Frustration of contract – the position in India #indianlaws

The doctrine of frustration is an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done

In the judgment as passed by the Supreme Court in Satyabrata Ghose vs. Mugneeram Bangur & Co. and Another [Dated 16.11.1953, reported as AIR 1954 SC 44 = 1954 SCR 310], (Satyabrata Ghose case) the Court dealt with the doctrine of frustration of contract. The present case is worth including in this category of timeless ratio as the matter involves the understanding the scope of frustration of contract.

The dispute in the present matter pertained to the question as to whether a contract for sale of land was discharged and came to an end by reason of certain supervening circumstances which affected the performance of a material part of it. The court while adjudicating the above issue was also sought to distinguish the law relating to frustration of contract as applicable in England and in India.

The first issue was taken up to interpret or rather understand the true scope and effect of Section 56 of the Indian Contract Act and to what extent, if any it incorporates the English rule of frustration of contracts. Section 56 relates to performance of contracts dealing with a circumstance under which performance of a contract is excused or dispensed with on the ground of the contract being-void. The first part of Section 56 lays down the law in the same way as in England, whereas the second part enunciates the law relating to discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done.

The Court observed that the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of section 56 of the Indian Contract Act. In regard to application of English legal position, it was clarified that in deciding cases in India the only doctrine that is to be seen is 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. Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties.

Although in English law these cases are treated as cases of frustration, in India they would be dealt with under section 32 of the Indian Contract Act which deals with contingent contracts or similar other provisions contained in the Act. The relief is given by the court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement.