THE LEGAL WATCH
Trusted Contract Advisory
TLW - Contract Awareness Initiative
TLW - Legal Awareness Initiative
When a contract is initially valid but becomes subsequently void, due to happening of a certain event. These circumstances are outside the control of the parties to the contract. Such a contract becomes void contracts. The parties to the contract are discharged due to impossibility of performance of the contract. This is known as doctrine of frustration. Certain instances where parties to a contract are discharged by supervening impossibility are as follows:
Destruction of Subject Matter:- Parties to a contract are discharged when subject matter, essential to the contract is destroyed. The subject matter is destroyed without the fault of any party to the contract.
Death or Incapacity to Contract:- According to section 37 of the Indian Contract Act, when promisor dies before the performance of the contract, the representatives of the promisor are liable to discharge the contract. One exception to this law is when the personal skill of the promisor is required for the performance of the contract. In cases, the contracts are discharged due to impossibility as to the performance of the contract.
Change of Law:- A valid contract becomes a void contract when the laws governing the subject matter of the contract are changed. For instance, a ban on the sale of liquor in a particular state would make all the contracts related to the purchase and sale of liquor void.
Declaration of War:- If a war is declared against a country then all the contracts with that country becomes void. Even if the contracts are valid before the outbreak of war, they become void subsequently
Non-existence or non-occurrence of an event:- When certain things essential to the contract ceases to exist the parties to the contract are discharged from the performance of the contract.
The performance of obligations under a contract may be hindered by unexpected supervening events, leading to contractual uncertainties. The doctrine of frustration paves the way for a just consequence of such an unfortunate event, which has happened without any fault of the contracting parties. The doctrine fills the void in a contract regarding supervening events, based on principles of fairness and equity. Considering the large implications on the obligatory and binding nature of a valid contract, it becomes important to analyse the factors that guide the courts to determine its application. Unlike common law, the Indian Contract law explicitly incorporates the doctrine of frustration under section 56 of the Contract Act. However, the evolution of this doctrine in India has been greatly influenced by English law. This paper attempts to restate the law on the doctrine of frustration as applicable in India.