INTRODUCTION
When two competent parties are privy to a valid contract, they are expected to perform their respective obligations and duties mentioned in that contract. Such obligations and duties are legally binding, and not performing them shall amount to a breach of contract. However, at times, certain unforeseen circumstances may occur, due to which, carrying out such obligations may become significantly harder for the parties, and in some cases, it may even become impossible. In such scenarios, the relevant parties may seek relief through the doctrine of frustration.
The doctrine of frustration[1] tends to discharge the relevant parties from their respective duties in situations where an unforeseen event arises, making it impossible for the parties to carry out their side’s obligations. In a way, the doctrine of frustration creates an exception to the general circumstances, as the triggering of the doctrine eliminates any legal consequences that would have followed otherwise.
ORIGIN OF THE DOCTRINE AND KEY CASES
The doctrine of frustration was first recognized in the case of Taylor v. Caldwell (1863)[2]. In this case, the plaintiff (Taylor) entered into a contract with the defendant (Caldwell) to rent a music hall to host several concerts. However, just before the scheduled week of concerts, the music hall was destroyed by fire. In an attempt to recover the damages, the plaintiff initiated a lawsuit against the defendant, however, the judge ruled in favour of the defendant, as the destruction of the music hall was not the defendant’s fault, as it was an unforeseen event, therefore, this situation was an exception to the rule of absolute liability.
The English courts made further advancements to the doctrine through the case of Krell v. Henry (1903)[3]. In this case, the plaintiff (Krell) and the defendant (Henry) entered into a contract where the defendant rented a flat so that he could view the coronation of the King. However, the coronation was cancelled, due to which the defendant refused to complete the payment. The plaintiff sued the defendant for the same, it was later held that the defendant shall be excused from the performance of his obligation, as the very purpose of entering into the contract was frustrated.
INTRODUCTION OF THE DOCTRINE WITHIN INDIA
In India, the doctrine of frustration was explained by the Supreme Court for the first time in the case of Satyabrata Ghose v. Mugneeram Bangur& Co (1954)[4] where the defendant (Mugneeram Bangur) entered into a contract with the plaintiff (Satyabrata Ghose) to sell a piece of land to them, once the construction of a residence is completed. However, due to war-like situations at the time, the government temporarily took the land for military use, as a result of which, the defendant treated the earlier contract as void. Nonetheless, the Supreme Court ruled that the doctrine of frustration cannot be applied here, as the government took the land only temporarily, therefore, the defendant’s obligations cannot be rendered impossible to perform.
STATUS OF THE DOCTRINE IN THE INDIAN CONTRACT ACT, 1872
In India, the Indian Contract Act, of 1872 tends to deal with all the relevant aspects of contracts. However, the term ‘doctrine of frustration’ is not expressly mentioned in the act, but the very principles of the doctrine are mentioned inSections 32 and 56 of the Act.
- Section 32 of the Indian Contract Act, 1872:
It states that the contingent contracts, which depend on the occurrence or nonoccurrence of an unforeseen future event, become void when the event itself becomes impossible to occur. Therefore, such contracts cannot be enforceable by the law, until and unless the unforeseen future event takes place. Section 32[5] also tends to govern a force majeure event if it is relatable to the contract.
- Section 56 of the Indian Contract Act, 1872:
It deals with the doctrine of frustration of contract, as it states that a contract becomes void when the obligations mentioned under the contract become unlawful or impossible to perform. The doctrine under Section 56[6] acknowledges that due to the occurrence of an unforeseen event after the formation of a contract, the obligations mentioned within the contract may become impossible to perform. In such situations, the contract automatically becomes void, and the parties shall be discharged from their respective obligations. It is important to note that Section 56 is based on the maxim ‘les non cogit ad impossibilia’, which means, the law would not compel a man to perform an impossible act, which further implies reasonability of the doctrine.
APPLICABILITY OF THE DOCTRINE
As discussed earlier, the doctrine of frustration is meant to discharge the parties from their respective duties if the obligations under a contract become impossible to perform due to the occurrence of unforeseen circumstances. However, some certain requirements and factors outline and determine the applicability of the doctrine of frustration, which shall be discussed below.
Requirements for the doctrine to become applicable:
- There must be a valid contract between the parties
- Some parts of the contract must be yet to be fulfilled
- The obligations under the contract must have become impossible to perform after the parties entered into it
Factors that shall trigger the doctrine:
- Death, or incapacity of a party to fulfil their obligation
- Destruction of the very subject matter of the contract
- Occurrence of an unforeseen event resulting in changed circumstances
- Legislative interventions
SITUATIONS WHERE THE DOCTRINE MAY NOT BE APPLICABLE
- Foreseeable Events:
When the obligations of a party become impossible to perform due to the occurrence of an event that was foreseeable, the doctrine of frustration cannot be applied in such a situation. The parties are expected to take such events into account before entering into a contract.
2. Self induced hardship:
In a situation where a party actively causes circumstances that make the performance of their obligation harder, or impossible, the doctrine of frustration may not apply.
Illustration: Z agrees to provide catering services to B, however, due to poor management, Z ran out of crucial ingredients, and as a result, he was unable to fulfil his obligation. Here, the doctrine may not apply as the performance of the obligation became impossible due to the poor management by Z.
3. Failure to Mitigate:
If the performance of an obligation becomes too difficult or impossible due to the parties actively ignoring opportunities to mitigate the situation, then in such a scenario, the doctrine of frustration may not apply.
Illustration: Z agrees to supply B with goods for a retail store, however, due to heavy snowfall in Z’s area which lasted for 2 days straight, there was a delay in the supply by a whole week. Z never notified B of such a possible delay and did not mention the reason for the same. Also, the snowfall as per weather reports, lasted for only 2 days, but the delivery of goods was delayed by a whole week. In this case, the doctrine of frustration may not be applicable.
4.Risk Assumption:
The doctrine of frustration may not be applicable in situations where the respective parties are already aware of the risk factor involved before entering into a contract.
5. Express Contractual Provisions:
A contract may consist of a specific provision that may expressly mention a circumstance that may affect the performance of obligations in the future. In such a situation, the parties will be bound to fulfil their respective duties, as the possible risk factor has already been addressed, therefore, the doctrine of frustration may not be applicable in such a scenario.
CONCLUSION
In conclusion, the doctrine of frustration tends to operate on a neutral ground, providing parties with the reasonable option of being discharged from their respective duties at times of genuine issues relating to the nonperformance of the obligations. However, the mechanism is designed in a way so that it cannot be taken advantage of, meaning, the circumstance affecting the performance of an obligation must be unforeseen and unpredictable, and shall not be a manifestation of either party’s self-induced hardship or negligence. Hence, based on the analysis thus far, we can conclude that the doctrine of frustration serves as an excellent mechanism for governing contractual obligations. The doctrine provides relief to the parties in situations where obligations may become genuinely impossible to perform, however, the requirements and limitations on its applicability ensure fairness so that it cannot be exploited.
Author(s) Name: Husain Rizvi (Rizvi College of Law, Mumbai)
Reference(s):
[1] Rishabh Soni and Monesh Mehndiratta, ‘Doctrine of frustration’ (iPleaders, 12 August 2023) <https://blog.ipleaders.in/doctrine-of-frustration/> accessed 4 March 2024
[2]Taylor v Caldwell [1863] 3 Best & S. 862(QB)
[3]Krell v Henry [1903] 2 ER Rep 740 (KB)
[4]Satyabrata Ghose v Mugneeram Bangur & Co. (1954) 44 AIR
[5]Indian Contract Act 1872, Sec 32
[6]Indian Contract Act 1872, Sec 56
