A BRIEF ANALYSIS OF THE DOCTRINE OF FRUSTATION

Introduction:

In general, the word "frustration" refers to defeat, and it is frequently used in contracts and agreements between parties. Transactions that fail or are not able to be completed for whatever reason are said to as frustrating. One of the most prevalent problems that have arisen to cope with broken contracts in contract law is the concept of frustration.

A key idea in contract law is the Doctrine of Frustration, which is concealed within the Indian Contract Act of 1872. This legal idea represents a departure from the widely accepted idea that requires parties to keep their end of the bargain, offering a way to balance the fairness of contracts with the integrity of agreements.

Evolution of Doctrine of Frustration:

The idea of absolute liability, which served as the foundation for contracts in England, is where the theory of frustration had its start. Courts often hold that parties to a contract are fully accountable for their actions and must fulfill their duties under all circumstances. In the 1647 case of Paradine v. Jane, the court established this idea of absolute liability. A person was sued in this instance for unpaid rent. He claimed that the land was not within his control and that he was forced to leave. For this reason, he was unable to collect the revenues from the land, which he had expected to be used for both rent payments and profit. However, he was held liable.

With the introduction of the concept of frustration, the shortcomings of the idea of absolute liability were addressed and avoided. In the case of Atkinson v. Ritchie (1809), the court acknowledged this idea for the first time. It was decided that the contract was frustrated since loading a British ship in a foreign port was impossible because of the start of war between the two nations. Furthermore, in Taylor v. Caldwell (1863), the defendants were released from the obligations outlined in the contract due to the contract being frustrated—that is because the contract was unable to be fulfilled because of outside circumstances.

In the 1903 decision of Krell v. Henry [1903] 2 KB 740, the English courts made yet another significant advancement in the evolution of the concept. In one instance, there was an agreement to rent an apartment for King Edward VII's coronation, but the ceremony was called off. The plaintiff's claim for rent was denied by the court on the grounds that the contract was frustrated since the coronation, which served as its basis, was called off. Because of this judgment, the theory now applies to transactions in which the main goal of the parties involved is to achieve some sort of economic gain.

Applicability Of This Doctrine in India:

The Indian Contract Act of 1872 does not define "frustration of contract" specifically. Nonetheless, the Agreement to Perform Impossible Acts in India is governed by Section 56 of the Act. A court of law may invalidate a promisor's promise to carry out impractical conduct under this clause. Every aspect of the contract is invalid if the conduct is made impossible or illegal by uncontrollable unforeseeable circumstances.

The Doctrine of Frustration in the Indian Contract Act was significantly shaped by the Satyabrata Ghose v. Mugneeram Bangur and Co. case. The doctrine permits the discharge of contractual commitments when execution becomes intrinsically impossible, as per this case.

An important factor in the implementation of the Doctrine of Frustration is Section 56 of the Indian Contract Act. It says that contracts that become impossible or illegal because of uncontrollable occurrences are invalid, as are obligations to do impossible activities. However, contracts that have specific provisions in place to address the fallout from unforeseen events are not subject to the rules in this section. In these situations, even in the face of unanticipated circumstances, the parties are still required to abide by the provisions of the agreement.

Essentials Of This Doctrine:

1.      There must be a valid contract and it must be legally binding.

2.      The contract must be unperformed i.e. it should be basically pending to be performed.

3.      The performance must have become impossible due to unforeseen events.

4.      The unforeseen events must be outside the control of the parties.

Grounds For Doctrine of Frustration:

The doctrine of frustration comes into play when unanticipated events make executing a contract extremely difficult or impossible. This includes disturbances to the fundamental principles of the contract in addition to physical impossibility. Events that might make a contract void include the following: the destruction of the contract's subject matter; the death or incapacity of a significant party; legal or governmental action; changes in circumstances undermining the aim of the contract; and the start of a war.

A contract automatically terminates when the Doctrine of Frustration is applicable, which means that the parties don't even need to agree to stop it. After then, neither party is left with any unfulfilled obligations under the terms of the agreement. The contract's termination does not, however, impact any legal rights or responsibilities that were in existence before the irritating occurrence.

Landmark Judgements in India:

1.      R. Narayanan v. Government of Tamil Nadu : The distinction between the doctrine of frustration and force majeure was clarified by the Madras High Court. When uncontrolled circumstances make it impossible to fulfill contractual duties, frustration sets in and the agreement is nullified. In contrast, a party may be released from performance under the terms of the contract in the event of a force majeure. The lockdown was declared a force majeure incident by the court, absolving the petitioner of any need to pay license costs.

2.      Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80: In this case, the court ruled that the contract cannot be frustrated since the increase in the price of Indonesian coal exports did not prevent the contract from being fulfilled. The doctrine of frustration is not relevant in this situation as there are other ways to fulfill the responsibilities specified in the agreement.

Conclusion:

A crucial element of contract law is the Doctrine of Frustration as it involves to the Indian Contract Act of 1872. It allows for the discharge of contractual obligations when unforeseen events render performance impossible. The doctrine is codified in Section 56 and offers a framework for handling situations when the validity of contracts is called into question. It acts as a safeguard to maintain fairness and keep people from being made to compensate for things that were beyond their control.