Saturday, 28 May 2022

Frustration of Contract

 Frustration of Contract

Under the Doctrine of Frustration, it is integrated in Frustration of Contract and Frustration of Purpose in English Law. The American legal system is based on the theory of impossibility and impracticability, and it was adopted into the Indian legal system via section 56 of the Indian Contract Act 1872.

In general, frustration is vanquished, and it is frequently used in agreements and contracts between parties. Frustration has been used to cope with a failed transaction that could not be completed due to a variety of factors. Frustration has been included into contract law as one of the most prevalent difficulties that have been arrived at to cope with failed contracts.

In general, rule parties to contracts are responsible for carrying out their obligations and anybody who breaches them. The party who breaches the contract is obligated to pay the other party. However, Section 56 of the Indian Contract Act of 1872 is an exception to this general norm, and it deals with the Doctrine of Frustration, which arises when an act is not done. A promisor is free of any obligation under a contract if the agreement is breached, and the contract is ruled void as a result of this doctrine.

The doctrine of contract frustration in English law has its origins in Roman law. The earliest instance occurred in Roman contract law, in the case of Paradine versus Jane[3], when the parties were dismissed because the object had been destroyed or the contract's purpose had become impossible to fulfil.

Paradine sued Jane for rent, according to the facts of the case. The defendant claimed that because the German Prince had assumed control of the region where the property was located, he was unable to benefit from it. He had intended to rent out this property when he realised, he might benefit from it by doing so. The defence was not held accountable since the contract's commitment was absolute, with no exceptions. The defendant's rationale, on the other hand, was sound and reasonable. He couldn't have done anything since the Judge believed that the contract's duty should be honoured in all instances.

The Doctrine may be traced back to a Queen's Bench decision in the case of Taylor v Caldwell[4] in England in 1863.

As a result of the above-mentioned Doctrine, the Doctrine of Frustration has developed. The strictness of English law was determined to be unhelpful and unfair in several cases when the contract was impossible to execute due to no fault of the defendant. As a result, an exception to this rule was created.

Major Indian Cases Concerning the Doctrine of Frustration:

Mugneeram Bangur and Company v Satyabrata Ghose and Company & Co .[6]

The defendant corporation has embarked on a proposal to convert the site into a housing colony. On the promise of advance payment, the plaintiff has offered a plot. The business agreed to install the roads and drainage needed to develop the site, making it more suitable for construction and residential use.

The purchaser must pay the remaining sum to finalise the transfer when the work is completed. Meanwhile, during WWII, the state appropriated a major amount of the land for military uses. On the grounds of supervening impossibility, the corporation attempted to annul the contract.

The Court sentenced the offender, holding that the term "impossibility" in Section 56 (Agreement to Perform an Impossible Act) does not refer to a literal or physical act. It described a change in circumstances that rendered the basic basis upon which the parties' agreement was built absolutely unworkable.

It was indicated in the requisition order that it must be permanent rather than temporary. There was no indication of a deadline for when the job should be finished. Because there was no particular date in the contract, and because it was inevitable for some constraints to be in place during the war, the project was hampered and delayed. The reason for the delay is that the requisition order did not affect the primary goal or strike at the right time.

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