What is Doctrine of frustration of contract with illustrations?

 The doctrine of frustration means that when, after a valid contract is made, a supervening event occurs without fault of either party, and that event makes performance impossible, unlawful, or fundamentally different from what the parties originally contemplated, the contract becomes void under Section 56 of the Indian Contract Act, 1872.

Meaning

Section 56 embodies the rule that the law does not compel a person to do what has become impossible. Frustration is therefore a mode of discharge of contract by operation of law, not by choice of the parties.

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What is basic concept of doctrine of frustration with reference to Indian contract act?

 

The Doctrine of Frustration is a legal concept in contract law that allows for the discharge of contractual obligations when unforeseen events render performance impossible. It is codified in Section 56 of the Indian Contract Act, 1872, which states that agreements to do impossible acts are void, and when a contract becomes impossible or unlawful due to uncontrollable events, the contract is void. The Doctrine of Frustration is an exception to the general rule that obliges parties to honor their contractual promises, providing a means to harmonize the integrity of contracts with equitable considerations. The doctrine applies when the performance of a contract has been frustrated, and the performance of it has become impossible to perform due to any unavoidable reason or condition. The doctrine makes any contract or agreement which is incapable of being performed or becomes so after it is made, void and hence, discharges the parties from their liabilities mentioned in the contract. The Doctrine of Frustration has evolved over time and has been incorporated into Indian law through Section 56 of the Indian Contract Act, 1872.

Important judgments on doctrine of frustration of contract :

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Whether court should grant restitution to a party he is equally or more responsible for the illegality in comparison to the defendant?

 Hence, in adjudicating a claim of restitution under Section 65 of the Indian Contract Act, the court must determine the illegality which caused the contract to become void and the role the party claiming restitution has played in it. If the party claiming restitution was equally or more responsible for the illegality (in comparison to the defendant), there shall be no cause for restitution. This has to be determined on the facts of each individual case. {Para 52}

IN THE SUPREME COURT OF INDIA 

CIVIL APPELLATE JURISDICTION

Civil Appeal Nos. 1447-1467 of 2016 and with Civil Appeal No. 893 of 2019

Loop Telecom and Trading Limited Versus Union of India and Anr.

Coram: Dr. Dhananjaya Y. Chandrachud, J; Surya Kant, J; Vikram Nath, J. 

Author: Dr Dhananjaya Y Chandrachud, J

Dated: March 03, 2022

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Whether doctrine of frustration of contract is applicable to leases of immovable property?

 We are unable to agree with counsel for the appellant in the present case that the relation between the appellant and the respondents rested in a contract. It is true that Court of Wards had accepted the tender of the appellant and had granted him a lease on agreed terms of lands of Dada Siba Estate. But the rights of the parties did not after the lease was granted rest in contract. By S. 4 of the Transfer of Property Act the chapters and sections of the Transfer of Property Act which relate to contracts are to be taken as part of the Indian Contract Act, 1872. That section however does not enact and cannot be read as enacting that the provisions of the Contract Act are to be read into the Transfer of Property Act. There is a clear distinction between a completed conveyance and an executory contract, and events which discharge a contract do not invalidate a concluded transfer.

10. By its express terms s. 56 of the Contract Act does not apply to cases in which there is a completed transfer. The second paragraph of s. 56 which is the only paragraph material to cases of this nature has a limited application to covenants under a lease. A covenant under a lease 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. But on that account the transfer of property resulting from the lease granted by the lessor to the lessee is not declared void.

11. By the agreement of lease the appellant undertook to pay rent for the year 1947-48 and the Court of Wards agreed to give on lease the land in its management. It is not claimed that the agreement of lease was void or voidable. Nor is it the case of the appellant that the lease was determined in any manner known to law. The appellant obtained possession of the land. He was unable to continue in effective possession on account of circumstances beyond his control. Granting that the parties at the date of the lease did not contemplate that there may be riots in the area rendering it unsafe for the appellant to carry on cultivation, or that the crops grown by him may be looted, there was no covenant in the lease that in the event of the appellant being unable to remain in possession and to cultivate the land and to collect the crops, he will not be liable to pay the rent. Inability of the appellant to cultivate the land or to collect the crops because of widespread riots cannot in the events that transpired clothe him with the right to claim refund of the rent paid.

12. Authorities in the Courts in India have generally taken the view that s. 56 of the Contract Act is not applicable when the rights and obligations of the parties arise under a transfer of property under a lease.

13. In Tarabai Jivanlal Parekh v. Lala Padamchand MANU/MH/0046/1950 : AIR1950Bom89 it was held that monthly tenants of residential premises from whose occupation the premises were requisitioned continued to remain the monthly tenants of the landlord as before and that by reason of the requisition there was no eviction by title paramount or a frustration of adventure. The Court in that case observed that the doctrine of frustration did not apply where there is a lease whether the term is one for a fixed period or one which can be terminated by notice to quit, as the estate vested in the lessee by a lease is not extinguished by the order of requisition which is of a temporary nature.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 407 of 1965

Decided On: 01.03.1968

Dhruv Dev Chand Vs. Harmohinder Singh and Ors.

Hon'ble Judges/Coram:

G.K. Mitter, J.C. Shah and Vaidynathier Ramaswami, JJ.

Citation:  (1968) 3 SCR 339 

J.C. Shah, J.

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Whether doctrine of frustration is applicable to contracts for sale of land in India?

It is true that in England the judicial opinion generally expressed is, that the doctrine of frustration does not operate in the case of contracts for sale of land. The reason is that under English law such a contract creates, an interest in the property, and the rule of frustration can only put an end to purely contractual obligations; but it cannot destroy an estate in land which has already accrued in favour of a contracting party. According to the Indian law, which is embodied in Section 54 of the Transfer of Property Act, a contract for sale of land does not of itself create any interest in the property which is the subject-matter of the contract. The obligations of the parties to a contract for sale of land are, therefore, the same as in other ordinary contracts and consequently there is no conceivable reason why the doctrine of frustration should not be applicable to contracts for sale of land in India.

C--Contract Act, 9 of 1872, S. 56- Contract for sale of land-Land requisitioned by Government-Frustration of contract.

Where after a contract for sale of a house-site by development company, the land was requisitioned by the Government under the Defence of India Rules: Held, that the requisition order being of a temporary nature could not be said to have made the performance of the contract impossible and the contract had not been frustrated at all.

Supreme Court of India

Satyabrata Ghose vs Mugneeram Bangur & Co., And ... on 16 November, 1953

Equivalent citations: 1954 AIR 44, 1954 SCR 310

BENCH:

MUKHERJEA, B.K.

BOSE, VIVIAN

BHAGWATI, NATWARLAL H.

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