DISCHARGE OF CONTRACT BY SUPERVENING IMPOSSIBILITY

July 2, 2022

Introduction

The Indian Contract Act is one of the oldest mercantile laws of our country. This Act came into force on 1^st September,1972. As we know, man is a social animal, he depends on the other human beings for living. So, from the very beginning itself, exchange of things were happening between two or more parties in one or the other way. But, there were no legal provisions with regard to the contract and for that reason breach of contract was not an unknown thing among them. Later, in order to prevent the parties from unnecessary breach of contracts, the Indian Contract Act, 1872 came into force. It contains legal provisions with regard to the performance of the contract, remedies for the breach of contract by one party, how the contract gets discharged etc.

Discharge of contract

The word ‘discharge’ means to end or terminate something. So, discharge of contract means to end or terminate the contract. Indian Contract Act, 1872 talks about various ways by which a contract gets discharged. One of the ways by which the contract gets discharged is ‘discharge of contract by supervening impossibility

Discharge of contract by supervening impossibility

Section 56, of the contract act, deals with the impossibility of performance. “An agreement to do an act impossible in itself is void.”

It is of two types;

1. Impossibility existing at the time of contract.

2. subsequent of supervening impossibility. Impossibility which arises subsequent to the formation of contract

A contract, which was capable of being performed at the time when it was entered into, but, later it became unlawful or impossible to perform. In those cases, the contract becomes void. This is what is known as doctrine of supervening impossibility or doctrine of frustration.

Frustration occurs where it is established that due to subsequent change in circumstances, the contract has become impossible to perform or it has been deprived of its commercial purpose. It is explained in section 56 para 2 of the Indian Contract Act, 1872.

Supervening impossibility may arise in various ways. Some of them are as follows:

Destruction of the subject matter of the contract:

If the subject matter of the contract is destroyed without the fault of any of the parties, then that particular contract will be discharged by doctrine of supervening impossibility. Because, the contract was capable of being performed when the parties entered into that contract, but unfortunately the subject matter of the contract is destroyed later, which makes the parties unable to perform their contract. As a result of that, the contract will be discharged.

Case law: Taylor v. Caldwell (1863)

In this case, the plaintiff (Taylor) and the defendant (Caldwell) entered into a contract to use the defendant’s Surrey Gardens and Music Hall, by the plaintiff, on four certain days. But unfortunately, after the contract was signed but even before performance of the first contract itself, the contract hall was accidently destroyed by fire even without the fault of any of the parties. Thus, making the parties unable to perform the contract.

It was held that the defendant is discharged from liability to let the music hall as promised. This makes the contract void and it was discharged by the doctrine of supervening impossibility.

Change of law :

If any change in the laws occurs, then the performance of the contract becomes unlawful. In those cases, the original contract becomes void.

Case law: In the case of Firm Bachhraj Amolakchand v. Firm Nand Lal Sitaram (1962), there was a contract with regard to the export of grains from one particular state to another. The state government later made some restrictions on the export of grains and as a result of that, the contract is discharged by the doctrine of supervening impossibility which is occurred through a change in the law.

Non- concurrence of circumstances :

If the parties entered into contract on the basis of a particular state of things, the contract becomes discharged if the state of things changes

For example:

X and Y had made a contract to get married on 27 January 2022. But before the date of marriage, on 27 December 2021, Y goes mad. So, in such condition, the contract becomes void.

Death or incapacity for personal services:

If the performance of the contract depends upon a person’s personal skills or a party’s qualification, the contract becomes discharged is that person dies, or becomes ill, before the performance of the contract.

Case law: Robinson v. Davison (1871)

In this case, there was a contract between the plaintiff and the defendant’s wife. The defendant’s wife was a great singer and their contract was that she should sing at a concert organised by the plaintiff. But, on the day of the event, the defendant’s wife got ill and she was not in a condition to sing at that particular concert. As a result of that, the plaintiff had suffered a great loss and he sued her for the breach of contract.

But the petition got failed due to the frustration of the contract.

Outbreak of war:

A contract which is entered into with an alien enemy during the time of war is void ab initio. So, when a person has entered into a contract with a citizen of another country, it becomes void and unlawful when a war is declared by the country of one of the parties against the other.

Case law: Metropolitan water board v. Dick kerr & Co. Ltd (1917)

In this case, a contract was made between X and Y where X promised to built a reservoir for Y within a period of three years. But war broke out and the government order to suspend the work. The war continued for five years, the contract could not be performed. So, the contract got discharged.

Non- existence of a particular state of things:

If the contract is made on the basis of a particular state of things, the contract becomes frustrated once the state of things changes or stops existing.

Conclusion

Section 56 of the Indian Contract Act, 1872 deals with provisions relating to the impossibility of performance of the contract. The doctrine of supervening impossibility, simply means that a contract was capable of being performed at the time when it was entered into, but later due to some circumstances the performance of the contract becomes impossible. Some of the circumstances by which the performance of the contract becomes impossible are the destruction of the subject matter, change of law, death of the party to the contract and outbreak of war.

Reference

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July 2, 2022