Lex non cogit ad impossibillia - The law does not compel the impossible

Legal Awareness @ Corona time

Have you signed a contract, made a commitment, paid an amount for a subject to be executed - but now it has become impossible to execute it due to the Corona situation?

Jai signs a contract in February 2020 with Deepika for a consideration of sum of money to act in a theatre show for four months starting April 2020. Jai paid the full amount in advance to Deepika. By beginning of April 2020, the Corona Pandemic makes it impossible for Deepika to act in the theatre show during the contracted period of four months. What rights do Jai and Deepika have?

Sunita on 10th of January 2020 contracts a banquet hall for performing the marriage ceremony of her son on 15 of May 2020. She paid the full amount in advance as per the requirement of banquet hall terms. Her plan was to invite 300 guests and enjoy the celebrations of the marriage ceremony. Now due to the Corona Pandemic her plans have become impossible. What rights does Sunita have?

In both the above illustrations it is seen that the contracts have become impossible to perform due to the ongoing Covid-19 pandemic.

In a landmark case Krell V. Henry (1903) - H agreed to hire the use of K's rooms in London on 26th and 27th of June 1902, for the purpose of seeing the intended coronation procession of the king. By reason of the king's illness, no procession took place on either of these days. Is H liable to K for the agreed rent? Read more for answers.

The Covid-19 Pandemic has played havoc across the world and India is no exception. The drastic change in our so-called normal lifestyle has started making impact in unimaginable ways. The impacts are so diverse that many of our arrangements have been rendered void and this has necessitated many Indians to re-look at the contracts they have entered and the commitments they have made before the onset of Covid-19 Pandemic.

What does the Indian Law say about this situation?
The law has provisions to safeguard oneself in such situations. Section 56 of The Indian Contract Act, 1872, contains the underlying principle about a contract to do an act afterwards becoming impossible or unlawful. The law states that "A contract to do an act which after the contract is made, becomes impossible, or, by reason of some event which the promissor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful."

Key elements of the section 56 are:
1) A contract to do an act, which after the contract is made becomes impossible, becomes void when the act becomes impossible.
2) The event or change of circumstances must be so fundamental as to strike at the root of the contract as a whole and to destroy altogether the basis of the contract and its underlying object.
3) The parties themselves had not foreseen the impossibility of performance.
4) That the impossibility should not be self-induced by the promissor or due to his negligence.

Doctrine of Frustration:
Frustration signifies a certain set of circumstances arising after the formation of the contract, the occurrence of which is due to no fault of either party and which renders performance of the contract by one or both parties physically and commercially impossible. It means that a contract has ceased to bind the parties because the common basis of which by mutual undertaking it was based has failed. It is well settled that when there is frustration, the dissolution of the contract occurs automatically. Happening of supervening event, legislative or otherwise is imperative for the doctrine of frustration to apply.

What happens generally in such cases that one party claims that the contract has been frustrated, while the other party denies it.

Essential conditions for applicability of Doctrine of Frustration:
1) A valid subsisting contract between the parties.
2) There must be some part of the contract yet "to do"
3) The contract after it is made, becomes impossible.
If the above 3 conditions are satisfied, then the contract becomes void when the act becomes impossible. Applicability of Doctrine of Frustration in India:
Madhya Pradesh High Court in 1949 observed that the Doctrine of frustration comes into play when a contract becomes impossible of performance after it is made on account of circumstances beyond the control of the parties.

It occurs when a violent outside force suddenly dashes against the purpose which forms the basis of the contract. The Doctrine of Frustration applies to India.

The same principle applies to the sale of goods.

Part performance:
Contracts becoming impossible after part performance of the contract becomes void as regards to that part that is yet to be performed.

Personal Contracts & impact of death & illness:
All personal contracts are rendered void on account of death or illness. For example, a contract with a singer due to his illness for the period of contract shall be rendered void.

Rent contracts:
The doctrine of frustration & S. 56 has limited applicability to rent contracts and the liability to perform the commitments shall continue.

Performance of contract being rendered unlawful:
Section 56 goes on to state that if the performance of a contract is rendered unlawful because of subsequent change in law, there is automatic discharge of the contract u/s 56

Force Majeure & Frustration of Contract:
Force Majeure is a term used to describe act of God and a clause to this effect is incorporated in agreements and contracts. On the other hand, when the contract is rendered impossible the doctrine of frustration comes into play even if there are no written provisions to this effect in the contract.

Consequences & Conclusion:
In Krell V. Henry, the procession was the root-cause of the contract. The procession having been cancelled; H is not liable to K for the rent.

Law of contract provides for such situations and one may rescind such contracts citing the impossibility of purpose of such contracts. One may also recover most of the amount paid. When an agreement is discovered to be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it to the person from whom he received it.

Satya Muley
Satya is a leading lawyer from western India.
He can be reached at Contact Us