This article is written by Paras Chugh, student of BBA.LL.B. 4th semester from RNB Global University, Bikaner, Rajasthan.
The Indian Contract Act, 1872, Section 56, addresses the contract’s difficulty of fulfilment. The terms of Section 56 substantially resemble the English notion of contract frustration. The Indian law of contract impossibility performance is broader than the English doctrine of frustration since it covers both the first and subsequent impossibilities. The doctrine of frustration, on the other hand, is applicable when an extraordinary event prevents the contract’s fulfilment even when it is initially possible. According to the doctrine of impossibility of performance, one party may be freed from a contract if unforeseeable events prevent them from being fulfilled.
How Will the Court Respond?
When a court considers this kind of legal issue, it must consider the state of the performance in light of circumstances that have changed since the contract was first entered into. This required the occurrence of the following:
There must have been a contingency, or something unanticipated.
The risk of the unexpected occurrence must not have been due to the negligence of either party
The circumstance must have rendered performance under the contract commercially impracticable
While a party may believe it is difficult to establish, such arguments are frequent in contractual disputes. All three conditions must be present for the court to determine an impossibility of performance, but a party may think it is difficult to prove. Most courts determine that these issues are significant and dissolve the contract since it is impossible to carry out the terms of the agreement.
Examples of Impossibility of Performance
The following are some instances of performance impossibilities:
- Due to an injury, one of the parties is no longer able to carry out the obligations set forth in the contract.
- Property that has been stolen or damaged, such as a contract for home remodelling that will be rendered useless if the house is destroyed.
- Weather conditions
- Natural disaster
- The government enacts legislation outlawing the performance.
How to Prove Impossibility of Performance?
In the event of a contract breach, you have options for defence. By identifying the accountable person, performance issues can be addressed before any occurrence happens. It’s crucial to remember that the circumstances must be unexpected and terrible. In order to establish objective impossibility, you must demonstrate that it is impossible for anyone to perform the contract, in addition to the contractual party
There are two sorts of performance impossibilities:
Initial Impossibility:
Every agreement has as its goal that the parties uphold their end of the bargain. If a contract is difficult to uphold, the parties will never agree to it. In plain English, we might argue that initial impossibility only pertains to situations in which the contract was impossible to fulfil from the outset.
For instance, if a married guy promises to get remarried but is unable to do so, he must pay the other party compensation.
Subsequent Impossibility:
Subsequent impossibility contracts cover situations in which a contract was initially performable but later becomes unworkable or illegal owing to an external occurrence.
For instance, suppose A purchases tickets from B for a cricket match and pays half the cost up front. A will not be able to reclaim from B if the match is called off because A had no control over the cancellation.
Who Takes the Risk When Performance Becomes Impossible or Unfeasible?
The occurrence that renders performance impossible or impractical and whether it was anticipated under the contract will typically determine whether performance is excused. The Court may exempt further performance of the contract on both sides if the incident was so unusual and unexpected that the parties could not have reasonably predicted it and if it is unreasonable to lay the risk of it happening on either party. On the other hand, the Court ordinarily would not excuse additional performance if the risk that such an occurrence could happen was one that the parties should reasonably have anticipated or if the contract allocated such risk to one of the parties. No matter how devastating the result of a known risk, performance is still required under the terms of the contract.
When is Impossibility of Performance Raised?
This is brought up as a rebuttal to a charge of contract breach. For instance, if the plaintiff claims that the defendant violated his contractual obligations, the defendant can file a claim saying that one of the aforementioned circumstances prevents him from fulfilling his obligations under the contract. This is brought up as a rebuttal to a charge of contract breach. For instance, if the plaintiff claims that the defendant violated his contractual obligations, the defendant can file a claim saying that one of the aforementioned circumstances prevents him from fulfilling his obligations under the contract. As a result, if a hurricane strikes while the homeowner is paying the contractor to repair his backyard, the contractor cannot be held accountable for failing to complete the work because it is impossible to do so.
The entire agreement will be cancelled if the court sides with the defendant.
Additionally, future performance would likewise be excused if the contract’s performance is no longer physically conceivable. A homeowner hiring someone to install a new roof is one illustration of this. The court would be unable to enforce anything or grant relief to either party if the home was completely destroyed by fire just before the other party started installing the new roof. The court would be unable to enforce anything or offer relief to either party if the house caught fire just as the other party started putting on the new roof because neither party was at fault for the fire.
When is Impossibility Not a Defence?
Impossibility isn’t a defence in the following circumstances:
- If the person making the promise in the contract is the one who caused the contract to become impossible to perform
- If the impossibility is foreseeable
- If the occurrence is not severe enough
An illustration of someone making a task impossible to do would be if John offered Sue payment in exchange for caring for his dog for a week. But John won’t have to give Sue any money if Sue kills the dog first, preventing performance of the contract from starting. In fact, John can sue for the demise of his dog and receive compensation.
The impossibility doctrine cannot be utilized as a defence if the impossible is foreseeable or predictable. An illustration of this would be if John’s dog had been seriously ill when Sue and John first signed the contract. Sue was well aware of John’s dog’s severe illness when she signed the contract. As a result, it is conceivable that the dog could pass away before the contract’s obligations are fulfilled.
The defense of impossibility cannot be utilized if the incidence is not serious enough. For instance, the contract would still be enforceable if the cost of performing the agreement increased by a tiny amount. Price changes may occur in some commercial transactions, especially if the cost of some components rises over time. The price change may give rise to other contractual conflicts, but the impossibility defense cannot be employed.
What Situations Make Performance Impossible?
If a necessary and irreplaceable person dies or becomes disabled, if project property is destroyed, or if performance would be illegal, there may be circumstances where performance is impossible. Let’s explore these three categories further.
Death or Disability
When the work involves some kind of highly specialized skills or services, it may become impossible to accomplish due to death or incapacity of a person who was required for performance. Since someone else may always be hired to do their job, this rarely applies to any contractors, project managers, or superintendents. The designer or engineer must be so specialized or one-of-a-kind that they cannot be replaced for the design or engineering contract to be eligible.
Destruction
It can be impossible to complete the project if a job site, specialized equipment, or other essential component is destroyed. The inability to perform, however, may not be a justification for non-performance if something can be changed reasonably quickly and total performance is still feasible.
Illegality
Performance under the contract can be deemed impossible if doing so would be against the law. When building codes, zoning laws, or any other requirements change during the performance and make it impossible to build the intended structure, then is when illegality may start to occur
Commercial Impracticability
Consider commercial impracticability as an “impossibility-lite” defense. In the past, it was extremely difficult to prove that it was impossible to move forward. Even though a performance is theoretically feasible, it may not be feasible monetarily. Courts have determined that a failure to perform in particular circumstances should be justified.
The Categories of “Impossibility”
Courts often cite three levels of impossibility:
Impossibility of Performance
Further performance would probably certainly be forgiven in cases when it becomes physically impossible. For instance, a roofing contractor would not be in violation if the roof on a building that was destroyed by fire due to circumstances beyond his or her control was not completed.
Frustration of Purpose
Absent a clause to the contrary, continued performance would likely be excused where a contract’s primary purpose is defeated. For instance, a roofer may be permitted to cancel a contract to purchase materials for a building that was destroyed by fire. Although the fire does not make the procurement of roofing material impossible, the purpose for which the products were contracted cannot be fulfilled for any reason. Since the material provider can claim that he is not to blame for the annoyance but is nonetheless made to suffer more than the roofer, this is a more difficult case to make. Once more, the court will probably weigh the equities.
Commercial Impracticability
It could be financially unfeasible to continue performance until completion if it gets so difficult or expensive that it destroys the value of the contract to one party. Even if there may be serious financial repercussions, continued performance may not be legally excused unless the primary cause of the problem was unforeseeable at the time it occurred. Losing money is not an acceptable defense in court for a breach of contract claim unless there are exceptional circumstances. Recovery will typically be permitted for the fair value of work that was actually completed when performance is excused after work has started, but not for lost profits on work that was not completed, as would be possible in a breach of contract case. In a recent Massachusetts case, the owner unexpectedly eliminated that material for the Project, allowing the general contractor to cancel a material contract with a supplier. The owner’s deletion, the court determined, completely damaged the intent of the supply contract, which excused future performance. The supplier was found to be entitled to reimbursement for materials provided but not to profit on the portion of the contract that was not cancelled.
In general, unexpected events may be an excuse for a failure to fully complete contract work in commercial settings, but only in the following circumstances:
an unexpected event occurs without the party asserting the defense’s fault;
the incident renders continued performance either impossible or prohibitively expensive or onerous, defeating the purpose of the agreement and diminishing its value;
The parties’ agreement does not divide up the risks of unforeseen events happening.
Conclusion:
The parties must recognize that, unless in a commercial context, extra difficulty or expense will not typically be a justification for avoiding responsibilities under the contract. However, if a contract is actually hard to carry out without the fault of the party trying to break it, the defense of impossibility is accessible, and Californian courts are increasingly supporting the defense of impracticality. Consequently, it is clear that a contract is frustrated when its fulfilment is rendered impossible without either party’s fault.
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