Indian Kanoon - Search engine for Indian Law

The doctrine of frustration of contract is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of s. 56 of the Indian Contract Act. It should be noticed that s. 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. In English Law a case of supervening illegality is treated as an instance of frustration of contract. In Metropolitan Water Board v. Dick, Kerr & Co., Ltd(1), under a contract made in (1) [1918] A.C. 119, July 1914, a reservoir was to be constructed and to be completed in six years from 1914 subject to a proviso that if the contractors should be impeded or obstructed by any cause the engineer should have power to grant an extension of time. Under the powers conferred by the Defence of the Realm Acts and Regulations, the contractors were obliged to cease work on the reservoir by order of the Ministry of Munitions in 1916. The House of Lords held that the contract was frustrated by supervening impossibility, and that the provision for extending the time did not apply to the prohibition by the Ministry. Lord Finlay, L.C. said that the interruption was "of such a character and duration that it vitally and fundamentally changed the conditions of the contract, and could not possibly have been in the, contemplation of the parties to the contract when it was made." In a subsequent case-Denny, Mott and Dickson Ltd. v. James B, Fraser & Co., Ltd.(1) a contract for the sale and purchase of timber contained an option for the appellants to purchase a timber-yard (which was meanwhile let to them) if the contract was terminated on notice given by either party. By the Control of Timber (No. 4) Order, 1939, further trading transactions under the contract became illegal, but in 1941 the appellants gave notice to terminate the contract, and also to exercise their option to purchase the timber-yard. The House of Lords held that the option to purchase was dependent on the trading agreement, that the 1939 Order had operated to frustrate the contract, and that, consequently, the option to purchase lapsed upon the frustration since it arose only if the contract was terminated by notice. At page 274 of the Report, Lord Wright made the following observations "It is now I think well settled that where there is frustration a dissolution of a contract occurs automatically. It does not depend, as does rescission of a contract on the ground of repudiation or breach, on the choice or election of either party. I t depends on what actually has happened on its effect on the possibility of performing the contract. Where, as generally happens, and actually happened in the present case, one party claims that there has been frustration and the other party contests it, the court decides the issue and decides it ex post facto on the actual circumstances of the case. The data for decision are, on the one hand, the terms and construction of the contract, read in the light of the then existing circumstances, and on the other hand the events which have occurred............. I find the theory of the basis of the rule in Lord Sumner's pregnant statement (loc. cit.) that the doctrine of frustration is really a de- vice by which the rules as to abso-