The doctrine fills the void in a contract regarding supervening events based on principal of fairness and equity. A frustration of contract is a contract that subsequent to its formation and without fault of either party is incapable of being performed due to an enforcement event. Job Post: Assistant Manager [Legal] @ RHFL, Chennai: Apply Now. But section 56 only deals with case of subsequent impossibility as opposed to case of initial impossibility. – The doctrine of frustration of contract 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 that case, it would be impossibility ab initio. Dispute Resolution - Commercial Litigation, Dispute Resolution - International Arbitration. Initial impossibility [S.56] Section 56 of The Indian Contracts Act, 1872 begins by laying down a straightforward principle that “an agreement to do an act impossible in itself is void”. It leads to a pertinent question as to what is such impossible act that would lead to frustration of contract. It is of two types; 1. It basically means, a contract could not be executed because of such an event that was beyond the control of both the parties. Thus, a contract would come under the purview of Section 56 of the Contract Act even if it is not an absolute impossibility, but the contract has fundamentally changed, which the parties had not contemplated at the time of the agreement. The doctrine of frustration has been envisaged in Chapter IV in Section 562 of the Contract Act.  Whilst entering into various commercial documents, parties seldom foresee their contract getting frustrated. It was observed that the impossibility contemplated by section of the contract is not confined to something which is not humanely possible. Indeed, since the very aspect of a contract getting frustrated may not be anticipated by the parties whilst executing the contract. While enunciating the law laid down under section 56, Mukherjee J. explained that the first paragraph of section 56 is on the same lines as of Common Law, which discharges the obligation to perform because of inherent impossibility attached to it. A contract is an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. This article is authored by Navneet Bhardwaj, B.A. If the event becomes impossible, such contracts become void", 7 Inder Pershad versus Campbell; (1881) 7 Cal. When a party to a contract is unable to perform its contractual obligation due to a supervening impossibility which the party could not prevent, then the defaulting party may be excused from performance of the contract in accordance with section 56 of the Indian Contract Act, 1872 or if the contract has a force majeure clause then in accordance with such clause - what is popularly referred … It is covered by Section 56 of … Such defences are generally perceived as sham or a tactic by one party to excuse the performance of a contract. Section 56 of the Indian Contract Act 1872 deals with different situations when it becomes impossible to perform the contract impossibility maybe at the time of making of contract for agreement or maybe supervening impossibility or illegality, Section 56 of the act provides Section 56 [2] is dealt with when matter is not determined to the intention of parties.  In the context of this article we are concerned with the second part of the Section 32 of the Contract Act. Contract to do 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. As per Section 56 , an agreement to do an impossible act is itself void. Events which make the performance of the contract impossible subsequent to the formation of the contract known as a supervening or subsequent impossibility. “An agreement to do an act impossible in itself is void.”. The Section is reproduced “An agreement to do an act impossible in itself is void”. The concept of frustration of contract is principally based on impossibility of performance of the contract. The aspect of discharge of contract has to, therefore, be analysed within the contours of Section 56 of the Contract Act. Supervening impossibility is the impossibility arising after the formation of a contract. When frustration occurs, it avoids the contract itself and discharges both parties automatically8. LL.B (Hons.) If you found any in this website, please report us at info@lawcorner.in. Happening of event which rendered the contract impossible to performance but would not include hard and difficult case of abnormal rise or fair. (1954) S. C. 44 and Alopi Prasad vs Union of India A.R. factors and circumstances that the court consider while determining the applicability or non-applicability of section 56 has been dealt with in detail in this paper. The second paragraph has the effect of turning into general rule, the limited exceptions under the English Law. Define Doctrine of supervening impossibility and Explain the effects on the performance of the contract. Subscribe to our newsletter and get all updates to your email inbox! This principal has been upheld in Satyabrata Ghose’s case (supra), Inder Pershad versus Campbell7 and other judgement of English Courts. We hold, therefore, 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 this case, the defendant company promised to sell the plaintiff a plot of land after developing by its constructing the roads and drains. Section 56 of the Act, declared such contract as void. Thus, in terms of Section 32 of the Contract Act, if the designated event on which the contract is contingent becomes impossible, such contract becomes void.  The doctrine of frustration qua the Section 56 of the Contract Act has been discussed extensively in the judgement of Supreme Court of India("SC") in the case of Satyabrata Ghose versus Mugneeram Bangur & Co & Anr5 and the same has been since followed in India. The performance of an act may be impracticable and useless from the point of view of the object and weather it form’s the biases of the contract rightfully has to be decided by the court. The law governing the contracts is embodied in the Indian Contract Act, 1862 ("Contract Act"). Doctrine of frustration as enshrined in section 56 of the Indian contract act 1872 deals with those case where the performance of contract has been frustrated and the performance of it is has become impossible to perform due to any unavoidable reason or condition. ‘Impossibility’ referred therein includes practical impossibility which goes to the root of contract or affects the object or purpose of the contract, i.e. Mukherjee J. further state while referring to the second paragraph to section 56. That the impossibility should be by reasons of some event which the promisor could not prevent. A radical change in the fundamental assumption, on the basis of which contract was entered into, is required to make the performance impracticable, illegal or impossible without the default of either of the parties.  The consequence of a contract getting frustrated is that the contract becomes ‘void’. Under Section 56, the court can proceed to grant relief on the ground of subsequent impossibility when the very foundation of the contract becomes upset by the happening of an unforeseen event which was not anticipated by the parties at …  The concept of frustration of contract dates centuries back to the ‘Doctrine of Frustration’ and has, thereafter, evolved in the English Laws. Supervening impossibility or illegality involving action contrary to law or public policy. "The doctrine of frustration comes into play when a contract becomes impossible of performance, after it was made, on account of circumstances beyond the control of parties"‐ Mr (Retd) Justice B K Mukherjea1. However, the term ‘frustration of contract’, explicitly, is not found in the Contract Act. The Supreme Court, while applying the doctrine, held that the requisitioning of the area had not substantially prevented the performance of the contract as a whole and therefore, the contract had not become impossible within the meaning of section 56. The doctrine of frustration of contract is an aspect or part of the law of discharge of contract by reason of a supervening impossibility or illegality of the act agreed to be done. Destruction of subject matter by five explosive spoilage of dates by water and sewage due to sinking of ship. Section 56 of the Indian Contract Act, 1872 stipulates: "Agreement to do impossible act: An agreement to do an act impossible in itself is void. factors and circumstances that the court consider while determining the applicability or non-applicability of section 56 has been dealt with in detail in this paper. Section 56 of the Indian Contract Act lays down: “An agreement to do an impossible act is void”. 5000/- Stipend to New... What is Article 370? —An agreement to do an act impossible in itself is void." In simple words, on the happening of an event which makes the contract impossible or unlawful, the contract stands determined and discharged. The performance of obligation under a may be hindered by unexpected supervening events leading to contractual uncertainties. It say that any act which was to performed other the contract was made become impossible or unlawful to perform. It was held by the court that Section 56 applies in the present dispute and further observed that the contract can get frustrated by the illegality of the act agreed to be done or by the reason of supervening impossibility. This doctrine is treated as an expectation to the general rule which provides for compensation in case of breach of contract.  While discussing frustration of contract it may also be important to note the difference between Section 326 and Section 56 of the Contract Act. For instance, an agreement to discover treasure by magic, because of its impossibility of performance, is void. Role Of UNHCR In Protection Of Refugee And Other Displaced Person? Section 56, of the contract act, deals with the impossibility of performance. Read PDF Article 61 Supervening Impossibility Of Performance performance of the contract and thereby contract is discharged, (Section 56, Indian Contract Act, 1872). The doctrine of frustration incorporated under section 56 of the Indian contract act provides a way out to the party when the performances has becomes impossible owing to any supervening events without their fault. Agreement to do impossible act.—An agreement to do an act impossible in itself is void. While deciding whether or not the contract has been frustrated, the courts objectively look to the construction of the contract, the effect of the changed circumstances on the parties’ contractual obligations, the intentions of the parties and the demands of justice. A thorough explanation of the section can be sought from the celebrated and seminal decision of Satyabrataghose v/s MugneeramBangur and Co. What is Compoundable Offence And Non Compoundable Offence? The SC in Satyabrata Ghose’s case (supra) has held that the "doctrine of frustration of contract 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". GENESIS OF FRUSTRATION OF CONTRACT. Compensation for loss through non-performance of act known to be impossible or unlawful: Where one person has promised to be 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. However, events such as change in law that leads to illegality or impossibility of performance are situation or intervening circumstances which fundamentally changes the contract, which in our view, lead to contract getting frustrated. Section 56 covers only ‘supervening impossibility and not implied terms’.  Section 32 postulates two things (i) the contingent contract is enforceable only on the happening of an uncertain event; and (ii) if the event, on which the contract is contingent which parties have contemplated at the time of entering the contract, becomes impossible, the contract becomes void. The doctrine of frustration is an aspect and 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, 1872. 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