FRUSTRATION OF CONTRACT

 Hello friends today we will discuss about the concept termed as frustration of contract. It is originated from the Roman laws. In India, it is defined under Sec 56 of the Indian Contract Act, 1872, which says that an agreement to do an impossible act is itself void. Further, in case a contract was possible at the time of agreement but becomes impossible afterwards, it also comes under this purview. Moreover, it also contain provisions for compensation in case the other party having knowledge about the impossibility of a particular act, still enters into a contract for the performance of the same.

Sometimes, people get confused between Sec 32 and Sec 56 of the Contract Act, however, there is a thin line between the two. Sec 32 of the Act deals with the contingent contract whereby happening or non-happening of an event governs the contract thereby making it as a void contract in case of such violation, in contrast under Sec 56 of the Act, as already discussed, the performance becomes void due to supervening impossibility. The test of frustration is an objective phenomena where the parties has non role to play.

Instances for invoking doctrine of frustration

Subject matter

When Subject matter of the contract itself is physically destroyed. Even if entire subject matter is not destroyed but only a portion of it is destroyed, then also it can be frustrated. In one case, where the cargo was destroyed, in such an event the cargo owner was absolved/discharged from paying the freight. Another example, where a certain area was rented out for a particular event, however before the actual event, the said area was destroyed due to fire, parties were discharged due to concept of frustration.

Change of law

Suppose the law at the time of entering into a contract is not in force afterwards or it changes over course of time, then also the parties may plead frustration of contract. However, the change must be about the basis of the contract.

 

Permanent and not temporary condition

Mere delay of the performance due to some supervening condition shall not be understood as the frustration as such the latter is applicable only when performance becomes impossible altogether. It means that there must be a condition making the performance of the contract permanently impossible as against merely a temporary impossibility.

Purpose becomes redundant

In such cases, even if the performance is possible, then also contract stands discharged as the mere object/purpose has been frustrated.

Delay where time is the essence

 In cases, where time is the essence of the contract and there is an abnormal delay in performance of the contract, then also frustration of the contract may be pleaded. However, it does not cover those cases where the delay if any is already been contemplated by the parties or was a normal thing in that particular trade.

Death / Incapacity of a party

In case, where personal performance / involvement of a party is requirement, and that person dies or is unable to perform due to some illness or any reason whatsoever, then also the parties may plead frustration of the contract. For example, a singer enters into a contract to perform for a particular event, however, just before the said event, he is prevented from performing say due to an illness, then the contract is said to be frustrated.

CONCLUSION

In today's scenario relating to the COVID-19 in particular, different courts has observed that no doubt the performance of many contracts has been delayed due to COVID, however, all the contracts need not be weighed in same manner. Each contract has to be seen in lieu of its facts and circumstances, and thus, mere delay of a particular event may not be covered simply under the frustration of contract and thus each case is to be seen separately. This is the reason as to why the banks and other financial institutions are allowed to institute recovery proceedings after the expiry of the moratorium periods. 

I hope I have covered every aspect with respect to the topic under discussion. For any query feel free to write below in our comment section.