DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE
FRUSTRATION OF CONTRACT

SUBJECT
LAW OF CONTRACTS

NAME OF THE FACULTY

MS. BVS SUNITA

NAME OF THE CANIDATE

ASISH ANSUMAN MISHRA
ROLL NUMBER-2019LLB036
SEMESTER-02
 ACKNOWLEDGEMENT
I would sincerely like to put forward my heartfelt appreciation to our respected Law of torts
Professor, Prof. Ms. BVS Sunita for giving me a golden opportunity to take up this project
regarding – “FRUSTRATION OF CONTRACT”. I have tried my best to collect information
about the project in various possible ways to depict clear picture about the given project
topic.
 CONTENTS

1.Introduction
1.1. Frustration under Indian Contracts Act
2. Evolution of the concept of frustration
2.1 Evolution of the concept of frustration in India
3.Frustration of the contract when object failed to materialise
4.Frustration of contract happens when
4.1.Destruction of the subject matter
4.2.Death or incapacity of party to accomplish specific performance of the contract
4.3.Government and administrative decision results in frustration
4.4.Intervention of war in performance of the contract
4.5.Non-occurrence of the contemplated event
4.6.Doctrine of change circumstances
4.7. Leases and frustration of contract
5. Consequences after the frustration of contract
5.1. Frustration of contract must not be induced by the parties
5.2.Frustration operates automatically
5.3.Restiration or adjustment of rights
6. Principle of Pari delicto and the frustration of contract
7. The quantum meruit and the frustration of contract
8. Legislations and frustration of contract
9. Conclusions and recommendations
 ABSTRACT
The doctrine of frustration of contract deals with those contractual cases in which the parties
of the contracts are not in a position to achieve their object, of which they thought of while
making that particular contract. Frustration of the contract in general means fulfilling the
terms and conditions of contract as they were made during the time of making the contract
becomes impossible because of some unforeseen and unavoidable circumstances which were
beyond the control of the parties to the contract. In Indian Contracts Act, 1872 there is no
mentioning of the term “Frustration”. But under section 56 of the contract act is mentioned
that "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.” The frustration of contract comes into play when
the performance of the terms and conditions become physically and practically impossible or
the object of the parties failed to materialise because of some unforeseen circumstances.

The principle of frustration of contract is applicable to various types of contracts. It is not

possible to enumerate and prepare the list of all situations wher it can be said that the contract
is frustrated. But there are certain well established grounds. There are certain circumstances
when one can say that the contract is frustrated. They are distraction of subject matter,
Change of circumstances, Non-occurrence of contemplated event, Death or incapacity of
party, Government, administrative and legislative intervention, Intervention of war,
application to leases. To claim that there is frustration of contract the party who is claiming
that the contract is frustrated he has the burden of proof on himself. The prerequisites for
frustration of contract is that the frustration must not be self-induced. The frustration of
contract do not depend upon the intention of the parties, their opinions, or even knowledge
regarding the event.

After the frustration of contract the rights of the parties are adjusted under the section 65 of
the Indian Contract Act.
1.INTRODUCTION-
The literal meaning of frustration is feeling upset when someone is unable to achieve
something. In law of contracts the meaning is almost similar but in contractual terms it can be
said that a contract is frustrated when the contract is discharged because of impossibility of
its performance1.The concept of frustration of contract is not only limited to physical
impossibility but the contract is also said to be frustrated when the contract is physically
possible to perform but the objective with which parties to the contract made the contract it
failed to materialise or the object of the contract was impossible to achieve. The contract is
said to be frustrated when because of some inevitable accident or incident which was outside
the control of parties to the contract, the contract was either impossible to perform or the
object with which the parties entered into the contract is lost. While making of the contract
the contract was a valid contract but because of some subsequent event the contract became
impossible to achieve or it became unlawful, this results in frustration of contract. The
impossibility to perform a contract may be present while making a contract, such as doing an
impossible act like finding treasure trove by using magic 2, or the contract can become
impossible after the making of contract because of some subsequent happenings, or while
making of the contract both the parties were unknown to the fact that the subject matter of
contract is not present or already destroyed. “Although various theories have been
propounded by the Judges and jurists in England regarding the juridical basis of the doctrine
of frustration, yet the essential idea upon which the doctrine is based is that of impossibility
of performance of the contract: in fact impossibility and frustration are often used as
interchangeable expressions. The changed circumstances, it is said, make the performance of
the contract impossible and the parties are absolved from the further performance of it as they
did not promise to perform an impossibility.”3

RESEARCH QUESTIONS-

1.Whether the contract is frustrated when there is changed circumstances or not.

2.Whether there is still an obligation by the parties remaining after the frustration of contract.

3.Whether the parties to the contract can sue each other for breach of the contract after the
frustration of contract.
1
Joseph Constantine Steamship Line, Ltd* v. Imperial Smelting Corporation, Ltd., (1942) A.C. 154
2
Illustration (a) to s. 56 of the Indian contract act.
3
Satyabrata Ghose v. Mugneeram & Co., A.I.R. 1954 S.C
SCOPE OF THE STUDY-

The scope of the research is limited to only to the study of frustration of contract; when the
frustration occurs and the circumstances after the frustration of contract.

RESEARCH METHODOLOGY-

The researcher has applied doctrinal method of research.

TYPES OF RESEARCH-

The researcher has used explanatory, analytical and historical method of research.

HYPOTHESIS-

1. The contract is frustrated when there is change of circumstances.

2. There is no obligation remaining for the parties after the frustration of contract.

3. The parties to the contract cannot sue each other after the frustration of contract.

LITERATURE REVIEW-

The researcher has taken information from books, journals, newspaper articles and various
online sources.

1.Contract and specific relief by Avatar Singh-The researcher has taken information from this
book from the 8Th chapter of the 12th edition, regarding impossibility and frustration of
contract. The book has been of great help especially while searching for the circumstances
where the frustration occurs and adjustment t of rights after the frustration of contract.

2. A.L Corbin, Recent Developments in Contracts, (1937) Harvard Law Review- The
researcher has taken information about the evolution of the concept of frustration from this
book.

3. Pollock, Principles of Contract (13th ed.).-Pollock was the first person to review the Indian
contracts act after the enforcement in 1872. The analysis of Pollock on Indian contracts act
has been of great help for the researcher while describing about Indian Contracts Act and
frustration.

4.Indian Contracts Act, 1872- The researcher has taken information from Indian contracts Act
from section 56, 65 and section 20 of the Indian Contracts Act. Section 56 talks about when
the contract becomes impossible, section 65 talks about the adjustment of rights, section 20
talks about when the contract becomes void when both parties made a contract under mistake
of fact, this is basically pre-contractual frustration.

1.1 FRUSTRATION UNDER INDIAN CONTRACT ACT-

It is a significant point that the term frustration is not at all used in Indian contracts act.
The term impossible is there in the Indian contract act but nowhere the term frustration is
present. According to section 56 of Indian contract act, an agreement to make and achieve
an impossible act is void. This means if an act is initially impossible from the point when
a contract is made then that contract is absolutely void. The first part of section 56
denotes the absolute impossibility of a contract. The second part of the section 56 depicts
that if in a contract, after its formation, the act became impossible or unlawful because of
some subsequent happenings, that is out of control of the promisor then that act becomes
void. Section 20 of the Indian contract act tells that Where both the parties to an
agreement are under a mistake as to a matter of fact essential to the agreement, the
agreement is void. This can also be treated as a frustration. When two parties are making
a contract and they are unknown to the fact or they are under mistake of a matter of fact,
and the performance was impossible during the contract but it was unknown to both the
parties. In these types of cases there is generally destruction of subject matter which was
the integral part of agreement, but the whole point about the destruction was beyond the
knowledge of the parties. This event is generally termed as “ Pre contractual frustration”.4
It is relevant for the definition itself that The contract is frustrated even before it is
actually a legally binding contract. This is a very interesting case. Now lets see How
frustration of contract takes place under these three different scenarios.

1. Under section 56 of the Indian contract An agreement between two parties to find
act, the first part is about the initial treasure trove using black magic is
impossibility, that is the act itself is initially itself impossible.
impossible to perform.
Under section 56 of Indian contracts act, 1.V.L Narasu v P.S.V. Iyer5 - In this case
the second part is about the subsequent Sectio 56 of Indian contract was applied.
impossibility to perform a contract, that is The facts of the case are , there was
after making of a contract because of acinema hall showing some movies, there
some uncontrollable events the contract was a contract between plantiff and
has either became impossible or unlawful. defendant to show a movie. But because
4
Bamford (1955) 72 S.A.LJ. 166,282
5
-AIR 1953 Mad 300.
 of heavy rains the wall of cinema hall
collapsed and the license of cinema hall
building was cancelled. The cinema hall
owner was under no obligation because by
the tie the film hall was to be
reconstructed the film which was to be
presented might have lost its popularity.
Hence the contract was deemed to be
frustrated because of inevitable accident
that is in this case is the heavy rain.
2.Alopi Prashad & Sons LTD v Union of
India6- In this case the plaintiffs were
agent of government of India for
purchasing ghee for the use of army. Their
cost was fixed and rates were fixed.
During that time world war 2 started the
rates during peace time changed
drastically during war time, hence the
agent company demanded to again revise
the rates according to the particular
prevalent circumstance, but they did not
receive any replies. They continued the
supply, but the government terminated the
contract in 1945 after the termination of
world war 2. The plantiff claimed their
payments as per the increased rate during
the war. But their claim failed. Because
the right of the company was to receive
their amount under the terms and
conditions. Again if the change in price is
minimum then it can be ignored, but when
the price change is significant which was
unexpected by the parties while making of
6
AIR 1960 SC 588: (1960) 2 SCR 793.
 the contract, which is impossible to pay ,
hen the law has to offer protection to the
party, who has to pay enhanced rate.
Because excessive increase in price makes
the contract impossible t perform for one
party.
3. Under section 20 of Indian contracts act Seikh Bros Ltd v Ochsner 7-In this case
when both the parties have made a the plaintiff was a lessor of a forest in
contract while they both are under mistake Kenya, the company was granted license
of fact then that contract is also void. to cut, process and manufacture all sisal
growing in the forest. The defendant
undertook the responsibility of
manufacturing and deliver the plaintiff 50
tons of sisal fiber per month. But the
forest area had not had the capability of
producing 50 tons of sisal leaves per
month, because of the limitation in leaf
producing capacity, hence the defendant
was sued for the breach of the contract.
The court decided that the contract is a
kind of joint venture, and it was a
fundamental base and assumption of the
contract that the forest has the production
capacity of 50 tons of sisal leaves during
the license period. Hence it was concluded
that both parties were under mistake of
matter of fact which was very essential
component of the agreement.

Mainly the second part of section 56 that is a contract is void if it has become impossible
or unlawful after the making of contract is very closely related to the actual meaning of
frustration. For frustration to be applied there are certain prerequisites that are essential to
be fulfilled, they are

7
1957 AC 136: (1957) 2 WLR 254 (PC)
 1. There must be a legally valid contract between both the parties.
2. The contract is yet to be performed, or in the process of performance.
3. The performance of the contract becomes impossible or unlawful after making of the
contract.
4. The impossibility of performance of the contract is mainly attributed to some events
which are out of the control of both the parties. The event was inevitable.

2. EVOLUTION OF THE CONCEPT OF FRUSTRATION-

Before the emergence of Indian contracts act, the concept of frustration was evolving in
English common law. The process of evolution of this concept was not immediate but it was
gradual. During 17th century the British judges were in favor of rule of absolute liability in a
contract, that is the party if binds himself in a contract, then he is absolutely liable to perform
it, with no excuses available to him. The principle can be also described as “When the law
casts a duty upon a men which, through no fault of his, he is unable to perform, he is excused
for non-performance ; but if he binds himself without reservations by contract to do a thing,
he cannot escape liability for damages by proof that as events turned out performance is fuitle
or even impossible.”8 This principle is also called as sanctity of the contract. That is if a
contract is made, no matter what the circumstances the parties have to perform their part,
impossibility to perform was not a valid excuse.

The principle of sanctity of a contract can be seen in the case of Paradine v Jane9. The facts
of the case are- The defendants took an estate from defendant on lease, for which they had to
pay rent on quarterly basis. But because of foreign invasion The lessee was detached from the
property, because of alien enemies. Hence the lessee or the defendant in case refused to pay
the rent quarterly for the period for which the property was captured by alien enemies. the
plaintiff filed a case for the rent from the defendant. It was held by the court that, “ for
although the whole army had been alien enemies, yet the defendant ought to pay his rent.
This defense was taken, that where the law creates a duty or charge, and the party is dis abled
from performing it without any default in him, and hath no remedy over, there the law will
excuse him...But when the party by his own contract creates a duty as a charge upon himself
he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity
because he might have provided against it by his contract.” 10 The plea by the defendant that

8
Cheshire and Fifoot, The Law of Contract, 173-174 (4th ed).
9
King’s bench,(1647) Aleyn 26: 82 ER 897
10
(1647) Aleyn, 26 ; (1553-1774) All E.R. Rep. 172
the contract was impossible to perform because of enemy aliens was held as insufficient by
the court. This case was decided in 1647. But the rule of absolute sanctity of contract
continued for a long time.

In another case Hills v Sughrue11 this rule was also applied. The facts of the case are The
ship owner made a contract that, in West Africa he will load guano in his ship. But it was
impossible to obtain guano in west Africa. But after that also the ship owner was held liable
and the Paradine v Jane12 rule was applied here. This case was decide in 1846, which
signifies the fact that the rule of sanctity of contract was applied even after 200 years of the
Paradine’s case. So, It continued for a long time.

Till then the concept of sanctity of contract was only prevalent in legal field, that is if both
the parties have entered into a contract, then they have to do the specific performance of
contract, no matter what the situation is. In others word the concept of sanctity of contract
supported the notion of absolute liability.

Then came the revolutionary case of Taylor v Caldwell13, came into existence. The facts of
the case are the defendants who were owner of a particular music hall, allowed the plaintiff to
use their own music hall for a concert, which was to be organized by the plaintiffs. But before
even the performance under the terms and conditions of the contract started, the music hall
was destroyed by a fire accident. The fire accident took place without the fault of either of the
parties. Because of this unexpected and inevitable event the plaintiffs suffered some
monetary loss. They filed a case against the defendants. It was held by the court that the
contract was not of absolute in nature. The specific performance of the contract depends upon
the existence of music hall, that was an implied condition. The court held that the rule of
Paradine v Jane14 cannot be applied here and held “But this rule is only applicable when the
contract is positive and absolute and not subject to any condition either express or implied;
and there are authorities which, as we think, establish the principle that where, from the
nature of the contract, it appears that the parties must from the beginning have known that it
could not be fulfilled unless, when the time for the fulfilment of the contract arrived, some
particular specified thing continued to exist, so that when entering into the contract they must
have contemplated such continued existence as the foundation of what was to be done, there,
in the absence of any expressed or implied warranty that the thing shall exist, the contract is
11
(1846) 15 M. and W. 253
12
King’s bench,(1647) Aleyn 26: 82 ER 897
13
(1836) 3 B&S 826: 122 ER 309
14
King’s bench,(1647) Aleyn 26: 82 ER 897
not to be construed as a positive contract, but as subject to an implied condition that the
parties shall be excused in case, before breach, performance becomes impossible from the
perishing of the thing without default of the contractor.” Here there was implied condition
that the music hall must exist for the performance, hence the contract is not absolute or
positive.

There are now two principle in conflict with each other one is positive, absolute or sanctity of
contract and the other is frustration of the contract. The case of Taylor v Caldwell15 acted as
the foundation stone of the concept of frustration. The implied term rule continued its
existence afterwards also.

In the case of Robinson v Davison16 the implied term rule was considered. The facts of the
case are, There was a contract made between plaintiff and wife of the defendants who was an
eminent piano player and according to terms and conditions of the contract she was to play
piano on a specified date at a concert. On the morning of that specified day the piano player
informed the plaintiff that her health condition was serious hence she will not be able to
attend the concert. For the severe illness the concert was postponed and as a result of which
the plaintiff suffered monetary loss. The plaintiff filed a case against her for the breach of the
contract. But the action failed and the court held that under the circumstances she was not
merely excused from playing , but she was not in liberty to play, if she was unfit to do so.
The contract was clearly subject to the condition of her being well enough to perform. 17 The
court held that, “The whole contract is based on the assumption of the continuance of life,
and on the conditions which existed at that time. That assumption is made by both; it is really
the foundation of the contract. It does not require close reasoning to prove that if the
foundation fails, the whole contract must fail. Here the foundation was wanting for there was
on Mrs Davison’s part an entire and total incapacity to do the thing contracted for.”

All these above cases we have seen how the destruction of subject matter leads to the
frustration of the contract. The destruction of subject matter is not the only way by which we
can say that the contract is frustrated. This has been proved to be the fundamental notion
while deciding many cases. The case of Krell v Henry18depicts the above principle. In that
case the defendant hired a flat from the plaintiff for June 26 and June 27, on which days the
coronation procession of king would pass through that route which was announced. A part of
15
(1836) 3 B&S 826: 122 ER 309
16
L.R. (1871) 6 Ex. 269 ; 40 L,J. Ex. 172 ; (1861-73) All E.R .Rep. 699.
17
Avatar singh, contracts and specific relief, 12th edition.
18
(1903) 2 KB 740 (CA)
rent was given in advance by the defendant to the plaintiff. But the procession got cancelled
because of illness of the king. The defendant refused to pay the remaining rent. The plaintiff
filed a case against the defendant for recovery of the remaining rent. But the court held that,
the parties while making the contract had an object in their mind, that is the coronation
process of the king. The coronation procession was the foundation of the contract and the
non-happening of the coronation frustrated the contract. Thus, we can see that the frustration
of a contract is said to happen when the performance of the contract becomes physically
impossible and the second circumstance is that when the object that both the parties had an
object in mind while making the contract that object because of some inevitable reasons
failed to materialize. 
2.1 EVOLUTION OF CONCEPT OF FRUSTRATION IN INDIA- 
The contract act came into force in 1872. Section 56 of the Indian Contracts Act deals with
the concept of frustration of contract. The concept of frustration in the Indian arena got its
foundation stone after the enforcement of Indian contracts Act. 

According to eminent jurist pollock who was one of the first jurists to review Indian
Contracts Act, “the Indian Contract Act attempted to generalize the doctrine, namely, where
the fulfilment of a contract according to the parties' true meaning and intent demands not only
their action in conformity with the terms, but the occurrence of events in the normal order
contemplated, or the existence or continuance of a so normal order contemplated, or the
existence or continuance of a normal state of things at the due time of performance, and the
material circumstances are so radically changed by unforeseen accident that the purpose of
the contract as a whole is frustrated, there a performance which has become impossible, or
though literally possible would be futile, is excused, and both parties are discharged.19” 
6

The supreme court of India has decided many cases related to the frustration. The English law
doctrine has followed in Indian law also. The scope and the applicability of the concept of
frustration has been quite dynamic. The society is changing and the complexity in the society
in every sphere is quite relevant. Hence the court is not at all hesitant to change the scope and
extent of this concept of frustration according to the present needs of the society. 

19
Pollock, Principles of Contract 227 (13th ed.).
We have seen that how the frustration of contract occurs when either the object of the parties
failed to materialize or the performance of the contract became physically impossible.
According to the Supreme court of India section 56 can be applied in both type of situations. 

In Satyabrata Ghose v Mugneeram Bangur & Co20, the plaintiff Satyabrata Ghose was

assignee of a land. A land was sold to the plaintiff which the defendant agreed to develop, but
he rejected it afterwards. The plaintiff filed a case against the defendant for specific
performance of the contract. But the defense taken by the defendant was that the land which
was in dispute was under the government for some military purposes because war prevailed
during the particular time. Hence the defendant pleaded the frustration of contract. The court
held that, ”The performance of an act may not be literally impossible but it may
be impracticable and useless from the point of view of the object and purpose which the
parties had in view; and if an untoward event or change of circumstances totally upsets the
very foundation upon which the parties rested their bargain, It can be very well said that the
promisor finds it impossible to do the act he promised to do.”21
3.FRUSTRATION OF THE CONTRACT WHEN THE OBJECT FAILED TO
MATERIALIZE- 
The best case to show how the object failed to materialize can be seen in the case
of Parshotam Das v Municipal Committee, Batala22. In that case the municipal committee
gave the lease of some Tonga stands to the plaintiff. In consideration of that act the plaintiff
had to pay Rs.5000/- to the municipal committee. But no Tonga driver used the specified
Tonga stands, which resulted in the loss of the plaintiff. The plaintiff sued for the refund of
the money, which he gave for acquiring the lease. It was held that both the parties had
assumption before the contract that the leased stand would be used by the Tonga drivers. But
the very purpose of the contract failed to materialize, as no Tonga driver used the stand.
Hence the contract is frustrated. 

Another case where it can be seen that in commercial cases how the attempt by the defendant
to claim the defense of frustration failed. The case is Sachindra Nath v Gopal Chandra23.
The facts of the case are the plaintiff gave some premises owned by him at a higher rent. The
defendant agreed to pay higher rent because there were British troops in the town. There was
20
AIR 1954 SC 44: 1954 SCR 310
21
Dhruv Dev Chand v Harmohinder Singh, AIR 1968 SC 1024
22
AIR East Punjab 301, 304
23
AIR 1949 Cal 240.
a specific clause in the agreement which provided that, the agreement will remain in force so
long as British troops will remain in this town. After some month's interval te British troops
left the town. The defendant denied to do specific performance of the contract and the
plaintiff filed a case against the defendant. The defendant pleaded the defense of frustration
of contract. The court held that, "Though it was possible that defendant would not
have piad such a high rent apart from the expectations of deriving high profits from the
British troops, that was not sufficient to make a case of frustration.” 

In this case it can be seen that the departure of British troops from the town makes the
contract less profitable to the defendant and this  cannot be treated as sufficient ground to
claim the frustration of the contract.  “This is a situation of commercial hardship.”24
In another case Samuel Fitz & Co v Standard Cotton and Silk Wvg Co 25 also concept of
commercial hardship and frustration of contract can be illustrated. The defendants in this case
placed an order to the plaintiffs for supply of particular kind of tapestries. He also mentioned
that he wanted to sell them in Australia. During that time Australian government prohibited
the import of tapestries. The Defendant as a result cancelled the order. The court held that it
is very hard to determine that the contract was enforceable only when there were customers
available. The court held that, “ We are unable to say that the foundation of the contract was
that these goods should be resold by the defendants to their clients in Australia.”

4.FRUSTRATION OF CONTRACT HAPPENS WHEN-

“The principle of frustration of contract, or of impossibility of performance is applicable to a
great variety of contracts. It is, therefore, not possible to lay down an exhaustive list of
situations in which the doctrine is going to be applied so as to excuse performance. The law
upon the matter is undoubtedly in the process of evolution. 26” This statement directly denotes
that the scope under the topic frustration of contract is very vast and huge. Hence it is quite
difficult to enlist all the situations and circumstances when it can be said that there is
frustration of contract. With changing complexity in the society, new types of situation
arising every day, the scope of the concept of frustration of contract has no fixed boundaries
and it is dynamic. But there are certain prominent and established grounds, where it can be
said that frustration of contract has happened is illustrated in this particular section.

24
AVATAR SINGH, CONTRACT AND SPECIFIC RELIEF, 12TH EDITION, 394
25
AIR 1945 Mad 291 at p. 293
26
A.L Corbin, Recent Developments in Contracts, (1937) 50 Harvard Law Review 549, 465-66
 
4.1. DESTRUCTION OF SUBJECT MATTER-
All the contracts are based upon the subject matter. The subject matter of a contract is the
foundation of the contract. It is obvious that if the subject matter of a contract is destroyed,
then the performance of the contract becomes physically impossible. There are case laws to
show how a contract is frustrated because of the destruction of the subject matter.

Taylor v Caldwell27 is the best example for destruction of the subject matter. In another case
Howell v Coupland28, where the defendant made a contract with the plaintiff to sell a 200
tonnes of potatoes to be grown in his farm. The defendant failed to supply the specified
quantities of potatoes because, the crop got destroyed by a disease. The defendants files a
case . The court held that it was impossible for the defendant to perform his part in the
contract. Because the crops got affected by a disease. Hence the subject matter in this
contract which is the potatoes got destroyed without the fault of either parties. Hence the
defendant was excused from the performance of the contract.

The Indian case which is related to the destruction of the subject matter is V. L Narasu v
P.S.V Iyer29.In that case the rear wall of a cinema hall was destroyed because of excessive
rain. The cinema hall was ordered by the chief engineer to be reconstructed in a particular
manner. The film hall owner made a contract with the plaintiff to show a particular movie in
the cinema hall. But because of some unforeseeable event the contract was impossible to
perform as the subject matter of the contract that is the cinema hall was to be repaired
because of some damages. Hence the contract was said to be frustrated.

These are the cases which shows how the contract gets frustrated when the subject matter of a
contract gets frustrated, But it will be an exception if the party performing particular part of
the contract had the opportunity to avoid the destruction of subject matter or in other words it
can be said that the subject matter could have been prevented from destruction. The event
was an inevitable accident. The party could have avoided the frustration if he or she had dealt
with the case with proper diligence and care.

27
(1863) 3 b&s 826: 122 er 309.
28
(1876) QBD 258 (CA).
29
AIR 1953 Mad 300
This can be illustrated by the case of Ghee Seng Motor V Ling30, In this case some cargo
were to be transported by sea to the plaintiff by the defendant. While travelling in the sea
some water started entering in the vessel. The vessel started to tilt to one side. The persons in
vessel pumped the water out of the vessel. After doing so they continued their voyage, as a
result of which the ship sank. The plaintiff suffered loss due to sinking of the vessel. The
plaintiff filed a case against the defendant. The defendant pleaded inevitable accident and
frustration og the contract. The court held that though the subject matter in this contract the
vessel carrying the cargo sank, but it cannot be treated as inevitable accident. After pumping
the water out the defendant could have taken the ship to some nearest port for repair, and
after repairing there they could have continued the transportation. Instead of doing that they
decided to continue the voyage. It could have been avoided by the defendant. Hence the
incident cannot be said as inevitable accident. There is no frustration of contract, as the
destruction of subject matter was because of the negligence of the defendant in taking proper
care of the ship after entering of water into it.

Though destruction of subject matter is a substantive ground for claiming the frustration of
contract. But it can be only applied as a defence in those cases where the destruction was
caused by some unforeseeable event, which was out of the control of both the parties, who
are parties to the contract.

4.2. DEATH OR INCAPCITY OF PARTY TO ACCOMPLISH SPECIFIC

PERFORMANCE OF THE CONTRACT-
It is a general principle or common knowledge that it is impossible to perform a contract
when the person is either very seriously ill to perform the contract without no second option
available for performance of the contract, or the person has died. A great example for this
condition for the frustration of the contract is Robinson v Davison31. The facts of the case are,
There was a contract made between plaintiff and wife of the defendants who was an eminent
piano player and according to terms and conditions of the contract she was to play piano on a
specified date at a concert. On the morning of that specified day the piano player informed
the plaintiff that her health condition was serious hence she will not be able to attend the
concert. For the severe illness the concert was postponed and as a result of which the plaintiff

30
(1994) 1 Curr LJ 382 ( Malaysia)
31
L.R. (1871) 6 Ex. 269 ; 40 L,J. Ex. 172 ; (1861-73) All E.R .Rep. 699.
suffered monetary loss. The plaintiff filed a case against her for the breach of the contract.
Here the court held that it was impossible for the piano player to perform at the concert.
Because she was very seriously ill to perform the contract, and there was no other option
available to her to somehow manage the performance of the contract. She was in no position
to perform the contract because of some unforeseeable incident which is becoming ill in this
case. Hence the piano player was incapable to perform the contract. The contract got
frustrated because of the incapacity of the piano player.

In Marshall v Harland & Wolff Ltd. 32The plaintiff Marshall was a permanent employee of
the company from 1946. In 1969 he fell ill and in 1971 company started giving his usual job
benefits. But Marshall had still to undergo an operation before he resumes the usual service
work. The contract was said to be frustrated and the plaintiff filed ac se in the court and the
court held that according to the terms and conditions of the contract it was there that no
wages will be paid in case of illness. It was also there that no employees can be removed
from the service because of the illness. There was unavailability of sufficient evidence to say
that the Marshall was incapable of doing regular service. There was no sufficient grounds to
tell that the performance of the contract has become impossible illustrating the fact that the
contract has not been frustrated because of any incapacity.

Hence death or incapacity of the party results in frustration of contract because it becomes
impossible to perform the contract. Impossibility in performance results in frustration.

4.3. GOVERNMENT, ADMINISTRATIVE INTERVENTION RESULTS IN

FRUSTRATION-
Whenever any government legislations or administrative actions changes the circumstances,
then it is highly probable that if the contract is related to those issues then the performance of
the contract will be affected. The conditions after the government intervention might make
the performance either unlawful or impossible to perform. The circumstances before the
government intervention after the government intervention can never be the same, Hence the
changed circumstances can affect the performance of the contract . Hence the contract can get
frustrated.

32
(1972) 1 WLR 899.
In the case of Metropolitan Water Board v Dick Kerr & Co Ltd.33, A contract was made
between a contractor group and the metropolitan water board. According to the terms and
conditions of the contract, the group of constructors had to construct a reservoir within 6
months. Then a notice was issued by the government under Defence of the Realms Act.
According to the notice the contractor group had to stop working on the construction of the
said reservoir. The water board filed a case against them. The construction firm claimed that
the notice has resulted in the end of the contract., because there was impossibility of further
performance. The court applied the doctrine of changed circumstances , that is the notice had
scuch an effect upon the contract if the contract was to be resumed afterwards the contract
would have been different than the contract which was to be made without any intervention.
Hence they ordered that the contract is frustrated.

In another Indian case Man Singh v Khazan singh34, a contract was made between the parties
for sell of plants in a forest. But subsequently a law was passed by the state government of
Rajasthan to forbid the exploitation and cutting of the forest trees. Hence the there was clear
impossibility in performance of the contract.

In famous case of Naihati Jute Mills Ltd v Khyaliram Jagannath 35, there was a contract
between the parties to purchase jute to be imported from Bangladesh. The buyer was to
supply the import license within the month of November. If he failed to provide the import
license within November then he had to pay some more amount than the previous one. If the
buyer failed again to obtain import license by December, then he had to pay difference
between the market price and the contracted price. The buyer applied for a license for the first
time but it was rejected by the authorities because he had enough stock of jute available with
him for next two months. He applied again after two months for import license. He was said
by the authorities that the rules made by the government was changed. According to the new
rules and regulations the person had to use an equal amount of Indian jute. Thus the buyer of
the jute failed to supply the import license, hence sued for breach by the other party. The
court held that the contract is not at all frustrated. The court held that , “The clauses present in
terms and conditions clearly indicate that the appellants were conscious of the difficulty of
getting the license in time. The question would depend upon whether the contract which the

33
1918 ac 119 (HL).
34
AIR 1961 Raj 277.
35
AIR 1968 SC 522: (1968)1 SCR 821.
appellants entered into was that they would make their best endeavours to get the license or
whether the contract was that they would obtain it or else be liable for the breach of that
stipulation. There is nothing improper or illegal for a party to take upon himself an absolute
obligation to obtain a permit for a license and in such a case if he took the risk, he must be
held bound to his stipulation.” The government in this case has not totally prohibited the
import of the jute but has put some restrictions. If the government totally banned the import
then it would have resulted in the frustration of contract. The contract by looking at the
contract we can say that the contract was absolute in nature, the administrative intervention
can not result in the frustration of the contract. This is an example of absolute contract and it
is independent of any administrative decisions.

In another case Boothalinga Agencies v V.T.C . Poriaswami Nadar 36, the defendant had a
license to import chicory for production of coffee powder. The license had certain terms and
conditions and according to the terms and conditions he should use the chicory only for the
his own industry. He agreed to supply chicory powder to the plaintiff. But before the arrival
of the ship, the sale of such imported goods was banned in India. The plaintiff filed a case
against the defendant. But the contract was held to be void. Because if any legislative and
administrative decision treats some particular event as unlawful, then the court has to apply
the doctrine of frustration. Because unlawfulness results in the frustration of contract.

In the case of DDA v Kenneth Builders & Developers Ltd 37, the Delhi Development
Authority allotted a land to the mentioned builders for the housing development. The forest
authority did not permit because the area where houses were to be constructed was too near to
the protected forests. The contract was frustrated. Because the act itself was unlawful, which
resulted in impossibility of performance of the contract.

4.4-INTERVENTION OF WAR IN PERFORMANCE OF THE CONTRACT-

The intervention of war makes it difficult for the performance of the contract. Sometimes it
may make the performance impossible. The intervention of war whether is to be taken as

36
AIR 1969 SC 110: (1969)1 SCR 65.
37
(2016) 230 DLT 706.
sufficient grounds for the frustration of contract depends directly upon the facts and
circumstances of each case.
In the case of Fibrosa SA v Fairbairn Lawson Combe Barbour Ltd, an English company made
a contract with a polish company for trade of certain machineries for 4800 pounds. The
deadline for the delivery of the machineries was after three to four months of the final
contractual settlement. The English company had to deliver the machineries by sea to
Gdynia, Poland. Clause 7 of the contractual document mentioned that granting reasonable
extension of the delivery to the English company because of war or any such event outside
the control of the English company. The polish company had to pay 1600 pounds while
placing the order. But they only paid 1000 pounds. On 1 st September, 1939 a war broke out
between Germany and Poland and on 3rd September, 1939, war broke out between Germany
and Great Britain. As a result Gdynia was occupied by The Germans and the British company
did not transfer the machineries. The polish company demanded its 1000 pounds back. The
court of appeal decided in favour of the English company. But when this case was placed
before house of lords they held that, “Clause 7 was limited only to a delay in respect of which
a reasonable extension might be granted. The war was not such a delay because it involved
prolonged and indefinite interruption of the prompt contractual performance. Therefore,
Clause 7 did not prevent the frustration of the contract.” The polish company was entitled to
recover the 1000 pounds because of the frustration of contract.

In the case of Tsakiorglou & Co Ltd v Noblee & Thorl GMBH. 38. the plaintiffs made a
contract to sell the defendants three hundred tons of Sudan groundnuts. The norml route of
the shipment was by using Suez Canal. The shipment was to be held in November or
December of 1956. But because of Anglo-French war with Egypt the Suez Canal was closed.
It was again reopened in April, 1957. The plaintiffs claimed that by closing of the Suez
Canal, the contract has frustrated.

It is also submitted that the plaintiff had the option of taking the ground nuts through Cape Of
Good Hope. But the plaintiff rejected to do so. The appellant took the dense that it was an
implied term of the contract that the delivery had to be made by the Suez Canal. The court
held that being the regular trade route of Suez closed, the plaintiffs were bound by the Sales
of Goods Act, 1893, Section 32(2), to ship the ground nuts by a reasonable route. It might
have cost the appellant more expenses by shipping the groundnuts through Cape of Good
38
1962 AC 93: (1961) 2 WLR 633.
Hope, but this event does not alter the supply of the ground nuts which was the subject matter
of the contract. Hence shipment through the cape did not render the contract fundamentally
different. This event did not result in the frustration of the contract.

In another case Twentsche Overseas Trading Co Ltd v Uganda Sugar Factory Ltd. 39, there
was a contract between the parties for supply of “ Krupps” steel rails. The appellants claimed
that the rails specified in the contract were to be manufactured by the German firm and that
firm only. To bring the rails the appellants had to deal with alien enemy due to World War II.
They also stated that as the terms and conditions of the contract put a compulsion upon them
to deal with alien enemy during World War II, hence that makes the contract impossible and
illegal. But the court after verifying the terms and conditions of the contract held that the
contract only specified about the krupps steel rail and it did not mention anything that states
that the rail had to be obtained in Germany only. It was only a specification of rails. There
were many option available to the supplier to supply the particular rail apart from dealing
with alien enemy. The case again illustrates the fact that if there are more than one option
available to the party to perform the contract and because of war only one of the ways of the
performing of contract became impossible, then also the party is bound by the contract
because there are still other options available. The war has not made the contract absolutely
impossible. Hence there can be no frustration of the contract in the case of war if more than
one option is available to the party to perform a contract.

In Gambhirmull Mahabirprasad v Indian Bank Ltd. 40, the war intervened the performance
of the contract because the delay was made by the negligence of one of the parties. Here the
court held that there can be no frustration of contract.

In A.F. Ferguson & Co v Lalit Mohan Ghose 41, the insurance company was a German
company. Because of the outbreak of World War II the business of the company was closed
by the government of India and the disposal of pending policies were assigned to a firm of
chartered accountants. The person who was insured was allowed to recover the money paid
by him under the policy. This is a clear example that how outbreak of war resulted in
impossibility of the performance of the contract for insurance.

39
AIR 1945 PC 144.
40
AIR 1963 Cal 163.
41
AIR 1954 Pat 596.
 4.5 NON – OCCURRENCE OF CONTEMPLATED EVENT-
In this type of circumstances the performance of the contracts remain possible. But while
making of the contract expected some contemplated event to occur. Because of the non-
occurrence of the contemplated event the object of the contract failed to materialise and gets
destroyed. This also results in frustration of contract.

This fact can be illustrated by the case of Krell v Henry42, In this case the coronation
ceremony of the king was the basic foundation of contract. Both the party contemplated that
coronation event will take place on a particular day. But because of the illness of the king the
coronation ceremony got postponed. Here there is non-occurrence of contemplated event
which contributed to disturbing the very foundation of the contract.

There is another case where the particular contemplated event was not the foundation of the
contract. In that case the contract is not said to be frustrated. This particular fact can be
illustrated by taking the help of another case, that is Herne Bay Steam Boat Co v Hutton 43, in
this case the defendant chartered a steamboat for observing the Royal Naval Review
proposed to be held on the particular occasion and for a day’s cruise around the fleet. But the
review was cancelled. Still the defendant held liable to pay the remaining amount which the
steam boat company could have generated if the company could have used in ordinary course
of the business. In this case the Royal Naval Review was not held as the foundation of the
contract.

4.6 DOCTRINE OF CHANGE OF CIRCUMSTANCES-

42
(1903) 2 KB 740 (CA).
43
(1903) 2 KB 683 (CA).
When there is a change of circumstance which either makes the contract impossible to
perform in a particular period of time or manner, or makes the contract impossible or
extremely difficult to perform then the contract is said to be frustrated.

In the case of Joseph Constantine Steamship Line Ltd. v Imperial Smelting Corporation
Ltd44, a ship was loaded with cargo but just before day before the departure of the ship
towards the destination, an explosion occurred in the boiler, which made it impossible to start
the voyage at the fixed time. In this case because of the explosion of the auxiliary boiler the
pre-determined time during which the contract was to be performed was made impossible,
hence the house of lords held that there was a frustration of contract. They held that, “Where
circumstances arise which make the performance of the contract impossible in the manner
and time contemplated”. It is said that frustration of contract occurs.

In another case of Davis Contractors Ltd v Fareham Urban District Council 45, there was a
contract to build certain number of houses for the urban district council for a particular price
within a time period of 8 months. But because of bad weather and labour strikes the work got
extended for 22 months. The cost of construction was at a higher price than the price for
which both the party contracted. The contractor pleaded for the frustration of contract and he
shoul be paid with the actual cost of the construction. The court rejected the appeal of the
contractor and held that, “ So, perhaps, it would be simpler to say at the outset that frustration
occurs whenever law recognises that , without the default of either party, a contractual
obligation has become impossible of being performed because the circumstances in which the
performance is called would render it a thing radically different from what which was
undertaken by the contract. ‘The data for decision are, on the one hand, the terms and
conditions of the contract, read in the light of the surrounding circumstances, and, on the
other hand, the events which have occurred.’ It is not the hardship or inconvenience or
material loss itself which calls the principle of frustration into play. There must be as well
such a change in the significance of the obligation that thing undertaken would, if performed,
be a different thing from that contracted for. If this is the law, the appellants’ case seems to be
long way from a case of frustration.”

44
1942 AC 154 (HL).
45
1956 AC 696, 715: (1956) 3 WLR 37 (HL).
In the case of Pameshwari Das Mehta v Ram Chand Om Parkash 46, there was a contract
between the persons to supply of certain American goods by one person to the other. The
arrival of goods got delayed. The purchaser rejected the goods saying that the quantities and
qualities of the goods were not according to the terms and conditions of the contract. Then
the supplier called the purchaser to Karachi to refer the case to an arbitrator who was there in
Karachi. But after that because of partition of India and Pakistan it was impossible for non-
Muslims to enter into Karachi. The court held that, “If it was necessary for the parties to go to
Karachi and to take witnesses there. The performance of the arbitration agreement would
have been rendered impossible. But, as going to Karachi was not necessary, the change of
circumstances did not have a material effect on the contract.”47
4.4. LEASES AND FRUSTRATION OF CONTRACT-
To see application of doctrine of frustration on leases , first we have to consider the cases of
England. There is no clarity in judgements regarding application of frustration of contract in
England’s cases. The application of the frustration of contract depends upon facts and
circumstances of each case.

The first case is Cricklewood Property & Investment Trust Ltd v Leighton’s Investment
Trust Ltd48. The facts of the case are, the lease of a building was given for 99 years. There
was a condition that the rent for the building was to be increased after the total erection of the
building. But before erection of the building after 9 years of the lease grant the building
construction was stopped by the government because of war. The chief justice held that, “The
lease at the time had more than 90 years to run, and though we do not know how long the
present war, and the emergency regulations which have been made necessary by it, are going
to last, length of the interruption so caused is presumably a small fraction of the whole term.
Here the lease itself contemplates that rent may be payable although no building is going on,
and I cannot regard the interruption which had arisen as such as to destroy the identity of the
arrangement or to make it unreasonable to carry out the lease according to its terms as soon
as the interruption in building is over.” After saying that there is no frustration the judge also
stated that at some cases the lease can end prematurely by frustration. He stated that, “If
legislation were subsequently passed which permanently prohibited private building in the
area, or dedicated it as an open space forever, why should this not bring to an end the

46
AIR 1952 Punj 34, 38.
47
At p.88. Nagnath Kaulwar and Sons v Govindram Shyamsunder, AIR 2004 Bom 271: (2004) 3 Mah LJ 457.
48
1945 AC 221 (HL)
currency of a building lease, the object of which is to provide for the erection in the area, for
the combined advantage of the lessor and lessee of the buildings which it would now be
unlawful to construct.”

In Matthey v Curling49, a house was given for lease for 21 years. The lesser had some
responsibilities to keep building in repaired condition, to insure the building and in case of
fire accident expend the insurance money for reconstruction. In 1918 during the world war
military took the possession of the building and remained their till the expiry of the lease
period. In February, 1919, the building was destroyed by fire and in March, 1919 the lease
expired. House of Lords confirmed the decision given by the court of the appeal that lessee
was liable for both repairs of the building and the rent of the building when it was not under
his possession but under the possession of the military. In this case also the extreme incidents
like possession by the army and destruction by the fire also did not result in the frustration of
the contract. Hence English law is still in dilemma regarding in this concept.

To illustrate the conflict in England regarding whether lease concept comes under the
purview of the frustration of contract, let’s take an example of another case that is National
Carriers Ltd v Panalpina Ltd. 50The facts of the case are a warehouse was given on lease to
the defendant for a period of 10 years. The warehouse must not be used for any other purpose
other than warehousing without the lessor’s consent. There was only one route by which the
vehicle could access the warehouse, and that route was closed by the local authority because
of the dangerous condition of a Victorian warehouse which was opposite to the leased
warehouse. The time period between the closing of the street and its reopening after the
demolition of Victorian warehouse was around 20 months. The defendant refused to pay
further rent because of the frustration of contract. But they were held liable, because there
was not any significant change in the contract. The length of the interruption was not that
great to affect the lease significantly. Hence the court did not apply the principle of
frustration of contract.

49
(1922) 2 AC 180 (HL)
50
1981 AC 675: (1981) 2 WLR 45 (HL).
If we take the case of India, then let’s see whether doctrine of frustration of contract applies
to the leases or not. In the case of Raja Dhruv Dec Chand v Raja Harmohinder Singh 51, the
lessor in this case leased a land to the lessee for one year. The land was an agricultural land.
The land was leased for a time period of 1 year. The rent of the land was paid and the lessee
was provided with the possession of the land. Because of the partition between India and
Pakistan the land stayed in Pakistan and both the lessor and lessee migrated to India. No
cultivation was made in the leased agricultural land. Because of this the lessee filed a case
against the lessor to repay the rent which was paid to him because of the lease.
But the court held that, “Authorities in the courts in India have generally taken the view that
section 56 of the Indian Contracts Act is not applicable when the rights and obligations of the
parties arise under a transfer of property under a lease.” This statement indirectly states that
doctrine of frustration of contract is not applicable in case of lease.

In this case the possession of the leased land was transferred to the lessee. But the Indian
courts treat the cases differently if the possession of the land is not transferred to the lessee.

In another case Gurdashan Singh v Bishen Singh52, In 1947 Gurdarshan Singh, who was a
minor. His guardian was his mother, Balwant Kaur. Gurudashan made a contract with Bishan
for transfer of the lease of the land. The lease was executed on 8 th August, 1947.The land for
which there was a contract for transfer of a lease is now in present Pakistan. In the contract
for lease of the land, it was mentioned that the possession of the said land is transferred to the
lessee, But in reality the possession of the land was with the lessor's tenants and the crops of
the tenants were present on the land of lessor. In The terms of the contract it was mentioned
the lease period was for 5 years and it was to start from kharif 1947 to Rabi season of 1952. It
was found by the court that the possession of the land was not transferred to the lessee,
because during that time the partition happened, hence it was impossible for the performance
of the contract. The high court held that “ The broad principle of frustration of contracts
applies to leases.” But the supreme court did not agree with the observation of Punjab High
Court.
In Mahadeo Prosad Shaw v Calcutta Dying & Cleaning Co 53 the court held that, “ Under a
lease of land there is transfer of right to enjoy that land. If any material part of the property be

51
AIR 1968 SC 1024: (1968) 3 SCR 339.
52
(1962) 2 Punj 5 (FB).
53
AIR 1961 Cal 70.
wholly destroyed or rendered substantially and permanently unfit for the purpose for which it
was let out, because of fire, tempest, flood, violence of any army or a mob, or other
irresistible force, the lease may at the option of lessee be avoided. This rule is incorporated in
section 108(c) of the Transfer of Property Act. Where the property leased is not destroyed or
rendered substantially and permanently unfit, the lessee cannot avoid the lease because he
does not use the land for the purpose for which it is let out to him.”

5. CONSEQUENCES AFTER THE FRUSTRATION OF CONTRACT-

Frustration of contract has a direct role to play in the possibility in performance of contract.
There are certain effects that takes place after the frustration which are very pertinent to the
topic of frustration to understand its application of frustration principle.

5.1. The frustration of contract must not be induced by the parties to the contract-
In the case of Maritime National Fish Ltd v Ocean Trawlers Ltd 54, the plaintiffs hired the
defendant’s trawler. That trawler was to be used for fishing purpose. Both the parties to the
contract had the knowledge of the fact that the license for the trawler was granted by the
Canada government only for fishing purpose. The plaintiffs were using 5 trawlers . They
applied five licenses one each for each trawler. Government granted license only to three
trawlers out of the five trawler. While hiring the trawler the contract between plaintiff and
defendant was the name of the trawler was to be “St. Cuthbert”. They named the trawler for
which they obtained license from the government in some other name, but not “St.
Cuthbert”. The plaintiff then rejected the charter or contract and they pleaded the frustration
of contract when defendant placed an action for the hire of the said trawler. The privy council
held that in this case the frustration arose because of plaintiff’s own decision to exclude the
defendant’s ship from the license. Hence they were held liable and not discharged from the
contract. Here the frustration arose because of the fault of one party, hence the contractual
obligation was not discharged.

5.2.Frustration operates automatically-

The effect of frustration operates automatically. It does not depend upon the intention, mood
or the feeling of the parties. The frustration of contract does not even consider the
circumstances of the parties. It starts on its own. In the case of Satyabrata Ghose v
54
1935 AC 524 (PC).
Mugneeram Bangur & Co55, The court held that, “The belief, knowledge and intention of the
parties are evidence, but evidence only on which the court has to form its conclusion whether
the changed circumstances destroyed altogether the basis of adventure and its underlying
object.” Hence the frustration of contracts operates automatically. It puts an end to the
liability of parties to perform the contract. The court will consider the operation of frustration
according to the facts and circumstances of each case.

5.3.Restoration or adjustment of rights-

After the frustration of contract the rights of the parties to the contract has to be adjusted
according to the section 65 of Indian Contracts Act. The section reads that, “When an
agreement is discovered to be void , or when a contract becomes void, any person who has
received any advantage under such agreement or contract is bound to restore it, or to make
compensation for it, to the person from whom he received it. The principle of section 65
applies to those situation where while making of the contract the contract was a valid
contract, after that some benefits have been received by the parties and after some time the
parties came to know that the contract is void or becomes void. But the principle under
section 65 of the act does not apply the contract which are void ab initio or which are legally
unenforceable at the time of the making of the contract, though this fact was not known to the
parties to the contract. Let’s dissect the section of the contract into parts and try to analyse
each part with the help of relevant case laws.

In the case of Tarsem Singh v Sukhminder Singh56, the advance money was paid by the
party for purchasing the piece of land. The contract between the parties turned out to be void
because the seller of the land thought that he was selling the at a rate of per Kanal whereas
the buyer of the land thought that he was paying the price at a rate per bigha. The supreme
court allowed the recovery of the paid amount.

In the case of Indu Mehta v State of U.P.57, the lady advocate acted as assistant district
counsel on the request of the district magistrate. This act was discovered to be void under
section 24(2) of Criminal Procedure Code, 1973. But the court granted her remuneration for
the working period.

55
AIR 1954 SC 44: 1954 SCR 310.
56
AIR 1998 SC 1400.
57
AIR 1987 ALL 309.
6. PRINCIPLE OF PARI DELICTO AND FRUSTRATION OF CONTRACT-
Pari delicto means at equal fault. This case applies when the contract was for unlawful object,
which was unknown to the parties. In the case Ram Singh v Jethanand Wadhumal & Co.58,
the parties made a contract for transport of hydrogenated ground nut oil. But both the parties
were unaware of the fact that an order was issued under the Defence of India rules which
prohibited such type of contracts. The court held that, “The parties are not in pari delicto, and
therefore, it is a contract which is subsequently discovered to be void. The purchaser who has
advanced money under the contract is entitled to refund of it.” The court also held that “the
principle behind the doctrine of pari delcito is that where each party is equally at fault, the
law favours him who is actually in possession, or that where both the parties are equally
culpable , the law will leave them where its find them and will not engage itself to determine
the rights as between them. But this principle is subject to well-known exceptions, one of
which is that it will not apply where both the parties are not or cannot be said to be really in
pari delicto”.
There are two kind of instances where when a contract becomes void because of illegality
and the benefits received under the contract can be recovered.
In the case of Hughes v Liverpool Victoria Legal Friendly Society 59, the women was induce
by an agent of insurance company to pay premium for a policy which was illegal and void,
she was allowed to recover the premium amount. In this case both the parties were not under
equal fault. The insurance company scheme was illegal but the woman who was induced by
the agent was innocent. This is first kind of instance where the party can recover the amount
though the object of the contract was unlawful.
In another case Dharindhar v Kanhji Sahay60, in this case there was a contract for marriage
which was illegal. The father of the bride paid some money to the father of bride groom. But
later he refused to perform the marriage. The father of the bride was entitled to refund of the
money which he paid to the father of bridegroom for the illegal marriage. This was the
second instance where though there is a unlawful object but the party was allowed to recover

58
AIR 1964 Raj 232.
59
(1916) 2 KB 482.
60
AIR 1949 Pat 250.
the amount. The condition is if the contract which is illegal is under the executory stage but
not executed then the benefits may be recovered back.
7.THE QUANTUM MERUIT AND FRUSTRATION OF CONTRACT-
The supreme court of India has given the prerequisites to claim Quantum meruit (claim for
damages for breach of contract).
1. The contract must be discharged by the opposite party.
2. The plaintiff is free from any further obligation under the terms and conditions of the
contract.
3. The remedy is not available to the party who breaks the contract at the first hand.
4. The remedy is recompensatory to the plaintiff for the plaintiff in order to restore him
to his pre contractual position.
8.LEGISLATIONS AND FRUSTRATION OF CONTRACT-
Law reform (Frustrated contracts) Act (English) came into being in the year of 1943. This is
the only act which was made specifically for the frustration of contract. Some major
provisions under the act are-
1. All sums of money which have been
transferred under a frustrated contract shall
be refundable and those which are still
under the process of transfer must be
stopped from the process of transfer.
2. If any party has spent some money as per
the terms and conditions of the contract
before the discharge of contract then he
must be allowed to recover.
3. The principle of recovery is also applicable
to the cases where the transaction was not
made by the medium of money or made by
any other medium.
4. The court while estimating the amount to be
compensated take into the work personally
performed by the party
5. Benefits received under the insurance policy
are not to be taken into account unless there
is an express obligation to insure61
OUTCOMES OF THE PROJECT-
The outcomes of the project is that a contract becomes frustrated when there is a destruction
of subject matter, death or incapacity of a party which makes the contract impossible to
perform, Government or administrative decision that makes the contract impossible to
perform, Intervention of war, non-occurrence of contemplated event, Change of
circumstances. These conditions makes a contract frustrated. Though there is some chance of
getting recovery under section 65 of Indian contracts Act if contract is found to be void or is
void then there is provision for restoring or compensating for the same contract. Thus, this
project has been of great help in understanding the circumstances which leads to frustration
of contract and what are the remedies available to party to deal with this frustration.

CONCLUSION-
The contract is frustrated when there is change of circumstances which makes the contract
impossible to perform. There lies no obligation on both the parties for specific performance
of contract after the frustration of contract. The parties cannot sue each other after the
frustration for specific performance of contract. All the three hypothesis have been proved to
be right after making a detailed analysis of case laws. There is relief available to the parties
under Law reform (Frustrated contracts) Act (English), 1943. There is also remedies available
to the parties under restitution. The frustrated contract evolved as a subject in contract and
grown in its scope by including various conditions when a contract becomes frustrated In
frustration the event that happened was beyond the control of both the parties and therefore
no party can be forced to compensate for it. Though English law has proceeded in giving
compensation to parties those which has suffered loss by making various legislations, Indian
judiciary lacks effort in this particular field. With increase numbers of frustration cases there
is a need for special legislation to regulate the cases of frustration of contract. There is also no
guidelines issued by supreme court to help the party that has suffered a loss. The Indian
legislative and Indian judiciary should act together to bring a law in this particular field to
help those parties who suffer because of frustration. Amendment in the Indian Contracts Act
by including a separate section for frustration of contract and the reliefs that are available to
the parties in case of frustration of contract will be a great step towards bringing clarity in this
particular subject.

CONTRACT AND SPECIFIC RELIEF, AVATAR SINGH, 12TH EDITION, CHAPTER 8, DISCHARGE OF
61

CONTRACT, PG NO- 426.

 BIBLIOGRAPHY
BOOKS-
1. Avatar Singh, Law of Contract and Specific Relief (Eastern Book Company, 12 th
edn.,2017)
2. R Yashod Vardhan, Pollock and Mulla The Indian Contract Act, 1872
(LexisNexis, 15th edn., 2018)
3. The law of Contract- Treitel-Sweet & Maxwell, Ninth Edn.
4. Chitty on contracts- Specific contracts- Sweet & Maxwell, Twenty Eighth Edn.

ARTICLES-
1. Doctrine of Frustration in the Law of Contract, G. M. Sen, visited on February
15, 2020

2. Frustration of Contract and impossibility of performance, Karnika Seth, visited

on February 16, 2020

WEBSITES-

1. www.jstor.org

2. home.Heinonline.org

3. www.scconline.com

4. www.manupatrafast.in