DOCTRINE OF FRUSTRATION by PURNIMA NAIDU @ LexCliq

DOCTRINE OF FRUSTATION

When the performance of the contract becomes impossible, the purpose which the parties have in mind is frustrated. If the performance become impossible, because of a supervening event the promisor is executed from the performance of the contract. This is known as doctrine of  frustration under English law and is covered by section 56 of the Indian Contract ActThe basis of doctrine of frustration was explained by Mukherjea, J. in the supreme court of india decision of  Satyabrata ghosh v. Mugneeram  in the following words-

“The essential idea upon which the doctrine of (frustration) is based that of impossibility and frustration are often used as interchangeable expressions. The changed circumstances make the performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility…. The doctrine of frustration is really an aspect or the part of law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the preview of section 56 of Contract  Act

In Alluri Narayan Murthy Raju v.  District Collector Vishakhapatnam  the petitioners under a contract were granted leasehold rights for lifting the sand in a river in Maddi gram panchayat of Vishakhapatnam district. The residents of village prevented him from carryimg on quarry operation from the ground that it would lead to the depletion of water affecting the irrigation channels. The villagers were undettered even by registration of criminal case against them and also by grant of injuction by civil court. The conclusion inevitable from the uncontroverted facts was that on account of events that had taken place in subsequent to entering in the contract , which were beyond the control of parties of contract rendering the performance of contract impossible, the Andhra Pradesh High Court held that the second limb of section 56 of the contract act 1872 was squarely attracted and therefore the doctrine of frustration envisaged by the said provison was applied to all the four of  the  contract

Therefore where performance is rendered by intervention of law invalid or the subject –  matter assumed by the parties to continue to exist is destroyed or a state of thing assumed to be foundation of the contract fails or does not happen , or where the performance is reffered to as rendered personally and the person dies or is disabled the contract stands discharged

DOCTRINE OF FRUSTATION NOT APPLICABLE

The petitioner housing board had entered into contract with contractor for water proofing work of houses. Petitioner had knowledge that said house where work has been was to be executed were in possession of allottees. Held that mere denial by allotness to allow work to be performed would not be in such an impossibility as envisaged by section 56  under  such a contract  is void.

DEATH OR INCAPACITY OF A PARTY

When the nature of a contract requires the personal performance  of the contract by a particular person, the contract is deemed to be conditional upon the continued life or good health of a person so that it is possible for him to perform the contract. Thus in case of contract based on  proposal skill or confidence of the parties the death of a party in such a case puts an end  to the contract and therefore the representative  cannot be made liable to perform such a contract. For example :- A promises to paint a picture for B by a certain day at a certain price. A dies before the day. The contract cannot be enforced either by A’s representative or by B.

FRUSTATION BY VIRTUE OF LEGISLATION

Where a law promulgated after the contract  is made makes the performace of the agreement impossible the agreement becomes void.

In Rozan Mian  v.  Tehera Begum,  an agreement was entered between the plantiff and the defendant on 3-12-1973 for sale and purchase of thika tendency. The agreement having not been carried out, the plantiff filed a suit for specific performance of agreement for sale on 7-2-1974. During the pendency of the suit , the Calcutta thika tenancy act 1949 was promulgated. Section 6 of this act read with section 4 prohibited the transfer if thika tendency rendering the performance of agreement to sell impossible and hence void

FRUSTATION DUE TO CHANGE OF CIRCUMSTANCES

The doctrine of frustration has been extended to those cases where there was no physical impossibility of performance of the contract, but because of the change of circumstances the adventure was frustrated or by the literal performance of the contract the  main  object of contract could not be fulfilled

POSITION IN INDIA

In India also, impossibility does not mean merely physical impossibility to perform the contract, it also includes situations where the performance of the contract may not be literally impossible but because of changed circumstances the performances would not fulfill the object which the parties has in mind

In Arti Sukhdev  v.  Daya Kishore Arora, it has been held that merely because performance has to be delayed, it does not mean frustration of the contract.  In this case, there was allotment of plot by the Development Authority with the condition that permission for sale could not be granted before the expiry of 10 years. Permission for sale was requested earlier than that and the same was refused as there were no exceptional circumstances for the same. It was held that since there was possibility of sale after 10 years, the contract had not been frustrated

NO FRUSTATION OF EXECUTED CONTRACT

 Section 56 covers case of executory contracts only, and does not apply to executed contracts.

In Dhruv Dev v. Harmohinder singh it was held that there is clear distinction between completed conveyance and an executory contract, and events which discharge an executory contract do not anavilidate an concluded transfer. In this case, A obtained B  a lease of some land in thesil okara, district Montgomery of kharif season 1947, due to partition of the country the above land went to Pakistan, and A migrated to india  A then filed a suit to recover back the rent paid by him on plea that has been frustrated. It was held that there was no agreement, express or implied, that the rent was payable only if A was able to personally attend or to supervise agricultural operations, and therefore, by the above stated event the transfer property resulting from the lease granted by B to A had not become void. It was also observed that section 56 did not apply to completed transfer of property. A’s action for the refund the amount was dismissed.

NO FRUSTATION BY MERE LIKELY DELAY IN PERFORMANCE

 In order that the doctrine of frustration is applicable, it is necessary that the performance should become unlawful or impossible. The event should be such that the object of the parties is thereby totally upset. Merely likely delay in performance does not amount to impossibility.

The doctrine does not apply where there is merely a likely delay in the performance of contract.

In satyabrata ghosh v. mugneeram the defendant company was the owner of a large tract of land. It started a scheme for the development of this land for residential purposes. Under this scheme, the purchaser of a plot of land was to pay some earnest money at the time of the agreement. The defendant undertook to construct the roads and drains necessary for making the land suitable for building and residential purposes as soon as they were completed, the purchaser was to complete the conveyance by payment of the balance of the consideration money. The plantiff agreed to purchase the plot and paid an earnest money of Rs. 101. Before the defendant could make the above stated development, considerable portion of the land was requisitioned by the government during the second world war for military purposes. The defendant their upon wanted the canceled the contract mainly on the ground that the contract stood discharged by frustration as the performance had become impossible because of supervening events.  It was observed that worth noting thing in the case was that there was absolutely no time limit fixed within which the roads and drains were to be made.  This was left entirely to the convenience of the defendant company and purchaser did not feel concerned about it.  It was held that under this circumstances, and also because of the facts that the requisition of land was only of a temporary character, the contract was not frustrated.

IMPOSSIBLITY DOES NOT MEAN MERE COMMERCIAL DIFFICULTY

A distinction is drawn between the happening of an event which makes the performances of the contract impossible, beyond the control of the promisor and an event which makes the performance only difficult or more expensive. The nature and the terms of the contract may help in deciding whether the performance has becomes impossible or merely commercially difficult.

In Punj Sons Pvt. Ltd. V. Union of India there was a contract between M/s Punj Sons Pvt. Ltd. And the Union of India under which the former agreed to supply to the latter 8,420 milk containers of 20 litres each.  The container were to be coated which “hot dip coating.” The coating was to be done which tin ignots, which was not available in market. The supply of tin ignots could be obtained by the promisors on the release of the quota by the Director General of supplies and Disposal. In spite of reasonable efforts on the part of the promisors the quota was not released, and thus, without any fault on their part they were not able to perform the contract. It was held that the contract in this case had become impossible of being performed and thus void. The promisors were therefore, not liable for the non-performance of the same.

Merely because the procurement of the goods. Becomes difficult due to a strike in the mill or there is a rise in prices, or a person will not be able to earn the expected amount of profits, it is not enough to frustrate the contract.

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