Doctrine of Impossibility

Written by - Ishita Jaiswal

Introduction

A contract is an agreement between two or more parties that creates legally enforceable or recognised responsibilities. Unforeseen or supervening events, i.e., occurrences that are unanticipated or cannot be predicted in advance by either party and ultimately discharge the parties from their contractual responsibilities, may impair the performance of these obligations. [1] The doctrine of impossibility is a contract law concept that allows a promisor to be reimbursed if his contractual performance considerably deviates from what was reasonably expected of him due to the occurrence of a supervening event.

The number and types of instances in which a party may plead inability of performance as a defence have been expanding under common law. Section-56 (i.e., a promise to execute an impossible deed) of the Indian Contract Act 1872, like most Indian legislation, is influenced by English law. The first general formulation of the notion of impossibility was offered in Taylor v. Caldwell. In Taylor v. Caldwell, the first general formulation of the doctrine of impossibility was offered. When the music hall was inadvertently damaged by fire before the performance in Taylor, the owner was absolved of his duty to pay damages for failing to make the facility available under the conditions of the lease. The court granted relief on the basis of the concept that in contracts in which performance is contingent on the continuous existence of a specified person or thing, a condition is implicit that the inability of performance resulting from the person or thing's death shall excuse the performance. Because of the principle's narrow scope, relief was only granted where performance was rendered due to certain types of subsequent events, such as the death or incapacity of a person whose services were the subject of the contract; the destruction of the specific thing that was contracted for or was essential to performance; or the prohibition of performance due to a subsequent change in the law, made performance impossible. Prior to Caldwell, it was assumed that if the parties so desired, they might have included such provisions in their contract. In the well-known case of Paradine v Jane, a lessee was held accountable for rent arrears even after being banished as a foreign enemy. [2]

Initial Impossibility The Indian Contracts Act, 1872, begins with the simple idea that "an commitment to execute an act impossible in and of itself is void." An agreement to find treasure using magic, for example, is null and void due to its inability of execution. An agreement to perform an act that is impossible from the start, regardless of whether the parties were aware of the possibility of success. It suggests that an impossibility exists at the moment of contract creation, which the parties may or may not be aware of. If both parties are aware of it, the agreement is null and void from the start. Impossibility after that.

What if the parties engage into a contract that was possible to perform at the time of entrance but becomes impossible to perform due to unanticipated circumstances or factors beyond either party's control ? Agreements of this sort are void since they are frustrated. For example, A agrees to sell a plot of land to B, but owing to government policy, this plot of land has been taken by the government for some official use. The contract has been violated, and B is unable to sue A for failure to fulfill his obligations because A's duty has become impossible to complete.

Factors Contributing to Contract Frustration Physical destruction of the subject matter, loss of the object, subsequent illegality to execute, delay, death or incapacity of a party in a contract requiring personal performance, and so on are some of the events that trigger the provisions of section 56. A situation could be affected by one or more of these elements. Some of the factors are : 1.The subject content of the contract is physically destroyed. The contract will be frustrated if the precise subject matter required for the contract's performance is destroyed. Caldwell, a seminal case that established the concept in the United Kingdom, also comes into this group.[3]

2. Changes in the law that result in subsequent illegality . The parties are presumed to intend to contract in accordance with the law in effect at the time the contract is made. [4] However, a later change in the legislation or in the legal position . A well-known cause of frustration under Section 56 is something that affects a contract and prevents it from being fulfilled. Unless the contract specifies otherwise, “law” may include foreign law. The Supreme Court held in the Energy Watchdog [5]case that, unless the contract states otherwise, “this would be true as a general statement of law if performance of a contract is to be done in a foreign country, what law would be relevant would be foreign law” and that if the performance under foreign law has become illegal. 3. An object that has been misplaced. Although physical fulfillment of a contract may be conceivable, if it has become redundant in light of the parties' goal and purpose due to an unforeseen incident or change in circumstances, the contract must be considered frustrated. This is captured in the seminal case of Krell v Henry [6] where despite the fact that the room could be rented, the court found the contract void because the aim of the rental (viewing the coronation parade) had been lost. As a result, the contract's object or purpose may be lost due to the non-occurrence of an expected event or the non-existence of a state of things. A instruction from the General Manager authorising the district officer to suggest the person or people to whom plaintiff had to sell the items foiled a contract in which the purchaser's purpose was to sell the things on his own terms to anyone he liked. 4. Performance Delay, Death, or Incapacity Contract frustration is also a result of the delays and laches. Though determining whether a contract has been frustrated by an incident or change in circumstances that creates an unanticipated delay in its fulfillment can be challenging. The delay must be so significant and of such a nature that it completely destabilises the bargaining position and commercial goal that the parties had in mind. Such a delay must be out of the ordinary in terms of its cause, effects, or expected duration, and could not have been reasonably anticipated at the time of contracting. When the delay is over, fulfilling the duties will not achieve the goal that both parties to the contract had in mind when they entered into the deal. Such a delay will drastically alter the situation, and then it will be too late to fulfill the conditions which parties had.

Finally, a valid reason for contract frustration is the death or disability of a party whose personal performance was needed under the contract. For example, in an English case, the contract was declared frustrated due to the pianist's illness, which prevented him from performing at the concert.

Factors that do not amount to Contract Frustration. Contractual stipulations, as well as the concepts of fairness and justice, limit the doctrine's applicability. It is not applicable in circumstances where the factors do not amount to contract frustration as defined below. 1. Risks that are inherent or predictable Although not expressly stated, a contract may include certain inherent or foreseeable hazards that must be addressed when applying the doctrine. Its application cannot be attempted in circumstances where the parties have foreseen or should have recognised the risk of a supervening event occurring because the parties have voluntarily accepted the risk. 2. Performance becomes onerous or burdensome During the performance, a party may encounter situations that were not foreseen, such as an unusual rise or decline in pricing, or a sudden depreciation of currency . These, however, do not, in and of themselves, eliminate the bargain that has been made. The Supreme Court has emphasised that courts do not have broad authority to release a party from liability simply because contract performance has become difficult due to an Unexpected twists and turns. The contract ceases to bind only when a review of the terms of the contract in light of the circumstances at the time it was made reveals that they never agreed to be bound in a fundamentally different situation that had unexpectedly arisen. As a result, a contract is not automatically terminated just because it is difficult or onerous to perform. Section 56 refers to the concept of impossibility.

3. Self-inflicted Frustration or situations in which Frustration might be avoided. If a party can show that the non-performance was caused by an impediment beyond its control, that it could not have reasonably foreseen the impediment at the time the contract was made, and that it could not avoid or overcome the impediment or its consequences, the party is excused from not performing.¹¹ A party cannot depend on its own fault to exempt itself from contract liability. 4. There is no significant damage to the foundation. As it has been decided, the notion of impossibility, which is based on fairness and common sense, cannot be allowed to be used to undermine contract sanctity. The Supreme Court has held that the lessee cannot terminate the lease on the grounds that he is unable to use the leased property for the purposes for which it was hired provided the leased property is not substantially harmed or rendered permanently unfit. 5. The Force Majeure Clause in Indian Contract Law. An unavoidable accident or a chance occurrence is referred to as "force majeure" or "case fortuit" (French) or "casus fortuitous" (Latin). It is based on the Napoleonic Code and has been interpreted in a number of cases. It's a broader term than "vis major," which refers to divine deeds. Other 7]situations, like as machinery breakdowns or labour strikes, are also considered force majeure. The presence of a clause in the contract dealing with unexpected circumstances does not preclude the theory from being applied. In a number of decisions, Indian courts have looked at the scope of such a provision to see if it covers the supervening event, thus it's vital to discuss how the doctrine and the clause interact.

Frustration and its consequences Any party who has benefited from a frustrated or void agreement or contract is obligated to return the benefit to the person who gave it to him. Furthermore, any advance consideration, part-payment, or earnest money supplied for contract performance that has now been frustrated must be reimbursed. For example, when a building contract was cancelled due to a restriction, the Supreme Court ordered a refund of the deposit plus interest. The Supreme Court ordered a refund of the consideration already paid, plus interest, when the land was vested in the State with the publication of the Calcutta Thika Tenancy Act , 1949. Conclusion The Doctrine of Frustration was created to address situations in which a contract is frustrated without the fault of either party. Perhaps, to some extent, the concept of impossibility clarifies the contradicting situations: contract supremacy, which supports the norm of absolute liability, and the impossibility of a contract being discharged when the contract's purpose has been undermined by a change in circumstances. The doctrine's application calls into question the contract's sanctity in specific new conditions. English courts developed several theories to justify the concept's use in specific circumstances, whereas Indian law has codified the doctrine under section 56 , obviated the need to develop and apply theories to support the doctrine's application.

[1] (SatyabrataGhose v MugneeramBangur and Co AIR 1954 SC 44 )[14]; (Dhruv Dev Chand v Harmohinder Singh AIR 1968 SC 1024) [6].

[2] (Atkinson v Ritchie [1809] )10 East 530. See also (Barker v Hodgso [1814] 3 M&S 267), later held to be wrongly decided in (Ralli Bros v Campania NavieraSota y Aznar [1920] 2 KB 287, 303); H G Beale, Chitty on Contracts (Sweet & Maxwell, 30th edn, 2008) 1480.

[3] Caldwell (n 10).

[4] Pollock (n 53) 900.

[5] Energy Watchdog (n 8) [52]

[6] (Krell v Henry [1903] 2 KB 740.)