INTRODUCTION
As a general norm, contracts are absolute. When a man binds himself to a contract, he is to be held liable for the obligations assumed by him under such a contract. In a case as early as 1647, in Paradine v. Jane[1] the rule of common law, that the performance of absolute promises is not excused by the mere supervening impossibility of performance was established,
“but when the party by his contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. And therefore if the lessee covenant to repair a house, though it be burnt by lightning, or thrown down by enemies, yet he ought to repair it.”
Furthermore, the sanctity of a contract is paramount and as far as possible, this sanctity is upheld by the courts.
Be that as it may, there arises a need for an exception to discharge parties from the contract in case a supervening event renders the performance of the contract impossible by making contractual obligation as radically or fundamentally different from what has been agreed in the contract. The Law cannot compel a man to do what he cannot possibly perform and thus, to hold the parties to their duty under the contract in such a case would be unreasonable. This ensures that justiceand fairness are not sacrificed at the altar of purely mechanistic certainty.[2]
The Doctrine of Frustration acts to relieve parties from their contractual obligations when without fault of either party, a supervening event has rendered the performance of the contract impossible. When an event so vitally affects the contract, to the extent that it makes performance impossible, the contract is said to be frustrated.
While the Doctrine itself has been derived from Roman Law, it was applied for the first time in Common Law in the decision of the Court of Queen’s Bench given by Blackburn J. in the case of Taylorv. Caldwell[3], where a music hall was destroyed by fire, without fault of either party, both the parties were excused as it was held that the performance under the contract was depended upon the existence of the hall.
Further, inKrell v. Henry[4], based on the principle held in Taylor v Caldwell, subsequent events rendered the purpose for which the contract was formed frustrated.
Lord Radcliffe in the leading House of Lords decision of Davis Contractors Ltd v.Fareham Urban District Council[5]stated that:
“Frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.”
DOCTRINE OF FRUSTRATION IN INDIA
The Doctrine of Frustration finds ground in India under Section 56 of The Indian Contract Act, 1872 which states:
- Agreement to do impossible act.-An agreement to do an act impossible in itself is void.
Contract to do an act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawful.— Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.
IMPOSSIBILITY OF PERFORMANCE
Section 56 of the Indian Contract Act deals with the agreement to do an act which cannot be performed. It operates both due to the initial impossibility and the subsequent impossibility of performance.
Initial impossibility is based on the principle that any agreement to do an impossible act is void. For that reason, the agreement itself never amounted to a contract. Subsequent impossibility is based on a supervening event that renders performance under the contract impossible or unlawful after the contract is made and thus, the contract becomes void when such an act becomes impossible or unlawful.
It not only renders void all agreements to do acts that are impossible but goes on further to envisage a situation wherein the act itself has become either unlawful or impossible. It states that any act, which was to be performed after the contract was laid, which then becomes either impossible or unlawful without default of either party, shall be void.
When a supervening event or unforeseen circumstance strikes at the very root of the contract, it renders performance not only impossible but also radically different from what had been envisaged by the parties while forming the contract.
In Satyabrata Ghose v. Mugneeram Bangur & Co.[6], the Supreme Court of India was of the opinion that,
“15. …In deciding cases in India the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in section 56 of the Contract Act taking the word “Impossible” in its practical and not literal sense…”
Performance under the contract may not be impossible, but if it is vitally and fundamentally different from the view of the object and purpose of the parties while forming the contract, it radically changes the existing contractual obligations. Not to mention, it may as well be impractical to carry out contractual obligations in light of the unforeseen circumstances. To hold them to the contractual stipulation considering the changed circumstances would be unjust. It discharges the contract by reason of supervening impossibility or illegality of the act.
APPLICATION
It is pertinent to note, however, that the Doctrine is applicable only without default from either party. It discharges both parties equally from their performance under the contract automatically by the operation of law.
It cannot be lightly invoked for dissolving a contract and to ensure this the application is very narrow. Economic hardship and commercial difficulty are not equitable to impossibility. Even themere increase in prices or delay in performance would not warrant frustration.
DOCTRINE OF FRUSTRATION AND FORCE MAJEURE
Due to the COVID-19 Pandemic, Contractual relationships are severely affected and parties today are increasingly looking for a way out of their existing contracts. Although the intention is to save innocent parties from events over which they have no control, Frustration is a positive law which operates automatically to discharge the contract whereas, Force Majeure, is a contractual provision that discharges parties from performing their contractual obligations.
Generally, Force majeure clauses include events such as fire, natural calamities like floods and earthquakes, war, epidemics, acts or omission of the Government, and so forth. Depending upon the contractual stipulation, the global pandemic may be deemed as a Force majeure event.
Frustration of the contract renders performance of the contract impossible, and thus, it operates to discharge the parties from the contract while force majeure which is a contractual stipulation, temporarily suspends the obligations of parties under the contract. It usually does not terminate the contract until such a stipulation has been given under the contract considering the time the force majeure event is in place.
Force majeure can be invoked when an unforeseen event beyond the control of the parties prevents the performance of the obligation under the contract. While the application of the Doctrine of Frustration could allow parties a way out of the contract if the performance has become impossible, Force majeure would allow a way out of contractual obligations for the period the force majeure event is in place.
CONCLUSION
The Doctrine of Frustration operates to save innocent parties if a supervening event has rendered performance of the contract impossible or radically different from what was envisaged by parties at the time of forming the contract.
By-
Bhavika Sharma
Amity Law School, Noida
[1] [1647] EWHC KB J5
[2]Alliance Concrete Singapore Pte Ltd v. Sato Kogyo(S) Pte Ltd[2014] SGCA 35
[3] (1863) 3 B & S 826
[4][4][1903] 2 KB 740
[5] [1956] AC 696 (“Davis Contractors”) at 729
[6] 1954 AIR 44
Previous post: https://desikanoon.in/decoding-youtuber-gaurav-tanejas-allegations-on-air-asias-policieswhat-is-flap-3-and-flap-4-landing/