IMPOSSIBILTY OF

PERFORMANCE
OF CONTRACT

SUBMITTED TO: -
PROF. HOMA BANSAL
(ASSISTANT PROFESSOR)

SUBMITTED BY: -
PARNEET KAUR
ROLL NO. 22
LL. B- 1ST SEM
 IMPOSSIBILITY OF PERFORMANCE OF
CONTRACT

Section 56 of Indian Contract Act, 18721, talks about the impossibility of

performance of contract. Section 56 is as follows:

56. Agreement to do impossible act — 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.

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.

Illustrations

(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.

(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 the promise.

1
Section 56 of the Indian Contract Act, 1872
(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 the 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.

The first paragraph of Section 56 lays down the simple principle that "an
agreement to do an act impossible in itself is void (initial impossibility)." For
example, an agreement to discover a treasure by magic, being impossible of
performance, is void [Illustration (a), Section 56]. The second paragraph lays
down the effect of subsequent impossibility of performance. By virtue of Section
56, paragraph 2, “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
(supervening impossibility).” For example, A and B contract to marry each
other and before the time fixed for the marriage, A goes mad. The contract
becomes void [Illustration (b), Section 56]. The third paragraph of Section 56
says that if 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.

The Indian law on the impossibility of contract performance is broader than the
English "doctrine of frustration" in that it covers both the initial and subsequent
impossibility. The "doctrine of frustration," on the other hand, applies when
contract performance is initially possible but is hampered by an extraordinary
event. In fact, frustration of contract is the same as the subsequent impossibility
mentioned in Section 56, paragraph 2. This principle does not apply only to
physical impossibilities. It includes situations in which the performance of the
contract is physically possible but the object that the parties had in mind has not
materialised.

General principle of judicial non-interference

In the first-known English case of Paradine v Jane2 it was pointed out that
subsequent happenings should not affect a contract already made:

There the defendant had taken an estate on lease from the plaintiffs. The
defendant was dispossessed of it by alien enemies for some time and, therefore,
refused to pay the rent for the period of dispossession.

It was held that "when the party by his own contract creates a duty, 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; though the land be
surrounded or gained by the seas, or made barren by . wildfire, yet the lessor
will have his whole rent".

In the subsequent case to Taylor v Caldwell3 Blackburn J laid down that the
above "rule is only applicable when the contract is positive and absolute, and
not subject to any condition either express or implied".

In this case, the defendants had agreed to let the plaintiffs the use of their music
hall between certain dates for the purpose of holding a con cert there. But before
that first day on which a concert was to be given, the hall was destroyed by fire
without the fault of either party.

The plaintiffs sued the defendants for their loss. It was heldthat the contract was
not absolute, as its performance depended upon the continue existence of the
hall. It was, therefore, "subject to an implied condition that the parties shall be

2
Kings bench, (1647) Aleyn 26: 82 ER 897
3
(1863) 3 B&S 826: 122 ER 309
excused in case, before breach, performance becomes impossible from the
perishing of thing without default of the contractor".

With this decision began the struggle between the two principles, namely, the
principle of sanctity of contract which supports the principle of absolute liability
and the principle that a contract be discharged when the shared contractual
assumption has been destroyed by change of circumstances.

Frustration
In the above case the performance of the contract had become physically
impossible because of the disappearance of the subject-matter. But the
principle is not confined to physical impossibilities. It extends also to cases
where the performance of the contract is physically possible, but the object the
parties had in mind has failed to materialise. The well-known coronation cases
of which Krell v Henry is one, illustrates this:

The defendant agreed to hire from the plaintiff a flat for June 26 and 27, on
which days it had been announced that the coronation procession would pass
along that place. A part of the rent was paid in advance. But the procession
having been cancelled owing to the King's illness, the defendant refused to pay
the balance.

It was held that the real object of the contract, as recognised by both con tracting
parties, was to have a view of the coronation procession. The taking place of
the procession was, therefore, the foundation of the contract. The object of the
contract was frustrated by non-happening of the coronation and the plaintiff was
not entitled to recover the balance of the rent.

Thus, the doctrine of frustration comes into play in two types of situa tion, first,
where the performance is physically cut off, and, second, where the object has
failed. The Supreme Court of India has held that Section 56 will apply to both
kinds of frustration.
Commercial Hardship or Difficulty
Commercial Hardship may make the performance unprofitable or more
expensive or dilatory, but it is not sufficient to excuse performance. In Ganga
Saran v. Ram Charan Gopal [AIR 1945 Mad 291], a contract was made for
supplying certain beles of cloth manufactured by the New Victoria Mills, Kanpur.
The contract added: “We shall go on supplying goods to you of the Victoria Mills
as soon as they are supplied to us by the said mills. The mill failed to supply
goods to the sellers and, therefore, the sellers pleaded frustration. It was held
by the court that there is no frustration and the sellers are liable for simple
breach of contract.

SPECIFIC GROUNDS OF FRUSTRATION

There is not any exhaustive list of situations in which the doctrine is going to be
applied. But, the following grounds of frustration have become well established.

1. Destruction of Subject-Matter
The doctrine of impossibility applies with full force "where the actual and
specific subject-matter of the contract has ceased to exist"4. Taylor v.
Caldwell5 is the best example of this class. There, a promise to let out a
music hall was held to have frustrated on the destruction of the hall.
Similarly, in Howell v. Coupland6, the defendant contracted to sell a
specified quantity of potatoes to be grown on his farms, but failed to supply
them as the crop was destroyed by a disease, it was held that
performance had become impossible.

4
See McCardie J in Blackburn Bobbin Co. v T.W. Allen &Sons, (1918) 2 KB 467 (CA); Markfed Vanaspati &Allies
Industries v Union of India, (2007) 7 SCC 679, force majeure clause can be invoked when it pertains to the contractual
obligation that has purportedly become impossible to perform.
5
(1863) 3 B&S 826: 122 ER 309
6
(1876) 1 QBD 258 (CA). State of A.P. v Tangudu Varaprasada Rao, (2004) 4 ALD 528, forest suffering from natural
calamity or vandalism by acts of third parties, effect upon contract and indemnity.
 2. Unusual Change of Circumstances
A contract will frustrate "where circumstances arise which make the
performance of the contract impossible in the manner and at the time
contemplated."7 This happens when the change of circumstances has
affected the performance of the contract to such an extent as to make it
virtually impossible or even extremely difficult or hazardous.
The Supreme Court laid down this principle in Alopi Prashad v. Union of
India8. In this case, the plaintiffs were acting as the agents to the
Government of India for purchasing ghee for the use of army personnel.
They were to be paid on cost basis for different items of work involved.
The performance was in progress when the Second World War intervened
and the rates fixed in peace time were entirely superseded by the totally
altered conditions obtaining in war time. The agents demanded revision
of rates but received no replies. They kept up the supplies. The
Government terminated the contract in 1945 and the agents claimed
payment on enhanced rates. They could not succeed. The contract was
held not frustrated.
3. Non-occurrence of Contemplated Event
Sometimes the performance of a contract remains entirely possible, but
owing to the non-occurrence of an event contemplated by both parties as
the reason for the contract, the value of the performance is destroyed.
Krell v. Henry9 involved a situation of this kind. There, a contract to hire
a room to view a proposed coronation procession was held to have
frustrated when the procession was postponed. For this result to follow it
is necessary that the happening of the event should be the foundation of
the contract. This is shown by Herne Bay Steam Boat Co v. Hutton10,

7
Viscount MAUGHAM in Joseph Constantine Steamship Line Ltd v Imperial Smelting Cotpn Ltd, 1942 AC 154 (HL)
8
AIR 1960 SC 588: (1960) 2 SCR 793
9
(1903) 2 KB 740 (CA)
10
(1903) 2 KB 683 (CA)
 which also arose from the postponement of the coronation. The Royal
Naval Review was proposed to be held on the occasion. The defendant
chartered a steamboat for two days "to take out a party of paying
passengers for the purpose of viewing the naval review and for a day's
cruise round the fleet". But the review was cancelled and the defendant
had no use of the ship. Yet he was held liable to pay the unpaid balance
of the hire less the profit which the plaintiff had made by the use of the
ship in the ordinary course.
4. Death or Incapacity of Party
"A party to a contract is excused from performance if it depends upon the
existence of a given person, if that person perishes" or becomes too ill to
perform. Robinson v. Davison11 is the well-known authority. There was
a contract between the plaintiff and the defendant's wife (who was an
eminent pianist) that she should play the piano at a concert to be given by
the plaintiff on a specified day. On the morning of the day in question she
informed the plaintiff that she was too ill to attend the concert. The court
said that the contract has become frustrated.
5. Government, administrative or legislative intervention
A contract will be dissolved when legislative or administrative intervention
has so directly operated upon the fulfillment of the contract for a specific
work as to transform the contemplated conditions for a specific work as to
transform the contemplated conditions of performance.
In case an intervention is not of permanent character which does not
uproot the foundation of the contract, it will be having no such effect of
frustration. In the Satyabrata Ghose v. Mugneeram Bangur & Co.12, the
construction of housing colony was started by the defendant. The plaintiff
paid the advance for the same purpose. The defendant asked for the

11
(1871) LR 6 Exch 269
12
AIR 1954 SC 44: 1954 SCR 310
 balance of amount and comedian of conveyance as the work was
completed. Meanwhile, second World War began and the Government
requisitioned a considerable portion of the land for military purposes. The
company contended that the contract be cancelled by reason of the
supervening events, Mukherjea J., held that the contract was not
frustrated.
6. Intervention of War
War or War like situations has often raised difficult questions for the
courts. In Tsakiroglou & Co. Ltd. v. Noblee Thorl GMBH13, appellants
had agreed to sell to the respondents three hundred tons of groundnuts.
The usual route at the date of the contract was via Suez Canal. The
shipment was to be in November/December, but due to certain
geopolitical development the canal was closed until April next year. It was
stated that the appellants could have shipped through the alternate route
which was Cape of Good Hope. Appellants refused to ship goods via
Cape. The appellant’s argument was that it was a tacit understanding
between the parties in the contract that the shipment should be via Suez.
It was held that such an understanding was wrong. What the appellants
could have done was shipped the shipment through Cape route, and they
were bound by law (Sale of Goods Act, 1893) to do this. Although this
would have been more expensive for the appellants, but it didn’t render
the contract fundamentally or radically different, hence there was no
frustration of contract.

Conclusion
The doctrine of frustration, incorporated under Section 56 of the Indian Contract
Act, 1872 provides a way out to the parties when the performance has become
impossible, owing to any supervening event, without their fault. The application

13
1962 AC 93: (1961) 2 WLR 633
of the doctrine questions the sanctity of the contract under certain changed
circumstances. English courts evolved various theories to justify the application
of the doctrine under certain circumstances, whereas Indian Law has, by
codifying this doctrine in Section 56, obviated the need for evolving and applying
theories to justify the application of the doctrine. Although, the vision of the
Indian legislature is wide and that is why it also included the instances of initial
impossibility under the preview of this doctrine. The provisions contained in
Section 56 provide a complete set of the legal consequences of the performance
of the contract.