The Doctrine of Frustration is governed by Section 56 of the Indian Contract Act, 1872. It covers "Supervening Impossibility"—where a contract was valid when made, but later becomes impossible or unlawful to perform due to circumstances beyond the control of the parties.
1. Statutory Provisions (Section 56)
Section 56 states: "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 unlawful."
2. Established Grounds of Frustration
- Destruction of Subject Matter: If the physical thing essential to the contract is destroyed without fault of either party (e.g., a music hall burns down before a concert - Taylor v. Caldwell).
- Non-occurrence of an Essential Event: e.g., renting a balcony to view a royal coronation parade, and the parade is cancelled (Krell v. Henry).
- Death or Incapacity: In contracts involving personal skills (like singing or painting), the death or serious illness of the performing party frustrates the contract.
- Change of Law / Government Intervention: e.g., the government imposes an absolute ban on the export of the contracted goods.
3. Landmark Indian Precedent
📜 Landmark Case: Satyabrata Ghose v. Mugneeram Bangur & Co. (1954)
Mugneeram Bangur & Co. agreed to develop and sell plots of land to Satyabrata. Before development started, the government requisitioned the land during World War II for military purposes. The company argued the contract was frustrated. The Supreme Court of India held that the requisition was temporary, and there was no absolute impossibility. The contract was not frustrated. The Court clarified that "impossible" under Section 56 does not mean physical impossibility, but commercial impracticability where the foundation of the contract is completely destroyed.
Mugneeram Bangur & Co. agreed to develop and sell plots of land to Satyabrata. Before development started, the government requisitioned the land during World War II for military purposes. The company argued the contract was frustrated. The Supreme Court of India held that the requisition was temporary, and there was no absolute impossibility. The contract was not frustrated. The Court clarified that "impossible" under Section 56 does not mean physical impossibility, but commercial impracticability where the foundation of the contract is completely destroyed.
4. Limitations of the Doctrine
Frustration does NOT apply in the following scenarios:
- Commercial Hardship: If performance merely becomes more expensive, difficult, or unprofitable, the contract is NOT frustrated.
- Self-Induced Impossibility: If the impossibility was caused by the deliberate act or negligence of a party, they cannot plead frustration.