness or incapacity, became incapable of performing the contract. However the theory is not always useful where the incapacity is temporary.
The Contract Is Not Void Automatically: Not all frustration will ‘frustrate’ a contract automatically. The invocation of the Doctrine of Frustration is a relief from the 'impossibility' of performance which must be proved to exist.
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Legal Consequences of Frustration of a Contract Under Section 56 of Indian Contract Act, 1872
When a contract is frustrated under Section 56 of the Indian Contract Act, 1872, the following consequences occur:
Rescission of the Contract: The parties are thus relieved from further performance; the contract is voidable on the part of both parties. The contract may be rescinded by either party without liability for breach.
Restitution of Benefits: If one party has become frustrated before it becomes entitled to restitution, and in some cases (most particularly where one party has already received benefits under the contract) the other party may be entitled to restitution. So the party that’s already gotten benefits has to pay them back.
Damages: Where the contract, by reason of frustration, results in damage suffered by one party, one may claim damages against the other, according to the particular facts of the case.claim damages from the other party, depending on the circumstances of the case.
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Summary
For the performance of a contract becomes impossible by the happening of some unforeseen event, when such performance is provided by the third person in the expectation of remuneration, the Doctrine of Frustration of the Section 56 of the Indian Contract Act, 1872 offers a legal solution to your problem. By relieving parties from obligation in the event of external factors making performance of the contract unfeasible. Nevertheless, it is important to keep in mind that frustration is inappropriate in all cases and should lay out the elements that are to be found and should include a happening without the control of the parties of which the performance is made impossible by that happening. Section 56 on Indian Contract Act, 1872 provides relief in case of inability to perform though the provision maintains the integrity of contracts.
Knowing what is the Doctrine of Frustration and Section 56 of Indian Contract Act, 1872 can provide individuals and businesses the opportunity to handle contracts and what it entails, as not being held responsible for matters not fulfilling their bound.
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Section 56 of Indian Contract Act, 1872: FAQs
Q1. What is Section 56?
Section 56 provides that a contract is frustrated when the performance of the contract is rendered impossible by the occurrence of an event which could not reasonably have been contemplated by the parties at the time when the contract was entered into.
Q2. What is the Doctrine of Frustration?
It excuses a party from performance when it is shown that the occurrence of an unexpected event has rendered the agreement a non-entity.
Q3. Is temporary impossibility raised?
No. Section 56 only applies where the basis of contract performance has become impossible to perform permanently and not temporarily.
Q4. What if the parties were aware that performance was an impossibility?
Section 56 provides that the seller cannot tender the performance which, at the time the contract was made, the parties knew could not be performed.
Q.5 How is initial impossibility compared to subsequent impossibility under Section 56?
This is when impossibility was first in point of time, and then the agreement itself was from the first impotent, that is to say, void ab initio.
Where a contract is valid at formation and becomes impossible to perform because of an unforeseen event, it therefore becomes void therefore subsequent impossibility occurs.
