In contract law, the doctrine of frustration provides that a contract may be discharged if an unforeseen event occurs that renders contractual obligations impossible to perform or radically different from what was initially agreed. However, the doctrine is applied restrictively, as courts prioritize upholding the sanctity of contracts.
A contract is deemed frustrated if: (i) an unforeseen event occurs without the fault of either party, (ii) the event makes performance impossible or illegal, and (iii) the event was not contemplated in the contract. The threshold for frustration is high, requiring the change in circumstances to be fundamental, not merely an inconvenience or increased difficulty.
Courts distinguish between force majeure clauses and frustration. A force majeure clause explicitly addresses extraordinary events (e.g., natural disasters, war) and allocates risk, while frustration applies when no such clause exists. If parties include a force majeure clause but do not account for a specific event, they cannot later claim frustration.
In Taylor v. Caldwell (1863), the destruction of a music hall before a concert led the court to declare the contract frustrated. In Krell v. Henry (1903), a contract for hiring a room to watch the King’s coronation was frustrated when the event was unexpectedly canceled. However, in Davis Contractors Ltd v. Fareham UDC (1956), the court held that mere delay and increased cost do not frustrate a contract.
A significant case in India is Satyabrata Ghose v. Mugneeram Bangur & Co. (1954), where the Supreme Court ruled that frustration must be assessed in light of Indian socio-economic conditions. The doctrine is encapsulated in Section 56 of the Indian Contract Act, which voids agreements that become impossible or unlawful post-contract. However, frustration does not apply if alternate means of performance exist, or if the contract explicitly allocates risk to one party.
Further, commercial hardship does not qualify as frustration. If an event merely affects profitability or makes performance burdensome, courts are unlikely to intervene. Instead, parties must negotiate new terms or rely on contractual clauses to manage risk.
1. Which of the following best describes the doctrine of frustration?
(A) A contract is void if one party no longer wishes to perform it.
(B) A contract is discharged when an unforeseen event makes performance impossible or radically different.
(C) A contract is automatically void if external conditions change.
(D) A contract cannot be frustrated if a force majeure clause exists.
2. In which of the following situations would frustration likely apply?
(A) A vendor’s shipment is delayed due to labor strikes, increasing costs.
(B) A musician is unable to perform at a concert because the venue burns down.
(C) A builder faces financial loss due to rising material prices.
(D) A business contract becomes unprofitable due to economic downturn.
3. According to the passage, why do courts apply the doctrine of frustration restrictively?
(A) To prevent parties from escaping contractual obligations due to inconvenience.
(B) To ensure that only financial difficulties qualify as frustration.
(C) To allow all contracts to be voided in unforeseen circumstances.
(D) To encourage renegotiation rather than contract discharge.
4. If a contract contains a force majeure clause but does not mention a particular unforeseen event, what is its likely effect?
(A) The contract will still be frustrated because the event was unforeseen.
(B) The contract cannot be frustrated, as a force majeure clause exists.
(C) The parties must abide by the contract since the risk allocation was incomplete.
(D) The court will automatically insert the unforeseen event into the clause.
5. Which Indian legal provision governs the doctrine of frustration?
(A) Section 10 of the Indian Contract Act.
(B) Section 73 of the Indian Contract Act.
(C) Section 56 of the Indian Contract Act.
(D) Section 27 of the Indian Contract Act.
1.✅ Answer: (B)
💡 Explanation: The passage explicitly states that frustration applies when an unforeseen event makes contractual performance impossible or fundamentally different...
2.✅ Answer: (B)
💡 Explanation: The passage mentions Taylor v. Caldwell, where frustration was applied when a venue was destroyed...
3.✅ Answer: (A)
💡 Explanation: The passage states that frustration requires a fundamental change in circumstances, not mere difficulty...
4.✅ Answer: (C)
💡 Explanation: The passage clarifies that if a force majeure clause exists but does not account for a specific event, frustration cannot be claimed...
5.✅ Answer: (C)
💡 Explanation: The passage explicitly states that Section 56 governs frustration by voiding contracts that become impossible or unlawful...
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