CHAPTER - V

DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
/. Introduction
2. Theories ofFrustration
(i) Theory ofImplied term
(ii) Theory ofJust solution
(Hi) Theory of foundation of the Contract
(iv) Construction theory
(v) Failure of Consideration theory
Practical Importance
Frustration and Mistake.
3. Indian Contract Act & Discharge by Impossibility
4. Supervening Impossibility -
(A) An Excuse
(a) Destruction ofsubject matter
(b) Non-existing of a state of things.
(c) Death or incapacityfor personal services.
(d) Change ofLaw.
(e) Out breach of War.
(B) Not An Excuse
(a) Difficulty of performance.
(b) Commercial impossibility.
(c) Failure of a thirdparty.
(d) Strikes, lockout and civil distrubance.
(e) SelfInduced impossibility.
5. Distinction between English & Indian Law.
 CHATPER - V

DISCHARGE BY IMPOSSIBILITY
OF PERFORMANCE

1. INTRODUCTION

The word "impossible" in Section 56 of the Indian Contract

Act, 1872 has not been used in the sense of physical or literal
impossibility. The performance of an act may not be literally
impossible, but it may be impracticable and unless from the point
of view of the object and which the parties had in view; and if an
untoward event or change of circumstances totally upsets the very
foundation upon which the parties rested their bargain, it can very
well be said that the promisor finds it impossible to do the act
which he promised to do.'

2. THEORIES OF FRUSTRATION

Much discussion is to be found in the cases as to the so-

called theoretical or juristic basis of the doctrine of frustration.
The first puzzle is why judges have devoted so mucn attention to
this question. Perhaps the reason is that they still feel the need to
justify in some way their departure from the doctrine of absolute
contracts. The second puzzle is to know exactly what the discussion

1. Satya Brata v. Mugneram, AIR 1954 SC 44. The principles laid

down in this case has been affirmed in Dhruv Dev V. Harmohinder
Singh, AIR 1968 SC 1024.
 [151]

is about. Two questions have become, perhaps inevitably, intertwined:

why are contracts frustrated, and when?'^ Discussions of the
juristic basis of the doctrine of frustration attempt sometimes to
justify the doctrine, and sometimes to evolve some general formula
for describing the conditions in which it operates. The main
theories of frustration are as follows :-

(i) Theory of 'Implied term'

The first theory is that the contract is discharged because it

impliedly provides that in the events which have happened it shall
cease to bind. This theory is put forward by Lord Lorebum in the
Tamplin case. "No court has absolving power"^ but the court will
not regard an obligation as absolute if the parties themselves did
not intend it to be absolute. If they "must have made their bargain
on the footing that a particular thing or state of things would
continue to exist ... a term to that effect will be implied.'"'

In a purely subjective form this theory is clearly untenable.

The parties often have no common view at all as to the frustrating
event. If one party is in a stronger bargaining position than the
other, he would probably not agree to discharge, while the other
would want it. Even if the parties could reach some agreement as

2. Thus in Davis Contractors Ltd. v. Fareham U.D.C., [1956] A.C.

696,729 Lord Radcliffe said that ':Frustration occurs whenever" the
changed circumstances make performance "radically different from
that which was undertaken." This seems to deal with the second of
the questions put in the text; but it can also be regarded as providing
an answer to the first: e.g. in National Carriers Ltd. v. Panalpina
(Northern) Ltd., [1981] A.C. 675,688,717.
3. Tamplin Case [1916]2 A.C. 397,404.
4. Ibid, at p 403.
 [152]

to the event, they would probably not agree to total, unconditional

discharge. As Lord Wright has said, "they would almost certainly
on the one side or the other have sought to introduce reservations
or qualifications or compensations."^

In fact Lord Lorebum did not put forward a purely subjective

version of the implied term theory. He said: "From the nature of
the contract it carmot be supposed that the parties as reasonable
men intended it to be binding on them under such altered
conditions. Were the altered conditions such that, had they thought
of them, they would have taken their chance of them, or such
that, as sensible men, they would have said, 'if that happens, of
course, it is all over between us'? What, in fact, was the true
meaning of the contract?"* But in this form, the implied term
theory loses its chief attraction, which is that frustration merely
gives effect to the intention of the parties themselves. There is an
element of contradiction in saying that the court has no absolving
power but that the court will absolve the parties if they would
have agreed to this course had they been sensible and reasonable
men. The role of the parties in bringing about frustration really
disappears. As Lord Radcliffe said in the Fareham case: "By this
time it might seem that the parties themselves have become so far
disembodied spirits that their actual persons should be allowed to
rest in peace. In their place there rises the figure of the fair and
reasonable man. And the spokesman of the fair and reasonable
man, who represents after all no more than the anthropomorphic

5. Denny, Mott Case [1944] AC. 265, 275; cf. Shell U. K. Ltd. v.
Lostock Garages Ltd., [1976) 1 W.L.R. 1187, 1196.
6. [1916)2 A.C. 397, 404.
 [153]

conception of justice, is and must be the court itself."^

(ii) Theory o f Just solution'

Lord Sumner once described the doctrine of frustration as

"a device by which the rules as to absolute contracts are
reconciled with a special exception which justice demands."* Lord
Wright in the Denny, Matt case, found "the theory of the basis of
9

the rule" in this statement; he added that the doctrine of frustration

did not depend on the possibility of implying a term, but was "a
substantive and particular rule which the common law has evolved."'"
And in the Constantine case he said: "The court is exercising
powers, when it decides that a contract is frustrated, in order to
achieve a result which is just and reasonable."" This "just
solution" theory does not purport to explain why the courts
sometimes abandon the doctrine of absolute contracts: it simply
says that they do so. The theory should not, moreover, be
interpreted to mean that the courts can do what they think just
whenever a change of circumstances causes hardship to one party:
it does not supersede the strict rules which determine the scope of
the doctrine of frustration.'^ Nor does it determine the type of

7. [1956] A.C. 696, 728.

8. Hirji Mulji v. Cheong Yue, SS. Co. Ltd. [1926] A.C. 497,510. In the
Bank Line Case [1919] A.C. 435, 455 he had supported the implied
term theory.
9. [1944] A.C. 265,275.
10. Ibid, at p. 274.
11. [1942] A.C. 154,186; cf. National Carriers Ltd. v. Panalpina (North-
ern) Ltd., [1981] A.C. 675 - 606
12 British Movietonenews v. London & District Cinemas, [1952] A.C.
166; ante, p. 649.
 [154]

relief which can be given. When a contract is frustrated, both

parties are at common law discharged, though the "just solution"
might be an apportionment of loss.

(iii) Theory of 'Foundation of the contract'

This theory was stated by Lord Haldane in the Tamplin

case. "When people enter into a contract which is dependent for
the possibility of performance on the continued availability of a
specific thing, and that availability comes to an end by reason of
circumstances beyond the control of the parties, the contract is
prima facie regarded as dissolved .... Although the words of the
stipulation may be such that the mere letter would describe what
has occurred, the occurrence itself may yet be of a character and
extent so sweeping that the foundation of what the parties are
deemed to have had in contemplation has disappeared, and the
contract itself has vanished with that foundation."" In W. J.
Tatem Ltd. v. Gamboa^* Goddard J. regarded this as "the surest
ground on which to rest the doctrine of frustration."

At first sight this theory has the merit of simplicity as it

does not involve speculation as to the intention of the parties. It is
particularly appropriate where performance depends on the continued
availability of a specific thing. But in other cases the metaphor
"foundation" is unhelpful. How can one tell whether passage
through the Suez Canal is the "foundation" of a charterparty ?
What is the "foundation" of a contract in which the parties take a
deliberate risk as to the continued availability or existence of a

13. [1916]2 A.C. 397; 406. Lord Haldane's was a dissenting speech.
14. [1939]1 K.B. 132, 137.
 [155]

specific thing or of some state of affairs? Such doubts as to what

is the "foundation" of the contract can, in the last resort, only be
resolved by construing the contract. If this is so, there is no real
difference between the "foundation" theory and the "implied term"
theory in its objective sense. Indeed, exponents of one sometimes
use the language of the other. Thus in the Tamplin case Lord
Lorebum, after stating the implied term theory, said that the court
"can infer from the nature of the contract and the surrounding
circumstances that a condition which is not expressed was a
foundation on which the parties contracted."*^

(iv) 'Construction' theory :

All the theories so far stated depend in the last resort on the
construction of the contract: to this extent, they "shade into one
another." '^ After stating the implied term theory, Lord Lorebum
proposed, as the ultimate test: "what, in fact, is the true meaning
of the contract?"*'^ Similarly, in Taylor v. Caldwell, Blackburn J.
said "the contract is not to be construed as a positive contract,
but as subject to an implied condition that the parties shall be
excused in case, before breach, performance becomes
impossible...."'^ Construing the contract and implying a term are in
these cases only alternative ways of describing the same process.

Similarly, the "foundation" theory raises a question of

construction whenever it is at all doubtftil what the "foundation" of

15. [1916] 2 A.C. 397,404.

16. National Carriers Ltd. v. Panalpina (Northern) Ltd., [1981] A.C.
675,693.
17. [1916] A.C. 397,404.
18. (1863) 3 B. & S. 826, 833.
 [156]

the contract is. And Lord Wright, in the course of stating the
"just solution" theory, said: "What happens is that the contract is
held on its true construction not to apply at all from the time
when the frustrating circumstances supervene."^' It seems that this
is the most satisfactory explanation of the doctrine of frustration.

(v) 'Failure of consideration' Theory :

This theory is sometimes used to explain why both parties

are discharged in the situation (discussed earlier in this Chapter^")
in which the supervening event makes the performance of only one
party impossible. Thus destruction of a specific thing may make
performance of the supplier's obligation impossible; but it has no
such effect on the recipient's obligation to pay, and it can be said
that he is discharged by failure of consideration,^* i.e. because he
does not receive the performance for which he bargained. In
England, however, these cases are explained on the ground that
the "common object" of the parties is frustrated. ^^ Moreover, in
so far as the present theory suggests that the failure of consideration
must be^^ it is plainly wrong since frustration can occur in cases
of partial destruction or after part performance; and the theory has
for this reason been rejected in the House of Lords. ^'^
19. Denny Mott case (1944) A.C. 265, 274; of The Eugenia (1964) 2
Q.B. 226, 239; The Siboen
20. Ante. p. 671.
21. Reststement, Contracts 2d., Introductory Note to Chap. 11, p. 310.
22 Hirji Mulji v. Cheong Yue 55. Co. Ltd., [1926] A.C. 497, 510;
ante, p. 671.
23 For total failure of consideration, see ante, pp. 685-686; post, p.
785.
24 National Carriers Ltd. v. Panalpina (Northern) Ltd., [1981] A.C.
675, 687,702.
 [157]

Practical Importance

It is sometimes asked whether this theoretical discussion has

any practical importance. It seems to have none. A number of
possibilities must be discussed.^^

(1) In W. J. Tatem Ltd. v. Gamboa Goddard J. said that

the contract would be frustrated although the parties foresaw that
the ship would be seized and detained. He even said: "If the
foundation of the contract goes, it goes whether or not the parties
have made a provision for it."^^ These statements could only be
made by an adherent of the "foundation" theory. But the first has
been doubted earlier in this Chapter, ^'^ while the second was
qualified later in the judgment: "Unless the contrary intention is
made plain, the law imposes this doctrine of frustration."^^

(2) In the Fareham case. Lord Reid said that no review

was possible of the arbitrator's decision on the "foundation"
theory, as the question whether the "foundation" had disappeared
was one of fact; while such review was possible on the "implied
term" or "construction" theories as implication of terms and
construction were questions of law.^' But a question of law would
be involved even on the "foundation" theory if the question: what

25. This seems to be the view of Lords Wilberforce and Roskill in

National Carriers Ltd. v. Panalpina (Northern) Ltd., [1981] A.C.
675, 693, 717. Lord Hailsham (ibid, at p. 687) regard "the theoretical
basis of the doctrine as clearly relevant to the point under discussion;
but he does not specify in what respect it is relevant.
26 [1939] 1 K.B. 132, 138.
27 Ante, pp. 680,676, note 57.
28 [1939] 1 K.B. 132,139.
29 [1956] A.C. 696,720.
 [158]

is the "foundation"? is itself one of construction. And after the

Tsakiroglou case^" it is difficult to argue that the right to review an
arbitrator's decision is restricted by any particular theory.

(3) In the Fareham case, Lord Reid also said that there
might be a practical difference between the "implied term" and
"construction" theories. On the latter theory "there is no need to
consider what the parties thought or how they or reasonable men
in their shoes would have dealt with the new situation if they had
foreseen it. The question is whether the contract which they did
make is, on its true construction, wide enough to apply to the new
situation: if not, then it is at an end."'" But in construing the
contract the court does not wholly disregard the intention of the
parties. The court may not have to ask: what would the parties
have said, had they thought of the frustrating event? But it does
have to ask in what circumstances did the parties intend the
contract to operate? It is only after this question has been
answered that the intention of the parties becomes irrelevant: that
is, it is not necessary to go on and ask whether they would have
agreed to discharge or to some compromise. But this question
does not arise under the implied term theory either, as fiiistration
at common law always results in total discharge of the contract.

Frustration and Mistake

A comparison is sometimes made between fi-ustration and

mistake which nullifies consent^^ because the supposed subject-

30 [1962] A.C. 93; see generally ante, p. 674.

31 [1956] A.C. 696, 721.
32 Ante, pp. 210-220.
 [159]

matter of the contract does not exist or is fundamentally different

from the subject-matter as it was believed to be. Thus in Krell v.
Henry^^ a contract for the hire of a room overlooking the route of
the coronation processions was frustrated when the processions
were later cancelled; in Griffith v. Btymer^^ a similar contract
was held void for mistake when the processions had already been
cancelled when the contract was made.

This analogy is interesting and sometimes helpful; but it

should not be pressed too far. Mistake and frustration are
"different juristic concepts," ^^ the one relating to the formation and
the other to the discharge of contracts. Events which frustrate a
contract would not necessarily avoid it if, unknown to the parties,
they had already happened at the time of formation. A contract of
carriage may be frustrated by the blocking of the route,''* but
would probably not be void for mistake on this ground. The law
seems to be less ready to hold a contract void for mistake than
discharged by frustration, perhaps because it is in general, easier
to be sure of present facts than to foresee the future.

33 [1903] 2 K.B. 740.

34 (1903) 19 T. L. R. 434; comparison of these two cases shows that
effects of frustration and mistake are not the same. In Griffith v.
Brymer the hirer recovered his advance payment, while in Chandler
V. Webster (ante, p. 685) he did not. If similar circumstances were
to recur, the powers of apportionment provided by the Law Reform
(Frustrated Contracts) Act 1943 would not apply to cases of mis-
take, though it is arguable that the equitable jurisdiction to rescind
on terms (ante. pp. 239-242) could produce similar results if the
contracts were only voidable in equity.
35 Constantine casse (1942) A.C. 154, 186; of Bell v. Lever Bros.
Ltd., (1932) A.C. 161, 237; Fibrosa case (1943) A.C. 32, 77.
36. As in the example given, ante, p. 661.
 [160]

(3) INDIAN CONTRACT ACT & DISCHARGE BY

IMPOSSIBILITY

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. Contract to do act afterwards becoming
impossible or unlawftil: 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, unlawftil, becomes
void when the act becomes impossible or unlawful. Compensation
for loss through non-performance of act known to be impossible
or unlawful: Where one person has promised to do something
which he knew, or, with reasonable diligence, might have known,
and which the promisee did not know, to be impossible or
unlawftal, such promisor must make compensation to such promisee
for any loss which such promisee sustains through the non-
performance of the promise.

Illustration :

(a) A agrees with B to discover treasure by magic. The

agreement is void.

(b) A and B contract to marry each other. Before the time

fixed for the marriage, A goes mad. The contract becomes
void.

(c) A contracts to marry B, being already married to C, and

being forbidden by the law to which he is subject to
practice polygamy, A must make compensation to B for
the loss caused to her by the non-performance of his
promise.
 [161]

(d) A contracts to take in cargo for B at a foreign port. A's

Government afterwards declared war against the country
in which the port is situated. The contract becomes void
when war is declared.

(e) A contracts to act at a theatre for six months in

consideration of a sum paid in advance by B. On several
occasions A is too ill to act. The contract to act on
those occasions becomes void.

Frustration may be defined as the occurrence of an intervening

event or change of circumstances so fundamental as to be
regarded by the law both striking at the root of the agreement, and
as entirely beyond what did the parties contemplate when they
entered into the agreement. If an event which could not be
foreseen by both parties supervenes, frustration would apply.

In Purmhotam Das v. Municipal Committee Patiala^'' it

was pointed out that Section 56 of the Indian Contract Act, 1872
does not deal with the cases in which an event, the parties took
it for granted will never happen does happen and makes the
performance of the contract impossible. If it be held that this
Section is exhaustive, no relief can be granted to any of the
parties on the happening of such an event, but this would be
against the very principle underlying the Section.

If the inability to perform the contract is due to the fault of

one of the parties, he cannot successfiilly plead fioistration. It is
also true that if the parties expressly contract with reference to the

37. AIR 1949 East Punjab 301.

 [162]

occurrence of the super-veining events, frustration is inapplicable.

But there is another type of case outside these rules. The parties
when they made the contract, may have foreseen the supervening
event as probable, but may have made no express provision with
respect to it. Here, if such event occurs, frustration can be
pleaded.^^

In Satyabrata Ghose v. Mugnee Ram,^^ Mukherjee J. stated

that Section 56 laid down a rule of positive law and did not leave
the matter to be determined according to the intention of parties.
Since under the Contract Act a promise may be express or
implied in cases where the court gather as a matter of construction
that the contract itself contains impliedly or expressly a term
according to which it would stand discharged on the happening of
certain circumstances the dissolution of the contract would talce
place under the terms of the contract itself and such cases would be
outside the purview of Section 56. Although in English law such
cases would be treated as cases of frustration, in India they would
be dealt with under Section 32. In a majority of cases, however,
the doctrine of frustration is applied not on the ground that the
parties themselves agreed to an implied term, which operated to
release them from performance of the contract. The court can
grant relief on the ground of subsequent impossibility when it finds
that the whole purpose or the basis of the contract was frustrated
by the intrusion or occurrence of an unexpected event or change
of circumstances which was not contemplated by the parties at the

38. Davis Contractors v. F.U. Dist. Council, [1956] A.C. 696.

39. AIR 1954 SC 44
 [ 163 ]

date of the contract. There would in such a case be no question

of finding out an impUed term agreed to by the parties embodying
a provision for discharge because the parties did not think about
the matter at all nor could possible have any intention regarding it.
When such an event or change of circumstances which is so
fundamental as to be regarded by law as striking at the root of the
control as a whole occurs it is the court which can pronounce the
contract to be frustrated and at an end. This is really a positive
rule enacted in Section 56 which governs such situations."

The first paragraph of the section lays doing that an agreement

to do an act impossible in itself is void. The expression 'impossible
in itself obviously refers to pre-existing impossibility i.e. even
when the contract was entered into the parties were blind to the
impossibility of their promises. In illustration (a) when A agrees
with B to discover treasure by magic, it is absurd to suggest that
B can sue A for specific performance to find out the treasure for
him, the mode being by magic.

Promises such as the above which are clearly impossible

cannot be binding. Impossible promise is no consideration for a
contract which, therefore, fails in its very foundation and is,
therefore, unenforceable. Where a person who is not enrolled at all
as a proctor undertakes to retire from business as proctor will
therefore be an invalid agreement without a foundation.'*" If A
covenants to perform a voyage in a particular ship which was
already unseaworthy and incapable of doing such a voyage, it will
be a covenant impossible of performance.'*' A covenant that a
40. Eddison v. Rothery, (1864) 4 New Rep 538.
41. The Salvador, (1909) 26 TLR 149 CA.
 [164]

ship should sail on a particular date and the covenant itself was
entered into after that date is meaningless and unenforceable/^

In the words of Viscount Simon (L.C.) "frustration is the

occurrence of an intervening event or change of circumstances so
fundamental as to be regarded by the law both as striking at the
root of the agreement and as entirely beyond what was contemplated
by the parties when they entered into the agreement.'"'' It means
that a contract has ceased to bind the parties because the
common basis on which by mutual understanding it was based has
failed. It would be more accurate to say not that the contract has
been frustrated but that there has been a failure of what in
contemplation of the parties would be an essential condition or
purpose of the performance."

Sherar, J. In Surpat Singh v. Sheo Prasad,^* observed,

"That doctrine, as I understand is that when the performance or
further performance of a contract has been rendered impossible or
has been indefinitely postponed in consequence of the happening
of an event which was not and could not have been contemplated
by the parties to the contract, when they made it, a court will
consider what as fair and reasonable man the parties would have
agreed upon if they had in fact foreseen and provided for the
particular event, and if in its opinion they would have decided that
the contract should be regarded as at an end, will discharge the
party who would otherwise be liable to pay damages for non-
42. Hall V. Cazenove, (1804) 4 Eas 477.
43. Cricklewood Property Ltd, v. Leightons Investment Trust Ltd.,
(1945) AC 221.
44. AIR 1954 Pat 300, 303.
 [165]

performance of the contract Again before the doctrine of

frustration can be invoked, it must be shown that the event which
has produced frustration was an event which the parties to the
contract did not foresee and could not, with reasonable diligence
have foreseen."

Supervening impossibility - Paragraph Second of Section

56 - A contract may be possible to be performed at the time
when it was made. Subsequently there comes a supervening
impossibility which prevents its performance.

In the Second paragraph of Section 56 the expressions used

are "when the act becomes impossible or unlawful." The
impossibility enshrined in this Section is physical or legal
impossibility not a mere impossibility pleaded with reference to
want of ability or circumstances of the promisor.

In Satyabrata Ghose v. Mugneeran Bagar & C<?./^ B.K.

Mukherjee J., pointed out, "The first paragraph of the section lays
down the law in the same way as in Engalnd. It speaks of
something which is impossible inherently or by its very nature and
no one can obviously be directed to perform such an act. The
second paragraph enunciates the law relating to discharge of
contract by reasons of supervening impossibility or illegality of the
act agreed to be done. The wording of this paragraph is quite
general and though the illustrations attached to it are not at all
happy, they cannot derogate from the general words used in the
enactment. "This much is clear that the word 'impossible' has not
been used here in the sense of physical or literal impossibility. The

45. AIR 1954 SC 44

 [166]

performance of an act may not be literally impossible but it may

be impracticable, and useless from the point of view of the object
and purpose which the parties had in view; and if an untoward
event or change of circumstances totally upsets the very foundation
upon which the parties rested their bargain, it can very well be
said that the promisor finds it impossible to do the act which he
promised to do."

In Ganga Saran v. Ram Charan, Fajal Ali, J. speaking for the

court observed, "It seems necessary for us to emphasise that so
far as the Court in this country are concerned they must look
primarily to the law as embodied in Section 32 and 56 of the
Indian Contract Act, 1872 for applying doctrine of frustration"

Impossibility due to illegality - An illegal contract is

unenforceable. In this regard para 2 of the Section 56 says, "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 unlawfiil". Section 23 declares agreements to do an
unlawful act as void. But under para 2 of Section 56, contracts
which are lawful when made but become unlawful afterwards by
reason of some act which the promisor could not prevent, become
impossible of performance. A part of a contract may be lawful the
other part may be unlawful. In Bio-Finance Ltd. v. The
Custodian,^^ it was held that the provision of Section 56 apply to
cases where two sets of promises are distinct that is the void part

46. AIR 1997 SC 1952

 [167]

of an agreement can be properly separated from the rest the later

part does not become invalid.

A supervening act of the legislature after the formation of the

contract discharge the parties from their obligations because the
fulfilment of the contract becomes impossible. It has been frequently
held that a subsequent change in law may render the contract
illegal and in such cases the contract is deemed discharged.''^ But
difficulty arising by the Government orders in transporting the
goods needed to meet the contract was not an impossibility
contemplated by Section 56 of the Act leading to frustration of
the Contracts."^

There may be cases where prohibition is not absolute but

extends only for a portion of the period covered in a contract. In
Laxmi Narain v. Raja Ram,'^^ the contract was to supply cloth
between February and June. The order of prohibition was passed
only in May after the dispute had arisen. It was held there could
be no frustration as there was no absolute bar. In Mugnee Ram
Banguar & Co. v. Gurbachan Slngh,^^ the Supreme Court was
of the opinion that if future performance of the contract is
rendered unlawful either by a determinate period of time or an
indeterminate period of time there can be no discharge of the
contract unless the ban on its performance existed on the day or
during the time in which it had to be performed.

47. Gundayya v. Subbayya, AIR 1927 Madras 89; Kawasaki v. Benthan,

(1939) 1 AER 819.
48. Seth Mohan Lai v. Grain Chambers Ltd., AIR 1968 SC 772.
49. 4 DLR All 203.
50. AIR 1965 SC 1523.
 [168]

In some cases the impossibility may be of uncertain period or

duration in such a situation the affected party can make reasonable
alternate arrangements and will not be liable to pay damages to the
former contracting party in Case the impossibility is Suddenly
removed. A English case cited by V.G. Ramchandran is Poussard
V. Spiers^^ in this case Madame Poussard signed the leading role
in an opera but was suddenly taken ill just 2 days before the
opening of the opera. Her physicians opined she would be able to
sing for some time beyond the opening night. So the employer in
good faith engaged a substitute for the entire season since the
substitute would not agree on any other term. Madame Poussard
recovered has voice a few days after. She offered to perform. She
sued for damages. It was held that the employer acted prudently
and the Madame had no right for damages for breach of contract.
When continuing impossibility is probable, it is open to the
affected party to adjust his position by making alternate arrangement.
Such a change is quite justified and terminates all legal duties if
any in the original contract. In Walts Watta & co. v. Mitsui
Coy,^^ the question arose was whether a party's duty of performance
of contract only suspended or discharged by government
interventions. The answer was that it depends upon the duration of
Governmental prohibition.

It is submitted that illegality may frustrate contract when

agreement are void in law or are forbidden by law. An agreement
may be for lawful performance yet it may be in furtherance of

51. 1 QBD 410.

52. (1917) AC 227.
 [169]

unlawful purpose. Though one of the parties may have no

wrongful purpose of his own, he cannot however sue for breach
of contract, if he does any act that goes in furtherance of the
other party's wrongful purpose. A good example of this is the
hirer of a hall with the object of using it for an illegal performance.
In Syed Khused All v. State of Orissa,^^ it was pointed out that
when the agreement entered into between the parties became
impossible to perform as well as unlawfiil, it amounted to frustration.
No doubt provisions of Section 56 of the contract Act, 1872,
does not cover every case of frustration but it applies to a
subsequent unforseen event or contingency for which neither of
the parties is responsible. Failure to supply beef in terms of the
agreement due to the restrictions imposed under the Orissa Prevention
of Cow Slaughter Act, 1960 was neither intentional or on account
of volition of contractor. The performance became impossible due
to force-majeureand not vis-majeur.^"*

Known to the Parties

Where a contracting party by his own act brings about a

state of affairs, which renders the performance of a contract
impossible, the contract will not be held unenforceable. If for
certain acts on the part of the company and on information
received by the police, the police takes the Managing Director and
other persons of the company into custody and seals and locks
up the go down, there is no frustration of contract within the

53. AIR 2007 Orissa 56 (D.B.)

54. AIR 2007 Orissa 56, at p. 58
 [170]

meaning of section 56.^^ The doctrine of frustration, as embodied

in section 56, is applicable only to executory contract where under
performance or further performance of a promise is outstanding.
Abdul Mutalib Vs. Musammat Rezia Begum^^ a clear line of
distinction can be drawn between a physical impossibility and a
mere difficulty in carrying out a contract. In this case plea of
impossibility was not made out. Mere difficulty' in the performance
of a contract or the need to pay exorbitant prices in order to
perform it does not amount to impossibility with s. 56 Contract
Act.

Impossibility must be physical or legal impossibility but not

economic unprofitable ness, nor impossibility with reference to
ability and circumstances. Where the lands held under a lease are
silted by floods but it is possible to put them right by incurring
some expenses, the lessee cannot refuse to pay rents. ^"^

Where sale becomes impossible for want of sanction of the

Cantonment authorities, the contract for sale becomes void. The
essence of "frustration" is that it should be without any default of
other party^^ If the occurrence which rendered the contract
incapable of performance was not within the contemplation of the
parties, there is frustration^'.

When the whole basis of the contract is frustrated by an

55. 8 P L R (Dae.) 409.

56. (1970) 22 D L R (SC) 134.
57. 1929 (Mad) 575: 11 IC 79.
58. 1935 P C 128 Pc.
59 1934 (Mad) 85.
 [171]

occurrence of an unexpected event or change of circumstances

there is dissolution of contract.*" Contracts between subjects of
countries at peace remain in abeyance during the continuance of
hostilities and can be enforce when peace is established but
contract enduring to the aid to the enemy or incapable of
suspension is dissolved by the outbreak of war. " Where goods
could not be delivered owing to the Government having requisitioned
all the ships and available, the contract became impossible of
performance and there was no liability for damages. A contract
may be cancelled for subsequent impossibility to perform in part.
In a suit for damages for breach of contract against a Hindu
father to give his minor daughter in marriage, performance of the
contract does not become impossible simply because the girl
declares her unwillingness to marry*^.

The real question that must be considered under this section

is not whether the contract was or became void but whether the
promisor has to make compensation for non-performance".

Doctrine of Frustration & lease of immovable property ;

The question arises whether the doctrine of frustration of

contract is applicable to leases of immovable property. The
doctrine of frustration as embodied in Sec. 56 of the Contract Act
is applicable to leases of immovable property. Frustration in the
present case is apparent from the facts proved that is, there has

60. 1954 SC 44.

61. 40 IC 851.
62. 21 B 23.
63. 105 IC 319.
 [172]

been a complete destruction of tile subject-matter of the tenancy

and therefore provisions of Sec. 108 (e) are not applicable. In
Azizur Rahman & others Vs. Abdus Sakur & othersf^ it was
stated that it will be noticed that the principles of Section 56 are
incorporated in Section 108(e) of the Transfer of Property Act
where rights and liability of the lessee are postulated. Section
108(e) reads:

"If by fire, tempest or flood or violence of an army or of

a mob, or other irresistible force, any material part of the property
be wholly destroyed or rendered substantially and permanently
unfit for the purposes for which it was let, the lease, shall at the
option of the lessee be void:

Provided that, if the injury be occasioned by the wrongful

act or default of the lessee he shall not be entitled to avail himself
of the benefit of this provision.

It, therefore, follows that when it is a case of lease, Section

108(e) is the appropriate section to apply and not Section 56 of
the Indian Contract Act.*^ The doctrine of frustration as to be
applied to leases is specially codified in Section 108(e). The
applicability of the doctrine enunciated in Section 56 appears to
have been given special statutory recognition in India as is clear
from clause (e) of Section 108, T.P. Act."

Section 56 covers a wider filed than Section 108(e) of the

64. 14 BLR (AD) 123.

65. Mahadeo Prasad v. Calcutta Dyeing & Gleaning Co., AIR 1961
Cal 70.
66. AIR 1956 Tra Co 59
 [173]

T.P. Act for in the latter the words are 'destroyed wholly or
rendered substantially and permanently unfit, while the phrase used
in Section 56 is 'an act becoming unlawful or impossible.' What
is 'impossible' is merely instanced in Section 108 (e). Section 56
gives the positive law while Section 108 (e) gives an option to the
lease.

In Gurdarshan Singh v. Bishan Singh, the Punjab High

Court by majority held that the doctrine of frustration does apply
to leases. The English principles cannot be applied to this country,
because a contract for the sale of land as well as a lease remain
contracts covered by the Contract Act. The Madras High Court
posited^* that the trend of opinion in both the House of Lords
and the Courts in India appeared that the doctrine of frustration or
impossibility of performance will not be applicable to cases of
agricultural leases.

A contract of lease may be avoided on the happening of an

event as contemplated by the terms of the contract express of
implied. This is not discharge by frustration but relly amounts to
construction of document and discharge of the same under
Section 32 of the Contract Act.*' Secondly, a contract of lease
may further be avoided at the option of the lessee on the
happening of any event contemplated under Section 108(e) of the
Transfer of Property Act.

67. AIR 1963 Punj 49 (FB)

68. Sri Amuruvi Perumal v. K.R. Subapathy Pillai, AIR 1962 Mad 132.
69. Dada Sibha Estate v. Raja Dharan Devchand, AIR 1961 Punj. 143
 [174]

Whether it applies to contracts only or to leases also ;

Whether provision of section 108(e) of the Transfer of

Property Act or doctrine of frustration as contained in section 56
of the Contract Act will apply in case where the entire structures
of the tenancy was destroyed. Where only a material part of the
tenancy is destroyed or otherwise rendered substantially and
permanently unfit for the purpose for which it was let at the
option of the tenant the lease will come to an end. But where the
entire subject matter of the tenancy is destroyed the provision of
section 108(e) Transfer of Property Act will not be applicable-The
doctrine of frustration as embodied in section 56 of the Contract
Act will apply in case of destruction of entire subject matter of
the tenancy. [Azizur Rahman and Ors Vs. Abdus Sakur and
Ors^^^ Impossibility of performing such contract on the property
of a party becoming abandoned property-On the coming into force
of PO 16 of 1972 the agreement entered into before 25th March,
1971 is binding upon the Government in the same way as upon
the original owner-Government merely stepped into the shoes of
the original owner.

LORD RADCLIFF has succinctly summarized the law relating

to frustration of contracts as under:

" .... frustration occurs whenever the law recognizes that

without default of either party, a contractual obligation has become
inapplicable of being performed because the circumstances in
which the performance is called for would render it a thing
radically different from that which was undertaken by the contract.

70. (1984) BLD (AD) 287.

 [175]

' .... It was not this that I promised to do.' There is, however, no
uncertainty as to the materials upon which the Court must proceed.
'The data for decision, on the one hand, the terms and conditions
of the contract, read in the light of the then circumstances and, on
the other hand, the events which have occurred.' In the nature of
thing there is often no need for any elaborate enquiry. The Court
must act upon a general impression of what its rule requires. It is
for that reason that special importance is necessarily attached to
the occurrence of an unexpected event that, as it were, change the
face of the things. But even so, it is not hardship or inconvenience
or material loss itself which calls the principle of frustration into
play."^i

LORD RADCLIFF, in the same judgment, further states:

"There must be as well such a change in the significance of the
obligation that the thing undertaken would, if performed, be a
different thing than that contracted for. "Frustration is a developing
concept; like negligence, its categories are never closed but are as
wide as the categories of human conduct. Its effect is immediate,
automatic, it guillotines a contract without the option of either
party which becomes dissolved. If the parties later purport to act
under it they are really making a new contract. The Court
supplying enlightened common sense to do justice, decides whether
the contract is at an end. The doctrine is invented by the Court in
order to supplement the defects of the actual contract. The theory
of the implied condition has never been acted on by the Court as
a ground of decision, but is merely stated as a theoretical

71. Davis C. Vs F.U. Dist. Council, 1956 A.C.696

 [176]

explanation."^^

A man can be expected to do what is humanly possible but

he cannot be expected morally or legally to do what is not
physically possible. It cannot be disputed that when a thing is
beyond the human control it cannot be expected from the party,
which had undertaken to do the work to suffer the consequences
of not proceeding with the contract work and in such a situation,
both the parties are relieved from their contractual responsibilities.
The word "impossible" in Section 56 of the Indian Contract Act,
1872 has not been used in the sense of physical or literal
impossibility. The performance of an act may not be literally
impossible, but it may be impracticable and unless from the point
of view of the object and which the parties had in view; and if an
untoward event or change of circumstances totally upsets the very
foundation upon which the parties rested their bargain, it can very
well be said that the promisor finds it impossible to do the act
which he promised to do.'^^ If the performance of a contract
becomes impracticable or useless having regard to the object and
purpose the parties had in view then it must be held that the
performance of the contract has become impossible. But the
supervening event should take away the basis of the contract and
it should be of such a character that it strikes at the root of the
contract.'''*

The essential principles on which the doctrine of frustration

is based is the impossibility, or, rather, the impracticability in law
72. Ram Kumar v. P.C. Roy, AIR 1952 Cal 335
73. Satyabrata Ghose v. Mugneeram Bangur, AIR 1954 SC 44.
74. Sushila Devi v. Hari Singh, AIR 1971 SC 1756.
 [177]

or fact of the performance of a contract brought about by an

unforeseen or unforeseeable sweeping change in the circumstances
intervening after the contract was made. In other words, while the
contract was properly entered into in the context of certain
circumstances which existed at the time it fell to be made, the
situation becomes so radically changed subsequently that the very
foundation which subsisted underneath the contract as it were gets
shaken, nay, the change of circumstances is so ftmdamental that it
strikes at the very root of the contract, then the principle of
frustration steps in and the parties are excused from or relieved of
the responsibility of performing the contract which otherwise lay
upon themJ^ Whether the contract has become impossible of
performance can be determined with reference to the terms of the
contract and the supervening circumstances. If the supervening
circumstances are such which were within the contemplation of the
parties at the time of the contract or which could reasonably be
within their contemplation, it could take the case out of the
purview.''*

To attract the plea of frustration, it must be shown that the

situation has changed so drastically and so radically that neither
party to the contract could have at all foreseen that because of
something happening at another place which may be a foreign
country would result in execution of the contract almost as good
as an impossibility. The impact which the market receives due to
an event happening elsewhere is the guiding factor for determining

75. Alopi Parshad v. Union of India, AIR 1960 SC 588

76. H. Radio Ltd. Co. v. State of Raj. AIR 1964 Raj 205
 [178]

whether or not frustration has occurred. Where after the firm price
contract for supply of transformers there was a subsequent 400%
rise in price of transformer oil due to the war, there was
frustration of contract. The abnormal increase in price due to war
condition, was an untoward event or change of circumstances
which "totally upset the very foundation upon which the parties
rested their bargain." Therefore, supplier could, be said to be
finding itself impossible to supply the transformers which it
promised to do.'^'^

The parties to an executory contract are often faced, in the

course of carrying it out, with a turn of event which they did not
at all anticipate - a wholly abnormal rise or fall in prices, a sudden
depreciation of currency, an unexpected obstacle to execution, or
the like. Yet this does not in itself affect the bargain they have
made. If, on the other hand, a consideration of the terms of the
contract, in the light of the circumstances existing when it was
made, shows that they never agreed to be bound in a fiindamentally
different situation which has unexpectedly emerged, the contract
ceases to bind at that point not because the Court in its discretion
thinks it just and reasonable to qualify the terms of the contract,
but because, on its true construction it does not apply in that
situation. There is no frustration where performance of the contract
remains physically and legally possible though commercially
unprofitable. The law is well settled that the doctrine of impossibility
of performance or frustration cannot be applied to cases of
commercial transaction. Impossibility of performance or frustration

77. Man Singh v. Khazan Singh, AIR 1961 Raj 277

 [179]

cannot be called commercial impossibility. Mere commercial

impossibility will not excuse a party from performing the contract.
Mere increased cost of performance or losing in a transaction
does not make the contract impossible. A man is not prevented
from performing his contract by mere economic unprofitable
ness.'^* The impossibility referred to in Section 56 of the Indian
Contract Act, 1872 is not what may be called "commercial
impossibility". An absolute contract involving unconditional terms
by way of obligation undertalcen by one of the contracting parties
may, if enforced, result in hardship, prejudice, loss or detriment to
the promisor. But the loss or damage suffered by the promisor in
the course of fulfilling the obligations cannot absolve him from
liability in the least degree.'^ The mere fact that the contract has
been rendered more onerous does not of itself, give rise to
frustration. Where the parties entered into a contract of sale of
material, the contract does not get frustrated by a subsequent
Government notification fixing a higher price for that material,
when the notification specifically mentioned that it had no
retrospective effect and also since there was no term In the
contract indicating that the rate was to depend upon changes made
by the Government in the price from time to time. In commercial
contracts, where the contract becomes impossible of performance
by reason of a state of war or by an act of the executive
Government, or the contract which would otherwise be expected
to be ordinarily performed, is delayed by reason of certain
regulations imposed by the Government making the performance of

78. J.L. V. Bihar State Co-op. Bank Ltd., AIR 1959 Pat 477
79. CA.G.Co. V. K.R.L. Narsimhan, AIR 1954 Mad 119
 [180]

such contract dependent upon the grant of license or permit, the

parties need not wait for an indefinite period in the hope of the
relaxing of the control orders or the granting of license and permit.
Performance of a contract may become impossible because of the
destruction of subject-matter or of anything essential to the
performance of the contract or, in case of contract of service, by
death or illness of the party concerned. A contract may become
impossible by change In law which has the effect of rendering a
contract, which was lawful at the time it was made unlawful. A
contract may also become impossible of performance because a
state of things which was the basis of the contract had ceased to
exist and finally a contract may become impossible of performance
in the sense that circumstances have intervened which render the
performance within the time, in the way contemplated, impossible.^"

The provision under the New Act that the award to become
a decree naturally without in the context of building and engineering
contracts, frustration will normally arise by reason of some
supervening event such as destruction of the entire site by fire or
flood, or the passage of legislation rendering the work illegal. It is
important to appreciate that the supervening event must so
unexpected and beyond the control of the parties, even as a
possibility, that neither party can be said to have accepted the risk
of the event taking place when contracting. It is precisely for this
reason that frustration can only rarely come about in building and
engineering contracts, since their performance is, as a matter of
reasonable foresight, hedged about with many uncertainties and far

80. Ram Kumar v. P.C. Roy & Co., AIR 1952 Cal 335
 [181]

more likely to be prevented by physical difficulties than in the case

of the other types of contract. In general, the contractor is taken
to have assumed the risk of the many uncertainties and difficulties
associated with the work in this field. The difficulty of the work is
not in general a valid excuse for non-performance of a contract,
nor is a contractor entitled to abandon work, which proves
unexpectedly onerous. The discharge of a contract by frustration
is not the result of an act or volition of a party to it. However,
the presence of already existent or supervening of certain set of
circumstances, which excused the performance of the contract
amounts to an automatic dissolution of the contract not dependent
upon the attitude of the parties to the contract.^'

In cases of frustration, it is the performance of the contract

which comes to an end but the contract would still be in existence
for purposes such as the resolution of disputes arising under or in
connection with it. The question as to whether the contract
becomes impossible of performance and was discharged under the
doctrine of frustration would still have to be decided under the
arbitration clause which operates in respect of such purposes.
Russell*^ states: "The test in such cases has been said to be
whether the contract is determined by something outside itself, in
which case the arbitration clause is determined with it, or by
something arising out of the contract, in which case the arbitration
clause remains effective and can be enforced" In Chitty on
Contract it has been stated as under: "So that the law must be
now taken to be that when an arbitration clause is unqualified such
81. AIR 1935 PC 128
82. Metropolitan Water Board v. Dick, Co., (1918) A.C. 119.
 [182]

a clause will apply even if the disputes involve an assertion that

circumstances had arisen whether before or after the contract had
been partly performed which has the effect of discharging one or
both the parties from liability, e.g. repudiation by one party
accepted by the other, or frustration." Before the partition of
India, the applicants had entered into a contract with the respondents,
both residing in Amritsar. One of the terms of the contract was
that any dispute or claim of whatever nature relating to or arising
out of the contract should be referred to arbitration of two
European Merchants at Karachi, one to be appointed by each
party and in accordance with the provisions of the Arbitration Act.
Karachi subsequently became a part of foreign Dominion, which
contingency was never contemplated by the parties. It was held
that due to change of circumstances, the contract of arbitration
was frustrated and must, therefore, be held to have been dissolved
as a whole.^^ Promises and reciprocal promises under a contract
come to an end when force majeure conditions occur. Force
majeure, or Act of God, occurs when: the cause is not created by
the defaulting party's fault; the cause must be inevitable and
unforeseeable; and the cause must make execution of the contract
wholly impossible. The net effect of force major is that it is the
performance of the contract, which comes an end, but the for
contract would still to be in existence purposes of the arbitration
agreement. The essential element of frustration is that it must not
be self-generated or the disability self-induced. Mere rise in prices
cannot attract conditions of force major.,

83. AIR 1998 Del 365

 [183]

Where the appellant had bid for the coal under the honest
and reasonable impression that he would be allowed to transport
the coal to Ferozabad, that this was thwarted by the attitude of
the coal commissioner, that later on the parties proceeded on the
basis that the auction sale was to be cancelled and the appellant
refunded his money. But apparently because by that time much of
the coal had been lost and the Railways would have been in
difficulty to explain the loss they chose to deny the appellant's
claim. Alagiriswami J. pollinated out that, "he can see no justification
on facts for such a denial and the defendants cannot refuse to
refund the plaintiffs amount. The contract had become clearly
fhistrated. We must make it clear that we are not referring to the
refusal to supply wagons but the refusal of the coal commissioner
to allow the movement of coal to Ferozabad inspite of the fact
that it was not one of the conditions of the auction. The appellant
is therefore, clearly entitled to the refund of his money. Furthermore,
the contract itself not being in accordance with Section 175 of the
Government of India Act is void and the appellant is entitled to
the refund of his money."^"*

4. SUPERVENING IMPOSSIBILITY

The essence of 'frustration' is that it should not be due to

the act or election of the party and it should be without any
default of either party and, if it was party's own default which
frustrated the adventure, he could not rely on his own default to
excuse him from liability under the contract. A contracting party

84. AIR 1973 S.C. 2380, at p. 2384.

 [184]

cannot be relieved from the performance of his part of the

contract if the fhistration of the contract is self-generated or the
disability is self-induced. In commercial contracts which become
impossible of performance by reason of a state of war or by an
act of the executive Government or the contract which would
otherwise be expected to be ordinarily performed, is delayed by
reason of certain regulations imposed by the Government making
the performance of such contract dependent upon the grant of
licence or permit, the parties need not wait for an indefinite period
in the hope of the relaxing of the control orders or the granting of
licence and permits.^^ A contract may be plausible at the time
when it was entered into. Subsequently there comes a supervening
impossibility that prevents its performance. Supervening impossibility
may fall under following heads:

(a) On account of destruction of anything essential to the

performance of the contract:**

(b) On account of a change of law which subsequently prohibits

the performance: ^'^

(c) On account of the state of things, the existence of which was

the basis of the contract, has since ceased to exits;**

(d) On account of some circumstances performance within time

in the way contemplated has become impossible;*^

85. AIR 1954 Mad 119 (DB)

86. Taylor v. Caldwell, (1863) 12 ER 309.
87. Bailey v. De Crisping, (1869) 4 QB 180.
88. Krell v. Henry, (1903) 2 KB 740.
89. Metropolitan Water Board v. Dick Kerr, (1918) AC 119.
 [185]

(e) On account of death or illness of party- particularly in case

of contracts of service.'"

In the second para of Section 56 the words used are 'when

the act becomes impossible or unlawful. So it must be physical or
legal impossibility and not a mere impossibility pleaded with
reference to want of ability and circumstances of the promisor. A
good deal of case law has grown round the word 'impossible,'
We have, however, to give all the weight of authority to the
opinion of the Supreme Court in Satyabrata Ghose v. Mugneeram
Bagar CO.^^ as Under:

In deciding cases in India, the only doctrine that we have to

go by is that of the supervening impossibility or illegality as laid
down in Section 56 taking the word 'impossible' in its practical
and not literal sense.

A) An Excuse

a) Destruction of subject matter

The doctrine of impossibility applies with full force

"where the actual and specific subject-matter of the
contract has ceased to exist" "Taylor v. Caldwell,^^ is
the best example of this class" There a promise to let
out a music hall was held to have frustrated on the
destruction of the hall. Similarly, where the defendant
contracted to sell a specified quantity of potatoes to be
grown on his farms, but failed to supply them as a

90. Robinson v. Dawson, (1871) 6 Ex 269.

91. AIR 1954 SC 44.
92. (1863) 12 ER 309
 [186]

disease destroyed the crop, it was held that performance

had become impossible. Similarly, a contract to exhibit a
film in a cinema hall was held to have become impossible
of performance when on account of heavy rains the rear
wall of the hall collapsed killing three persons and its
license was cancelled until the building was reconstructed
to the satisfaction of the chief engineer. The owner was
under no liability to reconstruct the hall and even if he
did reconstruct and it took him about sometime, by that
time the film would have lost its appeal.

b) Non-Existing of a state of things :

A contract will frustrate, 'Where circumstances arise

which make the performance of the contract impossible
in the manner and at the time contemplated." This
happens when the change of circumstances has affected
the performance of the contract to such an extent as to
make it virtually impossible or even extremely difficult or
hazardous.

A contract to refer a dispute to arbitration in

Karachi was not held to be discharged only because one
party migrated to India and it was impossible to go
there, because physical presence was not necessary'^.
"The parties to an executory contract are often faced, in
the course of carrying it out with a turn of events which
they did not anticipate a wholly abnormal rise or fall in

93. P.O. Mehta & Sons v. Ram Chand Om Prakash, AIR 1952 Punj
34, 38.
 [187]

price, a sudden depreciation of currency, an unexpected

obstacle to execution, or the like. Yet this does not in
itself affect the bargain they have made."

c) Death or incapacity for personal services :

As a general rule, a contract may be performed by

the promisor either personally or through an agent. This
requires a line of demarcation to be drawn between an
ordinary contract which can be performed by any person
and a personal contract which under the second category,
namely, personal contract, a contracting party is entitled
to the benefit which he anticipates from the character,
credit and substance of the party with whom he contracts
and cannot be compelled to accept the liability of some
other person as a substitute. In other words, where
person as skill or service lies at the root of the contract,
the law and justice would demand that in such cases the
contract will dissolve by personal in-capacity of the
promisor to perform it.

In Shri Madan Gopalsswami Temple and other

V. Saride Manikhyam and other.^^ It was observed:

"Where performance of a contract is required to be

in person and the personal qualifications of the promisor
are the consideration for the contract the death or
incapacity of the promisor discharges the contract and
frees the other party from liability of non-performances".

94. A.I.R. 1957 A.P. 643.

 [188]

In this case the defendants 1 and 2 namely Sanyasi

and Mahalakshmi, were engaged on a contractual basis
for doing Devadasi (dancing) services in the temple. The
defendents 1 and 2 were permitted to enjoy the income
of the lands in suit. The plaintiff executive officer of the
temple, gave notice to defendants 1 and 2 dispensing
with their services and calling upon them to deliver
possession of the lands. The defendants refused to
deliver the lands. The plaintiff filed a suit for recovery of
possession of the lands under section 78 of Madras
Hindu Religious Endowment Act, Defendants 1 and 2 as
well as defendants 3 to 5 who claimed to be members
of their families alleged that they and their ancestors were
doing dance services in the temple hereditarily from time
immemorial. They further pleaded that their services cannot
be removed at the pleasure of the plaintiff and they
cannot be removed from service so long as they performed
it satisfactorily. At the conclusion of judgment it was
said that the arrangement between the trustee or Executive
Officer of the temple and Sanyasi and Mahalakshmi was
contractual and intended to last so long as they were fit
for duties and in no event beyond their life time.

Illustration (b) to section 37 of Indian Contract Act

fiimishes a suitable example of such case. It says:

"A promises to paint a picture for B by a certain

day, at a certain price. A dies before the day. The
contract cannot be enforced either by A's representative
 [189]

or by B as it was only a personal nature."

"A party to a contract is excused from performance

if it depends upon the existence of a given person, if
that person perishes" or becomes too ill to perform. A
piano artist was held not liable when owing to her illness
she could not perform on the day in question.'^ A
contract of service for ten years was held to have
frustrated when the services of the employee were
requisitioned for war purposes and nothing could be said
as to how long war would go on.^*

The application of the doctrine of frustration to

industrial relations was examined by the (English) National
Industrial Relations Court in Marshall v. Harland and
Wolff Ltd.^'^ M was in a company's employment since
1946. In 1969 he fell ill and did not attend till April 1971
when the company retrenched him after giving usual
benefits. M had still to undergo an operation before he
could resume work.

Even so it was held that the contract of service had

not frustrated. The president of the court pointed out
that in considering whether flirther performance has
become impossible, regard must be paid to the terms of
the employment, the nature of the illness, its duration and
prospects of recovery, and the period of past employment.

95. Robinson v. Davison, (1871) 2 All ER 666, (1948) Rep 699.

96. Morgan v. Manser, (1947)
97. (1972) 2 All ER 175 (1972) 1 WLR 899.
 [190]

In another similar cases was employed as a works

manager under a five year contract. After two years he
became ill and was absent from work for five months.
The employer terminated the employment after four months
of absence and S sued for breach of contract. It was
held that a five year term contract of service could not
be deemed to have-frustrated by five months' illness.^^

d) Change of law

A contract will be dissolved when legislative or

"administrative intervention has so directly operated upon
the ftilfillment of the contract for a specific work as to
transform the contemplated conditions of performance."
Thus where a vendor of land could not execute the sale-
deed because he ceased to be the owner by operation of
law, he was held not liable." A contract by the State to
give a monopoly was held to have become void on the
enforcement of the Constitution'"" A contract between
certain parties for the sale of the trees of a forest was
discharged when the State of Rajasthan forbade the
cutting of trees in the area.*"' A well known English
authority is a contract for the construction of a reservior
was deemed to have ended when the work was stopped
on account of the war.'"^ But an intervention of a

98. Storey v. Fulham Steel Works Co. Ltd., (1907) TLR 89.
99. Shiam Sunder v. Durga, AIR 1966 All 185.
100. H.R. & G Industries v. State of Rajasthan, AIR 1964 Raj 205.
101. Man Singh v. Khazan Singh, AIR 1961 Raj 277.
102. Metropolitan Water Board v. Dick Kerr i& Co., ^C 119 (1916-17)
 [191]

temporary nature which doe not uproot the foundation of

the contract will not have the dissolving effect. This is
shown by the decision of the Supreme Court in
Satyabrata Ghose v. Mugneeram Bangur Co.'"^ In this
case the Defendant Company started a scheme for the
development of a plots of land into a housing colony.
The plaintiff was granted a plot on payment of earnest
money. The company undertook to construct the roads
and drains necessary for making the lands suitable for
building and residential purposes and soon as they were
completed, the purchaser was to be called upon to
complete the conveyance by payment of the purchase
money. But before anything could be done, a considerable
portion of the land was requisitioned by the State during
the Second World War for military purposes.

It was held that the contract was not frustrated.

"Undoubtedly the commencement of the work was delayed
but was the delay going to be so great and of such a
character that it would totally upset the basis of the
bargain and commercial object which the parties had in
view? The requisition orders, it must be remembered,
were by their very nature, of a temporary character.

e) Outbreak of war :

War is aimed at sapping all the resources of the

enemy. Its object is not only to defeat the enemy on the
battlefield, in air or sea, but also to cripple the enemy's

103. AIR 1954 SC 44 : 1954 SCR 310; 1954 SCJ I; 1954 SCA 187.
 [192]

commerce. This enables capture of the enemy's property

which includes the property of its subjects. So it follows
that commercial contracts will necessarily be greatly
handicapped if not fully obliterated by the outbreak of
war. So all rights under contracts are suspended during
the continuance of hostilities. In India the constitution
provides for the suspension of all or any of the
fundamental rights in Part III of the Constitution during a
declared emergency which includes a war. The President's
proclamation as to the emergency enables such suspension
of rights (Articles 358,359). When martial law is in force
Article 34 restricts the rights in Part III of the Constitution.
The control orders, requisition orders, ban on movement,
fixation of prices all follow in the wake of emergencies
and these indeed have a crippling effect on the performance
of a contracting party of his obligations under the
contract. If it is an absolute restriction, Then the doctrine
of frustration can be fully invoked as to impossibility of
performance. If the performance of the contract goes to
help the enemy, it becomes void and Section 56, para 2
can be invoked.'"'*

B) Not An Excuse

a) Difficulty of performance :

Impossibility can be pre contractual or post

contractual (supervening impossibility Sec 56). The ICA
provides for the grounds under which the supervening

104. Textile Manufacturing Co. Ltd V. Solomon, ILR 40 Bom 370.

 [193]

impossibility is acceptable, and where it is not acceptable.

Situations under which it is acceptable (performance is
excused): destruction of subject matter, non existence of
state of things, death/incapacity, change of law, and
outbreak of war. Situations where its not acceptable
difficulty (performance not excused): commercial of
performance, impossibility, failure of third party, failure
of one of the objects, and strikes and lockouts.

b) Commercial impossibility :

The "impossibility' contemplated in Section 56 is a

physical and legal impossibility and not a commercial
impossibility as such, with reference to ability or
circumstances of the promisor.*"^ The mere fact that
freight has risen exorbitantly so high that it prevents the
defendants from performing their contract at any profit is
no excuse at all for non-performance of the obligation
under the contract.*"^ There can be no reliance placed on
self-induced frustration.*"'^ Extreme and unforeseen cost
may render the contract commercially impossible but that
is no answer to the non-performance of the contract in
the legalistic sense.*"^ If outbreak of war made it difficult
to dispatch gold from London to India, it was nevertheless
possible to get gold at higher rates even In London. So

105. Ezkiel Abraham v. Ramjusroy Golabroy, AIR 1921 Cal 305.

106. Blythe & Co. v. Richards Turpan <fe Co., 114 LT753, Bom 301,310-
11
107. Bank Line v. Capel, (1999) AC 435, 452
108. Gurdit Singh v. Secretary of State, AIR 1931 Lah 347.
 [194]

it was held that Section 56 can not apply in such an

event.'"^ It is no defence to plead that it has become
commercially more onerous on account of increase in
duty, to have the contract performed."*^ On the same
principle a tenant cannot refuse to pay rent to landlord
on the ground that the lease land was silted away by
floods. For that could be set right by spending some
money.^^^ If Insurance Company demanded higher rates,
lease of a dry dock can in no way be affected. For the
covenant of insurance is really for the benefit of the
lessor and there can be no impossibility of performance
on the demand of higher rates of insurance.*'^ War may
raise the price of coal but that is no reason for canceling
the contract to supply coal as sufficient coal was
procurable at an enhanced price."''

c) Failure of a third party :

When frustration occurs, it avoids the contract itself

and discharges both parties automatically. In this situation,
a plaintiff suing upon the contract can only succeed if he
can show that the evet which would otherwise have
frustrated the contract was due to the defendant's default.
It is for the plaintiff who seeks to avoid the legal resuh
of an otherwise frustrating event to establish that the

109. Hukumchand v. Mercantile Bank of India, AIR 1921 Lah 100.

110. Dassomal Ramchand v. RusufAli Adam Ji, AIR 1925
111. Sinnappa Pillai v. Ramasamy Iyer, AIR 1929
112. Grant smith & Co. AIR 1919 PC. 85
113. Instane & Co. v. Speeding Marshall and Co., TLR 202.
 [195]

destruction of the subject matter of the contract was due

to the neglect or default of the defendant. When people
enter into a contract which is dependent for its
performance on the continued availability of a specific
thing (Railway wagons) and that availability comes to an
end by reason of circumstances beyond the control of
the parties (e.g., Governmental actions), the contract is
dissolved. An indefinite stoppage of work pursuant to a
Government order coupled with a compulsory sale of
plant has been held to be sufficient to cause frustration."'*

d) Strikes, lockout and civil disturbance :

A Promisor may not be absolved of his duty to

carry out his promise merely because there is a strilce of
workmen employed in the performance of the contract."^
A lessee of salt pans did not have any exemption clause
in his agreement of lease as to performance being
dependent on availability of skilled workmen. A strike by
the workmen could not excuse performance, as labor
was available otherwise. Further the strike also will not
shield the lessee fi-om a demand or rent and the cost of
repairs to the salt pan."* As Williston says, "'' Whether
a strike will result in performance impossibility of depends
on various factors. It is possible other labour may be
available or the strike may end soon, or the fault is

114. AIR 1954 Tri 17

115. Hari Laxman v. Secretary of State, AIR 1928 Bom 61.
116. 40 Bom 301.
117. WiUiston on Contracts, Sec. 1951-A.
 [196]

grossly on the employer, the result of which was the

strike. A well-informed writer"* says about conditions in
France and that will apply to India also: "And in France
it is said by text writers that a strike is not in
jurisprudentially principle, a case of vis Major. Such is
the classic doctrine in France. Yet the more recent cases
indicate that performance may be excused on this account
provided the strike prevails generally throughout the entire
industry, providing it has been sudden and unforeseeable
and providing that it is not imputable to the fault of the
employer." It has been suggested that a statutory adherence
to field rates for demurrage may prevent the excuse of
strikes as a plea."' If the strike was the result of his
own wrong, the plea fails.'^^ It must be also shown that
he tried his best to prevent the strike. Reasonable delay
due to strike may be excused by courts.'^' A violent
strike sometimes offers a good plea while it is not so in
the case of peaceful strikes.'^^ Strikes can well be good
excuse when there is a definite failure of performance
assumed as quite essential by the two contracting parties.'^-^

Where a contingency of strike of workmen is not

unforeseen the defendant should have done one of two

118. Cooper: Effects of Inflation on Private LR W 63 (70)

119. RefCo. V. Schaff, 225 AIR 1466.
120. McGovem v. New Rork City, NY 377.
121. Empire Transport Co. v. Philadelphia and R. Coal etc., F 919
122. Hass V. Kansas City FL S. etc. Ga 792.
123. Reader v. South Eastern & Chatham R. Co. 38 TLR 14 (14)
 [197]

things: (1) to secure labour in order to carry out the

contract (2) or expressly should have stipulated with the
plaintiff that they would be bound by the contract only if
they secured skilled labour.*^'*

The parties to an executory contract are often

faced, in the course of carrying it out, with a turn of
events which they did not at all anticipate a wholly
abnormal rise or fall in prices, a sudden depreciation of
currency, an unexpected obstacle to execution, or the
like. Yet, this does not in itself affect the bargain they
have made. If, on the other hand, a consideration of the
terms of the contract, in the light of the circumstances
existing when it was made, shows that they never agreed
to be bound in a ftmdamentally different situation which
has now unexpectedly emerged, the contract ceases to
bind at that point- not because the Court, In its discretion,
thinks it just and reasonable to qualify the terms of the
contract, but because on its true construction it does not
apply in that situation.'^^ The appellant obtained from the
Court of Wards, Dada Siba Estate, a lease of five
squares of land in Tahsil Okara, District Montgomery in
the undivided Punjab for the Kharif season 1947 and
Rabi season 1948. Following upon the partition of India
in July 1947 and allotment of the territory in which the
lands were situate to Pakistan, the appellant migrated to

124. Hari v. Secretary of State, 52 Bom 142.

125. Alopi Parshad & Sons Ltd., v Union of India, AIR 1960 SC 588
 [198]

India. An action commenced by the appellant against the

Court of Wards in the Court of the Subordinate Judge,
Kangra, at Dharamsala for a decree for refund of the
rent paid by him was decreed. But the High Court of
Punjab reversed the decree, holding that the doctrine of
finstration of contract did not apply to leases of immovable
property and that in any event of the facts proved there
was no case of frustration established by the appellant.
With certificate granted by the High Court, this appeal is
preferred by the appellant. Raja H and Kan war R have
not been substituted in place of the Court of Wards as
the respondent. The appellant claimed a decree for
refund of the rent on the ground that the consideration
for the lease failed, because the covenants of the lease
had become impossible of performance as a result of
communal riots in the District of Montgomery and the
inability of non-muslims to continue to reside in that
area. The High Court rejected the contention.

By section 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
Contract Act 1972. 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
 [199]

concluded transfer. By its express, terms, section 56 of

the Contract Act does not apply to cases in which there
is a completed transfer. The second paragraph of section
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,
unlawfiil, becomes void when the act becomes impossible
or unlawftil. But on that account the transfer of property
resuhing from the lease granted by the lessor to the
lessee is not declared void. Under a lease of land there
is a transfer of right to enjoy that land. If any material
part of the property be wholly destroyed or rendered
substantially and permanently unfit for the purpose for
which it was let out, because of fire, tempest, flood,
violence of an army or a mob, or other irresistible force,
the lease may at the option of the lessee, be avoided.
This rule is in corporated in section 108 (e) of the
Transfer of Property Act and applies to leases of land,
to which the Transfer of Property Act applies and the
principle thereof to agricultural leases and to leases in
areas where the Transfer of Property Act is not extended.
Where the property leased is not destroyed or substantially
and permanently unfit, the lessee cannot avoid the lease
because he does not or is unable to use the land for
 [200]

purpose for which it is let to him.*^* Once a valid lease

comes into existence the agreement to lease disappears
and its place is taken by the lease. It becomes a
completed conveyance under which the lessee gets an
interest in the property. There is a clear distinction
between a completed conveyance and an executory
contract. Events, which discharge a contract, do not
invalidate a concluded transfer. The agreement between
the parties was that the properties in question should be
leased to the plaintiffs for a period of three years. Such
a lease could not have been validly made except under a
registered instrument. As seen earlier, the contract between
the parties provided that the lease deed should be
registered within 15 days from the date of the acceptance
of the tender. For one reason or the other, the
contemplated lease deed was neither executed nor
registered. Therefore, only an agreement to lease and not
a lease. Such an agreement comes within the scope of
section 56 of the Contract Act.'^"^ The parties intended
to exclude from the computation of reasonable time such
time as was taken up in procuring the necessary material
which was not easy to obtain and such as may be taken
up if the land were requisitioned by Government. Thus,
it cannot be said that because of the requisitioning orders
which had the effect of making the entry by or on behalf

126. Raja Dhruv Dev Chand v. Raja Harmohinder Singh & Anr., AIR
1968 SC 1024
127. Sushila Devi & Am. v. Hari Singh & Ors., AIR 1971 SC 1756
 [201]

of the company on the land illegal during the subsistence

of the period of requisitioning the contract stood
discharged. If time is of the essence of the contract or
if time for performance is set out in the contract it may
be that the contract would stand discharged, even though
its performance may have been rendered unlawful for an
indeterminate time provided unlawfulness attached to the
performance of the contract at the time when the contract
ought to have been performed. Thus, where the
performance of a contract had been rendered unlawful
for an indeterminate time provided unlawfulness attached
to the performance of the contract at the time when the
contract ought to have been performed. Thus, where the
performance of a contract had been rendered unlawful by
reason of some subsequent event, the contract would
stand discharged but such discharge will take place not
necessarily for the date on which the further performance
was rendered unlawful, unless further performance was
rendered unlawful for all time. If the performance of the
contract is rendered unlawful either for a determinate
period of time or for an indeterminate period of time, the
contract would not stand its discharged unless the ban
on performance existed on the day or during the time in
which it has to be performed. Here it is pointed out that
the respondent had made time the essence of the contract
but that only applies to the grant of conveyance after the
completion of the roads and drains. As already pointed
 [202]

out, parties were wholly silent as to the time within

which the roads and drains were to be completed.
Therefore, in so far as this aspect of the contract is
concerned, time was, in no sense, made the essence of
the contract. It cannot be said that because of the
requisitioning orders which had the effect of making the
entry by or on behalf of the company on the land illegal
during the subsistence of the period of requisitioning the
contract stood discharged.*^^ If and when there is
frustration, the dissolution of the contract occurs
automatically. It does not depend, as does rescission of
a contract on the ground of repudiation or breach or on
the choice or election of either party. It depends on the
effect of what has actually happened on the possibility of
performing the contract. What happens generally in such
cases and has happened here is that one party claims
that the contract has been frustrated while the other party
denies it. The issue has got to be decided by the Court
'ex post facto', on the actual circumstances of the case.
Having regard to the nature and terms of the contract,
the actual existence of war conditions at the time when it
was entered into, the extent of the work involved in the
development scheme and last, though not the least, the
total absence of any definite period of time agreed to by
the parties within which the work was to be completed,
it cannot be said that the requisition order vitally affected

128. Mugneeram Bangur & CO., (P) Ltd. v. Gurbachan Singh, AIR
1965 SC 1523.
 [203]

the contract or made its performance impossible.*^^ There

can be no doubt that a man may, by an absolute
contract, bind himself to perform, which subsequently,
however, becomes impossible, or to pay damages for the
non-performance and this interpretation is to be placed
upon an unqualified undertaking, where the event which
causes the impossibility was or might have been anticipated
and guarded against in the contract, or where the
impossibility arises from the act or default of the promisor.

But where the event is of such a character that it cannot

reasonably be supposed to have been in the contemplation of the
contracting parties when the contract was made, they will not be
held bound by general words which, though large enough to
include, were not used with reference to the possibility of the
particular contingency which afterwards happened. It is on this
principle that the act of God is in some cases said to excuse the
breach of a contract. The Latin maxim lex non cogit ad impossibilia
also expressed as impotentia excusat legem in common English
acceptation means, the law does not compel a man to do that
which he cannot possibly perform. There ought always, thus, to
be an invincible disability to perform the obligation and the same
is akin to the Roman maxim nemo tenetur ad impossibile.'^"
Section 56 of the Contract Act lays down a rule of positive law
and does not leave the matter to be determined according to the
intention of the parties. The impossibility contemplated by section

129, Satyabrata Ghose v. Mugneeram Bangur, AIR 1954 SC 44.

130, Industrial Finance Corpn. of India Ltd. v. Cannanore Spg and
Wvg. Mills Ltd., (2002) 5 SSC 54
 [204]

56 of the Contract Act is not confined to something, which is not

humanly possible. If the performance of a contract becomes
impracticable or useless having regard to the object and purpose
the parties had in view, then it must be held that the performance
of the contract has become impossible. But the supervening events
should take away the basis of the contract and it should be of
such a character that it strikes at the root of the contract. From
the facts found in this case, it is clear that the plaintiffs sought to
take on lease the properties in question with a view to enjoying
those properties either by personally cultivating them or by sub-
leasing them to others. That object became impossible because of
the supervening events. Further, the terms of the agreement between
the parties relating to taking possession of the properties also
became impossible of performance. Therefore, the contract had
become impossible of performance.'^*

Self Induced impossibility

The provisions of Section 56 do not apply to 'self induced

impossibility'. In Boothalinga Agencies v. T.C. PeniasamyP^
Justice Ramasami observed, "In other words the doctrine of
frustration of contract cannot apply where the event which is
alleged to have frustrated the contract arises from the act or
election of the party We hold that this principle cannot be
applied to the present case for there was no choice or election left
to the appellant to supply chicory other than under the terms of

131. Sushila Devi & Am. v. Hari Singh & Ors., AIR 1971 SC 1756.
132. AIR 1969 SC 110
 [205]

the contract. On the other hand, there was a positive prohibition

imposed by the licence upon the appellant not to sell imported
chicory to any other party but he was permitted to utilize it only
for consumption as raw material in his own factory." In this case
the sale of imported goods would be in direct contravention of
Clause 5(b) and under Section 5 of the Imports and Exports
Control Act, 1947, any contravention of the Act or any sale made
or deemed to have been made under the Act is punishable with
imprisonment upto one year or fine or both. In consequence, even
though the contract was enforceable on November 26, 1955 when
it was entered into, the performance of the contract became
impossible or unlawful after December 7, 1955 and so the contract
became void under Section 56 of the Indian Contract Act after the
coming into force of the Imports (Control) Order, 1955.

In M.D. Army W.H.O. v. Sumangal Services Pvt. Ltd.,^^^

S.B. Sinha J. pointed out that 'impossibility to ftilfill the contractual
obligation may arise in different fact situations. Statutory injunction
by a statutory authority may be one of such causes. A building
bye-law must be scrupulously followed. Violation of Section 204
of the West Bengal Municipal Act, 1993 attracts penal provisions
contained in Section 440. It is, therefore, mandatory in nature. The
correspondences between AWHO and the Municipality clearly
show that even infrastructural works were not permitted to be
carried out. Sumangal, therefore, cannot be said to have committed
any illegality in complying with the stop work notice. To what
extent it committed breach of the terms of the contract, assuming

133. AIR 2004 SC 1344

 [206]

that it could have carried out some job as pointed out by AWHO
would depend upon the commercial viability as a large number of
workmen were to be engaged although it cannot carry out the
major construction work., which was a relevant factor for determining
the quantum of damages. Sumangal might have been partially liable
but it cannot be faulted when it refused to carry out any
constructional work in violation of the stop work notice which
would attract the penal provisions of Section 440 of the West
Bengal Municipal Act, 1993. The Arbitrators were also bound to
take into consideration this aspect of the matter. They failed to do
so and misdirected themselves in law.

In an interesting article titled "The Principle of Impossibility in

Contract" by H.W.R. Wade published in law Quarterly Review
Volume 56 page 519. It is stated :

"Two points emerge from the argument so far : - (I) There

can exist no duty to do an impossible act. (II) A promise is,
normally and primarily, a promise of performance simply, and not
of damages in the alternative. The effect of supervening impossibility
on an existing duty can now be determined, and in view of
conclusion (I) the answer is a simple one. It must be that the
impossibility causes the duty to cease to exist. For a duty either
exists or it does not — that is to say, every duty continues until
it is discharged and discharge is the only process known to the
law by which a duty once legally undertaken can be put off the
shoulders of the obligee. Its effect is a complete removal of the
obligation and discharge by impossibility of performance is no less
perfect than discharge by the performance of the original promise.
 [207]

In the words of Professor Corbin already cited, society no longer

commands performance' — nothing more can be demanded of the
promisor."

In Emden and Gill's Buildings Contracts and Practice, Seventh

Edition, pages 162-163, it is stated that liability to pay damages
for non-performance of an impossibility only arises where the
contract is absolute and unrestricted by any condition expressed
or implied. It is further stated that a difficulty may not in all
circumstances amount to impossibility. But even in that event the
terms and conditions relating to performance of the contract may
stand eclipsed.

The transaction was a commercial one. Sumangal could not

plead frustration of contract if it itself had abandoned it, (See
Hauman v. Nortje^^* and Hoenig v. Issacs.^^^ It is well-settled
that a builder renouncing his obligation could not claim substantial
performance.

In Hudson's Building and Engineering Contracts at page 484,

the law is stated as :

"A further overriding principle to be deduced from the

cases, it is submitted , is that a party consciously in breach, a
fortiori a party repudiating an obligation or abandoning work,
should not be enabled to abuse the doctrine by maintaining that
position while at the same time suing for remuneration under the
contract. Thus in South Africa, there is long-standing authority that
substantial performance is not available where work is abandoned

134. (1914) AD 293, at p. 297

135. (1952) 2 All ER 176, at p. 178H).
 [208]

or the method of performance is inconsistent with an honest

intention to carry out the work in accordance with the contract,
Sumpter v. Hedges and Ibmac v. Marshall were clear cases of
abandonment."

Such a case of abandonment was not made out. What was

made out was a case of self-inducement frustration. We repeatedly
asked Mr. Tiwari to show before us and pleading as regard self-
induced frustration on the part of Sumangal. He failed to do so.
No material far less any pleading has also been placed before us
to show that there had been collusion by and between Sumangal
and municipal authorities in getting the work stopped. There exists
a presumption as regard the official transactions having been done
in regular course of business. The onus of proving that plea of
frustration was self-induced one is on the party who alleges that
this is the case. (See Joseph Constanting Steamship Line Ltd.
V. Imperial Smelting Corporation Ltd.^^^ )

In Treitel's Law of Contract, Seventh Edition at page 701, it

is stated : "The onus of proving that frustration is self-induced is
on the party who alleges that this is the case. In Joseph
Constantine SS Line v. Imperial Smelting Corp. Ltd.,^^"^ a ship
wad disabled by an explosion from performing her obligations
under a charter part. The owners were used for damages and
pleaded that the explosion frustrated the charter party. The charters
argued that the owners must prove that the explosion was not due
to their fault, but the House of Lords rejected this argument and

136. (1942) AC 154.

137. Ibid.
 [209]

upheld the defense of frustration although the cause of the

explosion was never explained. The rule is open to the objection
that the charter is much less likely than the owner to be able to
show how the explosion occurred. This reasoning does, indeed,
prevail in one group of cases : a person to whom goods have
been bailed, and who seeks to rely on their destruction as a
ground of frustration of the contract of bailment, must show that
the destruction was not due to any breach of his duty as a bailee.
But, this special situation excepted, the rule as to burden of proof
laid down in the Joseph Constantine case can be defended on the
ground that generally catastrophic event which prevent performance
do occur without the fault of either party. To impose the burden
of disproving fault on the party relying on frustration is therefore
less likely than the converse rule to lead to the right result in the
majority of cases."

It is in interesting to note that at page 700 of the said

treatise, the learned author states : "The further question arise
whether a contract can be frustrated by an event brought about by
the negligent act of one of the parties. Lord Simon has put the
case of a prima donna who lost her voice through carelessly
catching cold. He seemed to incline to the view that she could
plead frustration so long as the incapacity "was not deliberately
induced to order to get out of the engagement. "This particular
result can perhaps be justified by the difficulty of foreseeing the
effect of conduct on one's health. But it is submitted that
generally negligence should exclude frustration : for example, the
plea should have failed in Taylor v. Candwell if the fire had been
 [210]

due to the negligence of the defendants. In such a case it would

be unjust to make the other party bear the loss. A negligent
omission should likewise exclude frustration"

In Cheshire, Fifoot & Furmston's Law of Contract (14"'

Edition) at page 643, the law is stated, thus : "This rule, that a
party cannot claim to be discharged by a frustrating even for
which he is himself responsible, does not require him to prove
affirmatively that the event occurred without his fault. The onus of
proving that the frustration was self-in-duced rests upon the party
raising this allegation. For instance : One the day before a
chartered ship was due to load her cargo an explosion of such
violence occurred in the auxiliary boiler that the performance of
the charterparty became impossible. The cause of the explosion
could not be definite ascertained, but only one of three possible
reasons would have imputed negligence to the shipowners.

It was held by the House of Lords that, since the charterers

were unable to prove that the explosion was caused by the fault
of the owners, the defence of frustration succeeded and the
contract was discharged. It should perhaps be noted that in many
cases a self-induced frustrating event will be a breach of contract
but this will not necessarily be so. In Maritime National Fish
Ltd. V. Ocean Trawlers Ltd.,^^^ the applicants were not
contractually bound to licence the chartered trawler but could not
excuse failure to pay hire by relying on the absence of a licence."

Even no case of negligence on the part of Sumangal made

out.

138. AIR 2004 SC 1344, at pp. 1369-1371

 [211]

The burden of proof in relation to all these pleas, thus, was

on AWHO. If failed to discharge the same.

(8) DISTINCTION BETWEEN ENGLISH AND INDIAN LAW

In Naithati Jute Mills Ltd. v. Khyaliram Jagannath,^^^

Shelat J. (on behalf of himself, and on behalf of J.C. Shah, S.M.
Sikri JJ.) observed, "Section 56 of the Contract Act interalia
provides that 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 unlawfiil. It also provides that where one
person has promised to do something which he knew, or with
reasonable diligence might have known, and which the promise did
not know to be impossible or unlawful, such promisor must make
compensation to such promisee for any loss which such promise
sustain through the non-performance. As envisaged by Section 56,
impossibility of performance would be inferred by the Courts from
the nature of the Contract and the surrounding circumstances in
which it was made that the parties must have made their bargain
upon the basis that a particular thing or state of things would
continue to exist and because of the altered circumstances the
bargain should not longer be held binding. The Court would also
infer that the foundation of the contract had disappeared either by
the destruction on the subject matter or by reason of such long
interruption or delay that the performance would really in effect be
that of a different contract for which the parties had not agreed.
Impossibility of performance may also arise where without any

139. AIR 1968 SC 522.

 [212]

default of either party the contractual obligation had become

incapable of being performed because the circumstances in which
performance was called for was radically different from that
undertaken by the contract. But the Common law rule of contract
is that a man is bound to perform the obligation which he has
undertaken and can not claim to be excused by the mere fact that
performance has subsequently become impossible. Courts in England
have, however, evolved from time to time various theories to
soften the harshness of the aforesaid rule and for that purpose
have tried to formulate the true basis of the doctrine of discharge
of contract when its performance is made impossible by intervening
cause over which the parties to it had no control. One of such
theories is what has been called the theory of implied term as
illustrated in F.A. Tamplin Steamship Co. Ltd. v. Anglo-
Maxican Petroleum Products Co. Ltd., *'*" where Lord Lorebum
stated, "A court can and ought to examine the contract and the
circumstances in which it was made, not of course to very, but
only to explain it, in order to see whether or not from the nature
of it the parties must have made their bargain on the footing that
a particular thing or a state of things would continue to exist. And
if they must have done so, then a term to that effect would be
implied, though it be not expressed in the contract". He further
observed, "It is in my opinion the true principle, for no court has
an absolving power, but it can infer from the nature of the
contract and the surrounding circumstances that a condition which
was not expressed was a foundation on which the parties contracted
.... Were the altered conditions such that, had they though of tem,

140. 1916-2 AC 397.

 [213]

they would have taken their chance of them, or such that as

sensible men they would have said, "if that happens, of course, it
is all over between us."

The same theory in a slightly different form was expressed by

Lord Watson in Dahl v. Nelson, Donkin and Co. *'" in the
following words:

"The meaning of the Contract must be taken to be not what

the parties did intend (for they had neither though nor intention
regarding it), but that which the parties, as fair and sensible man,
would presumably have agreed upon if, having such possibility in
view, they had made express provision as to their several rights
and liabilities in the event of its occurrence."

In the first case the term is a genuine term, implied though

not expressed; in the Second it is a faction, something added to
the contract by the law : Anson, Principles of the English Law of
contract, 22"'' Ed. 464. It appears that the theory of implied term
was not found to be quite satisfactory as it contained elements of
contradiction. For, if the parties foresaw the circumstances they
would provide for them in the contract; if they did not, that meant
that they deliberately took the risk and therefore no question of an
implied term could really arise. In Russkoe v. John Stirk and
Sons Ltd., ^^^ Lord Atkin propounded the theory of disappearance
of the foundation of Contract stating that he could see no reason
why if certain circumstances, which the court would find, must
have been contemplated by the parties as being on the essence of

141. (1881) 6 AC 38.

142. (1922) 10 L.I.L.R. 214.
 [214]

the Contract and the Continuance of which must have been

deemed to be essential to the performance of the contract, the
Court cannot say that when these circumstances cease to exist, the
contract ceases to operate. The third theory is that the Court
would exercise power to qualify the absolutely binding nature of
the Contract in order to do what is just and reasonable in the
new situation. Denning L.J. in British Movietonews Ltd. v.
London and District Cinemas Ltd.,^'*^ expounded this theory
as follows :

"Even if the contract is absolute in its term, nevertheless, if

it is not absolute in intent, it will not be held absolute in effect.
The day is done when we can excuse an unforeseen injustice by
saying to the sufferer. It is your own folly. You ought not to have
passed that form of words. You ought to have put in a clause to
protect yourself. We no longer credit a party with the foresight
of a prophet or his lawyers with the draftsmanship of a
Chalmers."

This theory would mean that the court has inherent jurisdiction
to go behind the express Words of the Contract and attribute to
the Court the absolving power, a power consistently held not to
be inherent in it. But this theory was discarded by the House of
Lords in the appeal. In more recent times the theory of a change
in the obligation has come to be more and more generally
accepted. In Davis Contrctors v. Farehan U.D.C.,^** Lord Radcliffe
stated it as under :

143. (1951) 1 K.B. 190.

144. 1956 AC 696.
 [215]

"Frustration occurs whenever the law recognizes that without

default of either party a contractual obligation has become incapable
of being performed because the circumstances in which performance
is called for would render it a thing radically different from that
which was undertaken by the contract".

It is not hardship or inconvenience or material loss which

brings about the principle of frustration into play. There must be
a change in the significance of obligation that the thing undertaken
would, if performed be a different thing from that which was
contracted for.

These theories have been evolved in the main to adopt a

realistic approach to the problem of performance of contract when
it is found that owing to causes unforeseen and beyond the
control of the parties intervening between the date of the contract
and the date of its performance it would be both unreasonable and
unjust to exact its performance in the changed circumstances The
necessity off evolving one or the other theory was due to the
common law rule that courts have no power to absolve a party to
the contract from his obligation. On the one hand, they were
anxious to preserve intact the sanctity of contract while on the
other the courts could not shut their eyes to the harshness of the
situation in cases where performance became impossible by causes
which could not have been foreseen and which were beyond the
control of parties.

Such a difficulty had, however, not to be faced by the courts

in this country. In Ganga Saran v. Ramcharan^^^ this court

145. AIR 1952 SC 9.

 [216]

emphasized that so far as the courts in this country are concerned

they must look primarily to the law as embodied in sections 32
and 56 of the contract Act. In Satyatbrata Ghose v.
Mugneeram,^^^ also Mukherjea J. stated that Section 56 laid down
a rule of positive law and did not leave the matter to be
determined according to the intention of the parties. Since under
the contract Act a promise may be express or implied in cases
where the court gathers as a matter of construction that the
contract itself contains impliedly or expressly a term according to
which it would stand discharged on the happening of certain
circumstances the dissolution of the contract would take place
under the terms of the contract itself and such cases would be
outside the purview of Section 56. Although in English law such
cases would be treated as cases of frustration, in India they would
be dealt with under Section 32. In a majority of cases, however,
the doctrine of frustration is applied not on the ground that the
parties them selves agreed to an implied term which operated to
release them from performance of the contract. The court can
grant relief on the ground of subsequent impossibility when it finds
that the whole purpose or the basis of the contract was frustrated
by the intrusion or occurrence of an unexpected event or change
of circumstances which was not contemplated by the parties at the
date of the contract. There would in such a case be no question
of finding out an implied term agreed to by the parties embodying
a provision for discharge because the parties did not think about
the matter at all nor could possible have any intention regarding it.

146. AIR 1954 SC 44.

 [217]

When such an event or change of circumstances which is so

fundamental as to be regarded by law as striking at the root of the
control as a whole occurs it is the court which can pronounce the
contract to be frustrated and at an end. This is really a positive
rule enacted in Section 56 which governs such situations.