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The belief, knowledge and intention of the parties are evidence upon which the Court would form its conclusion whether the changed circumstances destroyed the contract altogether.

In that case, a land was to be developed for residential purpose. The development was to take place during the second world war. Requisition orders were usually passed during the period. There was scarcity of building material and the Government restrictions in respect of them. Taking into account the evidence in that case, including the fact that there was no stipulated period during which the development was to be completed and war conditions prevailing at the time of the development, it was observed that the requisition order under the Defence of India Rules could not be taken to have vitally affected the contract or made its performance impossible so as to frustrate the contract. ig Under those circumstances, the applicability of doctrine of frustration to a contract was laid down.

In that case the parties entered into a contract to sell goods under the form prescribed by the Indian Jute Mills Association for importing jute from Pakistan under the import licence obtained by the buyer.

ig During the subsistence of the contract, there was a change in the policy of the Government which the parties could not foresee when they entered into the contract. It was observed that impossibility of performance would have to be inferred by the Courts from the nature of the contract and the surrounding circumstances considering that parties would have made their bargain upon the basis that that particular thing or state of thing would continue to exist and because of the altered circumstances the bargain should no longer be held binding. The Courts would infer that the foundation of the contract had disappeared either by the destruction of the subject-matter or by reason of interruption or delay in performance. The Court considered the bounden duty of the contracting parties to perform their obligations undertaken under the contract which could not be excused except when such performance was made impossible by intervening causes, over which the parties had no control. Referring to the case of Davis Contractors vs. Fareham U.D.C., 1956 AC 696, it was quoted thus :

It was observed that it was not only hardship or inconvenience or material loss which brought about the frustration of the contract but the change in the significance of the obligation, which if performed, would be different from that which was contracted for.

In that case what was to be considered was whether the change in the policy of Government of India brought out the total prohibition of import of Pakistan jute which was not envisaged by the parties which intervened at the time of performance of the contract and which made the performance impossible. The evidence showed that there were circulars issued since March 1958 showing warnings of the Government of India that import of Pakistan jute would be permitted to the absolute minimum and that the Jute Mills should satisfy their needs by purchasing Indian jutes. The licence to import jute was granted in the ratio of 5:1 to the importer upon producing evidence of purchase of five times the Indian jute for being able to import one time the Pakistan jute. The Indian Jute Mills Association had issued a circular showing the said policy. Further the evidence of the parties with regard to the import of jute showed that there was a complete embargo on the import of jute placed by the Government. The licencing authority was to scrutinise each case on merits.

ig It was observed that the parties were aware that licences were not freely issued. The contract made a provision for the shipment period to be extended if the import licence was not obtained. Damages were provided in respect of failure to furnish the licence. The contract indicated that the parties were conscious of the difficulty of obtaining the licence knowing of the damages they would incur upon refusal to accept licence and hence there was no question of the performance becoming impossible by reason of the Government policy. Under such cases, therefore, the contract did not become impossible of performance and was held not void on the ground that it was frustrated.