Scroll Top

THE DOCTRINE OF FRUSTRATION AND ITS APPLICABILITY IN THE TIMES OF COVID-19 PANDEMIC

INTRODUCTION

Frustration is generally defined as the act or event which makes the accomplishment of a contract impossible by supervening impossibility which cannot be foreseen by any party making the purpose of contract unachievable and results in the frustration of contract, such event shall be outside the control of any party. For example, if A enters into a contract with B to sell his horse and the horse dies, in this case, the purpose of agreement here is destroyed and hence the contract is frustrated. The roots of Doctrine of Frustration are from the Roman Laws. In Roman Contract Law the innocent parties were extinguished from obligations where the purpose of the contract was destroyed without the fault of any party. In the famous case of Taylor vs. Caldwell[1], it was decided that the contract is frustrated as the main essence of the contract on which the contract depended i.e., the opera house was destroyed and the contract seems frustrated. It was also observed that the doctrine of frustration shall not be applicable when the main essence of the contract is destroyed ceased to exist.

THE DOCTRINE OF FRUSTRATION: INDIAN SCENARIO

The doctrine of frustration is embodied in S. 56 of the Indian Contract Act 1852[2]. It states that if the act which was supposed to be performed after the contract is made between parties and later the act becomes unlawful or impossible to person and out of control of any party, in such a case the contract becomes void. The Doctrine of Frustration establishes the rule of positive law and the intention of parties is irrelevant in determining whether the contract seems to be frustrated or not. The court is said to give relief to the parties involved in the contract where the object and purpose of the contract are destroyed by any outside event or circumstances which is not foreseeable by any party or known to any party at the time of the contract. The applicability of the force majeure clause which means the Act of God and frustration clause requires a supervening event i.e., not foreseeable nor predictable by either party. If the events are foreseeable then the doctrine of force majeure and frustration will not be applicable and it will be considered as a breach of contract and hence parties cannot be excused from the liability and obligations.

The landmark case of Satyabrata Ghose vs. Mugneuam Bangur[3] cleared the position of doctrine of frustration in India. In the given case it was stated that:

The main object of the doctrine of frustration is the impossibility of the performance of the contract. The circumstances outside the contract make the performance of the contract impossible and the parties are set to be free from the legal obligation as they do not agree upon the presumption and performance to impossibility in the contract. The doctrine of frustration discharges the parties to contract from the performance of the contractual obligations by the reason of supervening impossibility or illegality in the term & conditions of the contract, which comes under the ambit of section 56 of the Indian Contract Act, 1872. The Supreme Court cleared the meaning of the term impossibility and doesn’t include it to physical or literal impossibility contrary to the English Law.

THE OUTBREAK OF COVID-19 IN INDIA

Today the term Covid-19 is not unknown to anybody, the global pandemic created a condition of public health emergency around the whole globe. India recorded its first case of Covid-19 in January 2020 when a student traveled back to the state of Kerala in India from Wuhan, China. In response to curb the number of Covid-19 cases, the government of India set many guidelines and protocols and declared its first country-wise lockdown on 24th March. Amid the ongoing lockdown, all services and transportation were suspended and most of the economic sectors were also affected by set restrictions. Many contracts and businesses were also highly affected by the pandemic.

THE DOCTRINE OF FRUSTRATION AND ITS APPLICABILITY IN TIMES OF COVID-19 PANDEMIC

The Covid-19 pandemic can cause the events of the contract impossible when the means of performance of the contract is obstructed by any law, order policy or statutory prohibition laid down by the government. For example, the performance of the contract during the lockdown period cannot be accomplished. However, it should be kept in mind that this doctrine does not apply just because the performance of the contract has become inconvenient and difficult because of the Covid-19 outbreak. To take shelter under the doctrine of frustration it is important to prove that the covid-19 outbreak has made it impossible to perform the contract both legally and physically.

Amid the Covid-19 pandemic, many businesses are facing a decrease in their turnovers and other challenges resulting in volatility in the markets. However, the doctrine of frustration does not count inconvenience and hardship as significant grounds for claiming the frustration of doctrine. A contract is not said to be frustrated merely on the ground that the method of completing the contract has now become more difficult and onerous than anticipated by any party before entering into the contract. Also, where the events can be foreseen by the parties such events will not fall under the force majeure clause.

Where parties enter into a private contract and the contract has a clause of express or implied force majeure, then the liability and obligations of parties involved will be determined by the specific consequences mentioned in the force majeure clause. In such a case, whether the parties can invoke a force majeure clause in the name of the Covid-19 outbreak, will depend on the terms and conditions of the contract made by the parties at the time of entering into the contract. Force majeure clauses require that the performance supposed to be done in a contract has become legally or physically impossible to achieve. However, if the force majeure clause is not specified in the contract or occurrence of an unforeseeable event such as the outbreak of the Covid-19 pandemic then the principle of the doctrine of frustration shall apply to the contract as specified under section 56 of the Indian Contract Act,1872.

CONCLUSION

For an event to fall under the act of God and not merely an accidental circumstance, the event should be out of the control of any party. Whether the event has happened before is irrelevant the event should be extraordinary and could not be reasonably be anticipated. Deciding whether the event falls under this clause will require a careful examination of all the events surrounding the contract. The ongoing pandemic has already caused a lot of stimulation and hindrance in pursuance of the contracts and other businesses. The court of law shall take into consideration the specific facts of each case and then determine whether to apply the doctrine of frustration or not. It is the responsibility of the state authority to maintain justice, law, and order in a society. Hence, the law of public good shall prevail.

Author(s) Name: Pratima Pal (Amity Law School, Lucknow)

References:

[1] Taylor vs. Caldwell [1863] EWHC QB J1 122 ER 309;3 B. & S. 826

[2] Indian Contract Act, 1872, S.56, Acts of Parliament, 1872

[3] Satyabrata Ghose vs. Mugnenam Bangur, 1954 AIR 44, 1954 SCR 310