Doctrine of Frustration under the Indian Contract Act

Lawxpertsmv India
Oct 13
4 min read

Doctrine of Frustration under the Indian Contract Act, 1872 |Notes for Judicial Service Examination

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- serves as a safeguard against unforeseen and uncontrollable events

Meaning and Origin : The doctrine of frustration has its roots in English common law, particularly the case of Taylor v. Caldwell (1863), where a contract for the use of a music hall was held frustrated when the hall burned down accidentally.

Legal provision : Section 56 of the Indian Contract Act, 1872 (ICA).

Concept : It provides relief to contracting parties when performance of a contract becomes impossible, illegal, or radically different from what was originally agreed upon due to unforeseen circumstances beyond their control.

Exception to General Rule : The doctrine acts as an exception to the general rule that contracts must be performed (pacta sunt servanda). It recognizes that sometimes, events occur after the formation of a contract that make performance impracticable or meaningless, and in such cases, the law excuses the parties from further obligations.

Statutory Provision: Section 56, ICA 1872 : Section 56 of the Indian Contract Act states:

“An agreement to do an act impossible in itself is void.” “A contract to do an act which, after the contract is made, becomes impossible or unlawful, becomes void when the act becomes impossible or unlawful.”

This section therefore covers two kinds of impossibility:

Initial impossibility – where the act was impossible from the beginning.

Subsequent or supervening impossibility – where the act becomes impossible after the contract is formed.

Key Elements of the Doctrine of Frustration

Unforeseen Event: The event causing frustration must be unexpected and beyond the contemplation of both parties at the time of contract formation.
No Fault of Either Party: The frustrating event should not arise due to the act, omission, or negligence of any of the parties.
Impossibility or Illegality: Performance must have become impossible, illegal, or fundamentally different from what was initially promised.
Radical Change in Circumstances: The event must alter the nature of the contract so radically that enforcing it would be unjust or meaningless.
Partial Impossibility Not Sufficient: Mere hardship, delay, or inconvenience is not enough — the change must be so substantial that it defeats the contract’s purpose.

Grounds for Frustration

Destruction of Subject Matter: When the essential thing required for performance is destroyed. Example: Taylor v. Caldwell (1863) – the concert hall burned down, making the contract impossible.
Death or Incapacity: When a party whose personal skill or qualification is crucial dies or becomes incapable. Example: Robinson v. Davison (1871) – pianist’s illness discharged her from the contract.
Change in Law: When a new law or government order makes performance illegal. Example: Rozan Mian v. Tahera Begum – if a law prohibits the agreed activity, the contract is void.
Change of Circumstances: When the fundamental purpose of the contract is destroyed, even if performance is still technically possible.Example: Krell v. Henry (1903) – renting a room to watch the coronation procession was frustrated when the coronation was cancelled.
War or Political Events: Outbreak of war, embargoes, or political upheavals may make performance impossible. Example: Contracts between citizens of enemy nations become void.

Doctrine of Frustration and Force Majeure

Force Majeure refers to contractual clauses listing specific events (like natural disasters, war, pandemics, or government orders) that excuse non-performance.
It is a contractual concept, while frustration is a statutory concept under Section 56.
If a force majeure clause exists, courts first interpret that clause; if none exists or it is insufficient, Section 56 may apply.
Indian courts recognize that both concepts overlap — both relieve parties when events beyond control make performance impossible.

Leading Judicial Decisions | Satyabrata Ghose v. Mugneeram Bangur & Co. (1954) | Facts: A land development project was delayed due to government requisition during wartime.

Held: The Supreme Court held that frustration applies not only when performance is physically impossible but also when it becomes impracticable or meaningless.
Principle: The change must strike at the root of the contract.
Murlidhar Chiranjilal v. Harishchandra Dwarkadas (1962) | Held: For frustration to apply, there must be a fundamental change in circumstances beyond the control of the parties. Government requisition making performance impossible amounted to frustration.
Industrial Finance Corporation of India Ltd. v. The Cannanore Spinning & Weaving Mills Ltd. (2002) | Held: The doctrine applies only when an unexpected event beyond the parties’ control makes performance impossible and unavoidable.
Taylor v. Caldwell (1863) – English Law Influence
Destruction of subject matter frustrated the contract automatically.

Effects of Frustration | Automatic Termination: The contract becomes void immediately upon the occurrence of the frustrating event; no formal notice is needed.

Discharge of Parties: Both parties are released from further performance.
No Fault Requirement: Frustration operates regardless of intention or negligence; it arises purely from circumstances.
Restitution (Section 65, ICA): Any benefit received before frustration must be returned or compensated for, to prevent unjust enrichment.

Frustration vs Impossibility

Aspect	Impossibility	Frustration
Nature	Physical or legal impossibility from the outset or later	May include cases where performance is possible but pointless or impractical
Scope	Narrower concept	Broader; includes loss of purpose
Example	Concert hall destroyed by fire	Coronation cancelled (Krell v. Henry)

Limitations of the Doctrine

It cannot be invoked for commercial hardships or financial losses.
It does not apply if the parties have expressly allocated risk for such events in the contract.
The doctrine cannot be used as an excuse for negligence or failure to perform.

Conclusion | The Doctrine of Frustration under Section 56 of the Indian Contract Act, 1872 serves as a safeguard for fairness and equity in contractual relationships. It ensures that no party is compelled to perform a contract that has become impossible, unlawful, or radically different due to unforeseen events.

However, the courts apply this doctrine narrowly and cautiously, ensuring it is used only in genuine cases of impossibility and not as a means to escape contractual obligations. Ultimately, it maintains the balance between sanctity of contract and justice in unforeseen hardship.