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Frustration of Indian contract act notes – CSEET

Frustration of Indian contract act notes – CSEET

Frustration of Indian contract:

ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.

The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.

Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.

We are now going to discuss the details of CSEET Paper-2 Legal Aptitude and Logical Reasoning – Frustration of Indian contract act notes.

Frustration of Indian contract

Frustration of Indian contract

Frustration of Indian contract: A contract is said to be discharged or terminated when the rights and obligations arising out of a contract are extinguished. Contracts may be discharged or terminated by any of the following modes:

Discharge by Impossibility or Frustration

In India, the doctrine of frustration is primarily looked at as contained in Sections 32 and 56 of the Act. The Court usually gives relief on the ground of subsequent impossibility when it finds that the whole purpose or the basis of the contract was frustrated by the intrusion or occurrence of an event that was not contemplated by the parties. The Court also grants relief where one of the parties was or could have been aware of such a contingency happening and the other party was not. Before invoking the doctrine, it must be shown that the event, which has produced the frustration was one which the parties to the contract did not foresee and could not with reasonable diligence have foreseen.

A contract which is entered into to perform something that is clearly impossible is void. For instance, A agrees with B to discover treasure by magic. The agreement is void by virtue of Section 56 para 1 which lays down the principle that an agreement to do an act impossible in itself is void.

Sometimes subsequent impossibility (i.e. where the impossibility supervenes after the contract has been made) renders the performance of a contract unlawful and stands discharged; as for example, where a singer contracts to sing and becomes too ill to do so, the contract becomes void. In this connection, para 2 of Section 56 provides 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.

If the impossibility is not obvious and the promisor alone knows of the impossibility or illegally then existing or the promisor might have known as such after using reasonable diligence, such promisor is bound to compensate the promisee for any loss he may suffer through the non-performance of the promise in spite of the agreement being void ab-initio (Section 56, para 3).

In Satyabarta Ghose v. Mugnuram A.I.R. 1954 S.C. 44 the Supreme Court interpreted the term ‘impossible appearing in second paragraph of Section 56. The Court observed that the word ‘impossible has not been used here in the sense of physical or literal impossibility. 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 very well be said that the promisor found it impossible to do the act which he promised to do. In this case, A undertook to sell a plot of land to B but before the plot could be developed, war broke out and the land was temporarily requisitioned by the Government. A offered to return earnest money to B in cancellation of contract. B did not accept and sued A for specific performance. A pleaded discharge by frustration. The Court held that Section 56 is not applicable on the ground that the requisition was of temporary nature and there was no time limit within which A was obliged to perform the contract. The impossibility was not of such a nature which would strike at the root of the contract.

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