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Task 3

The document discusses contractual obligations and ways to be legally released from contractual obligations. It explains the doctrine of frustration which allows contracts to become void if performance becomes impossible due to events outside a party's control. It provides examples and discusses sections 56 and 32 of the Indian Contract Act relating to impossible or illegal acts and contingent contracts.

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Aditya Das
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8 views

Task 3

The document discusses contractual obligations and ways to be legally released from contractual obligations. It explains the doctrine of frustration which allows contracts to become void if performance becomes impossible due to events outside a party's control. It provides examples and discusses sections 56 and 32 of the Indian Contract Act relating to impossible or illegal acts and contingent contracts.

Uploaded by

Aditya Das
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Law of Contract- Legal way-out to your contractual obligations

by,

Aditya Das, Intern at ubAdvocate

(Based on the YouTube video https://youtu.be/BsNsPq-DjSM

of Jeevan Prakash, AOR, Supreme Court)

Contract :

In legal terms, a contract is a document that details an agreement between two or


more parties. This agreement between parties, such as a finder’s agreement or a
sales agreement, is legally enforceable. Contracts may be written or oral, but in
order to actually be legally binding, most contracts must be made in writing and
signed by all parties involved. Some other common examples of contracts include
real estate purchase contracts, employment contracts, confidentiality agreements,
and insurance contracts.

Contractual Obligation :

Contract obligations are those duties that each party is legally responsible for in
a contract agreement. In a contract, each party exchanges something of value,
whether it be a product, services, money, etc. On both sides of the agreement, each
party has various obligations in connected with this exchange.

An example of contract obligations is with the sale of a product such as an


automobile. One party has the obligation to transfer ownership of the car, while the
other has the obligation to pay for it. The contract will specify the terms that
regulate the obligations, such as the method and amount of payment, and the
time/place of delivery.
If either party fails to perform their contractual obligations according to the
contract terms, it will usually result in a breach of contract. This may result in a
damages award to reimburse the non-breaching party for their economic losses.

Legal way :

Doctrine of frustration

The doctrine of frustration basically talks about the impossibility of performance of


the contract. It means a contract cannot be executed because of an incident beyond the
control of parties. The performance of such a contract becomes frustrated i.e. it
becomes complicated, impossible or even illegal. The frustration of contract can be
due to any unforeseen, impossible events and events out of control of the parties.

The doctrine of Frustration under Indian Contract Act

The Indian Contract Act, 1872, does not define the term “frustration of contract”.
However, the doctrine of frustration is enshrined under section 56 of the Act.
According to section 56, an agreement to do an impossible act is in itself void.
Further, it states that when a contract to do an act becomes impossible, or, by reason
of some event which the promisor cannot prevent, it becomes unlawful, the whole
contract becomes void when the act becomes impossible or unlawful.

1. Unforeseen or unforeseeable supervening events

2. the performance of the contract impossible

3. no fault of the party concerned


In 1861 court of England their was a case – Taylor vs. Caldwell (1862-73) ALL ER
REP 24 in this case the doctrine was born for this case the court in every cases
regarding contractual application used to enforce strict liability to perform the same
but for the first time situation changed and in terms of feeling of injustice the concept
of doctrine of frustration was adopted to provide justice. The court stated that if
anything is not written in expressed form then the court through implied inference
can write the same in dissolution and can grant relief and pronounce the same in
favour of justice. This type of implied condition is known as force majure – means
something before the control of the party. Prior to explaining certain case laws at first
we should come to know that supreme Court in his statements said that no search
force majeure clause is required in India as under section 56 of the Indian contract Act
the court can grant relief if necessary.

Section 56 of Indian contract Act –

Agreement to do impossible act.—An agreement to do an act impossible in itself


is void. —An agreement to do an act impossible in itself is void." Contract to do
act afterwards becoming impossible or unlawful.—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.1 —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" 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 unlawful, such promisor must make
compensation to such promisee for any loss which such promisee sustains through
the non-performance of the promise. —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 unlawful, such promisor
must make compensation to such promisee for any loss which such promisee
sustains through the non-performance of the promise." Illustrations

(a) A agrees with B to discover treasure by magic. The agreement is void. (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. (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. (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."

(d) A contracts to take in cargo for B at a foreign port. A’s Government afterwards
declares war against the country in which the port is situated. The contract
becomes void when war is declared. (d) A contracts to take in cargo for B at a
foreign port. A’s Government afterwards declares 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. (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.

L 32 of Indian contract Act –

Enforcement of contracts contingent on an event happening.—Contingent contracts


to do or not to do anything if an uncertain future event happens, cannot be enforced
by law unless and until that event has happened. —Contingent contracts to do or
not to do anything if an uncertain future event happens, cannot be enforced by law
unless and until that event has happened." If the event becomes impossible, such
contracts become void. Illustrations

(a) A makes a contract with B to buy B’s horse if A survives C. This contract
cannot be enforced by law unless and until C dies in A’s lifetime. (a) A makes a
contract with B to buy B’s horse if A survives C. This contract cannot be enforced
by law unless and until C dies in A’s lifetime."

(b) A makes a contract with B to sell a horse to B at a specified price, if C, to


whom the horse has been offered, refuses to buy him. The contract cannot be
enforced by law unless and until C refuses to buy the horse. (b) A makes a contract
with B to sell a horse to B at a specified price, if C, to whom the horse has been
offered, refuses to buy him. The contract cannot be enforced by law unless and
until C refuses to buy the horse."

(c) A contracts to pay B a sum of money when B marries C. C dies without being
married to B. The contract becomes void. (c) A contracts to pay B a sum of money
when B marries C. C dies without being married to B. The contract becomes void."
Case Laws :

Satyabarat Ghose v. Mugneeram Bangur & Co. – 1954 SC 44 (Full Bench)

The issue before the court was whether the contract was discharged by reason
of certain supervening circumstances which affected the performance of a
material part of it as envisaged under Section 56 of the Indian Contract Act,
1872?

The Court held that the requisition orders were of temporary nature and there
was a total absence of any definite period of time within which the work was to
be completed under the contract. The contract has therefore not been discharged
by supervening impossibility. The doctrine of frustration is an aspect and part of
the law of discharge of contract by reason of supervening impossibility or
illegality of the act agreed to be done, and hence comes within the purview of
Section 56 of the Indian Contract Act, 1872.

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