When a party is unable to perform a contract, being an impossible act, there is no breach
When a party is obligated to perform an act which becomes an impossible one under Section 56 of the Indian Contract Act, 1872, there is no breach of contract. This was held by the Hon’ble High Court at New Delhi in the matter of New Delhi Municipal Council v. Manohar Stone Crushing Co. & Anr., RFA No. 341 of 2006, on 1st October, 2018.
Challenge:
A contract was entered into between the parties vide a letter dated 11.05.1992 whereby the Respondent/Defendant had to supply stone grit and stone dust to the Appellant/Plaintiff for a period of 6 months commencing from the date of the said letter for an amount specified therein. As the Respondent failed to supply the requisite quantity, it was served multiple notices to resume supply and the said contract was rescinded by the Appellant. Ultimately, for the supply of the balance quantity, the Appellant had to float another tender, resulting in loss. The Appellant filed a suit for recovery of damages against the Respondent. The Respondent contested that the contract between the parties stood frustrated because the Hon’ble Supreme Court, vide its orders, prohibited stone crushing with effect from 15.08.1992. Since the stone crusher of the Respondent was closed and Respondent could not undertake the activity required to perform his part of the contract in light of the orders of the Hon’ble Supreme Court, the Trial Court dismissed the suit for recovery of damages.
Held:
The Appellate Court held that since it was mandatory for a supplier to have its own stone crusher and due to the prohibition on all stone crushing activity with effect from 15.08.1992 as directed by the Supreme Court, the contract of supply of stone grit and stone dust stood frustrated as per Section 56 of the Indian Contract Act, i.e. agreement to do impossible act. The breach of contract was analyzed in two parts by the Hon’ble Court; firstly, whether there was breach till 15.08.1992 and secondly, if there was any breach post 15.08.1992. For the first part, it was seen that in the absence of any specified contracted quantity which the Respondent was obligated to supply before 15.08.1992 under the subject contract, there was no breach of contract. In the second period, i.e. post 15.08.1992, the contract between the parties stood frustrated. Hence, the appeal was dismissed, being devoid of merit.