Unit V:

• 5.1 Discharge of contract by impossibility

• 5.2 Specific ground of frustration and restitution

• 5.2.1 Effect of frustration

• 5.2.2 Frustration and restitution

• 5.3 Discharge by lapse of time

• 5.4 Discharge by operation of law

• 5.5 Discharge by breach

• 5.6 Quasi contractual obligations

 

 

Unit V: Impossibility, Breach, & Quasi-Contracts

1. The “Plain English” Intro

This unit explores how a contract is “killed” when it becomes physically or legally impossible to perform (Frustration). It also introduces Quasi-Contracts, where the law imposes an obligation on a person to prevent them from getting “unjustly enriched” at someone else’s expense, even if no formal agreement exists.

2. Day-to-Day Analogy

Frustration: You book a famous singer for a concert, but a day before the show, the singer loses their voice completely. Since the “subject matter” (the voice) is gone, the contract is frustrated and ends automatically.

Quasi-Contract: A delivery driver accidentally leaves a box of premium chocolates at your door meant for your neighbor. If you eat them knowing they aren’t yours, the law says you must pay the neighbor or the shop for them—this is an “implied” contract.

3. The Legal Backbone

Section (Indian Contract Act)	What it says in Simple Terms
Section 56	Doctrine of Frustration: A contract becomes void if the act promised becomes impossible or unlawful after the contract is made.
Section 65	Restitution: If a contract becomes void (like through frustration), any person who received an advantage must restore it or pay for it.
Section 39	Discharge by Breach: If one party refuses to perform, the other party is freed from their duty.
Section 68	Necessaries for Minors: If you provide essential goods (food/clothes) to a minor, you can be reimbursed from their property.
Section 70	Non-Gratuitous Acts: If you do something helpful for someone (not as a gift) and they enjoy the benefit, they must pay you.
Section 71	Finder of Goods: A person who finds lost items has the same responsibility as a “bailee” (must try to find the owner and keep it safe).

4. The “Checklist” (Essentials of Frustration)

To prove a contract is discharged by Impossibility/Frustration in court, you must show:

• A Valid Contract existed: There was a real agreement to begin with.
• Performance is still pending: The act hasn’t been completed yet.
• The act becomes impossible: Physically (destruction of object) or Legally (change in law).
• The impossibility is NOT the party’s fault: It must be an external event.

5. Landmark Case Laws (The Story Method)

Taylor v. Caldwell (1863)

• The Conflict: A person agreed to rent a music hall for a series of concerts. Before the first concert, the hall accidentally burned down. The concert promoter sued for damages because the hall was not provided.
• The Verdict: The court ruled the contract was Frustrated. Because the existence of the hall was essential to the contract, its destruction made performance impossible, and neither party was at fault.

Satyabrata Ghose v. Mugneeram Bangur & Co. (1954)

• The Conflict: A company agreed to sell developed land. During WWII, the government requisitioned the land for military use. The company tried to cancel the sales contract, claiming “frustration.”
• The Verdict: The Supreme Court of India ruled that Temporary Hardship is not frustration. The war was temporary, and the contract could still be performed later. The contract remained alive.

6. Comparison Table: Discharge by Frustration vs. Breach

Feature	Frustration (Sec. 56)	Breach (Sec. 39)
Cause	External, uncontrollable event.	One party chooses not to perform.
Fault	No one is at fault.	One party is at fault.
Outcome	Contract becomes void automatically.	The injured party can sue for damages.
Restitution	Benefits must be returned (Sec. 65).	Damages are paid to the victim.

7. Visual Flowchart Description

1. Contract Formed → Parties agree to terms.
2. External Event Occurs → Is the act now impossible?
   • If YES → Frustration (Contract is Void) → Restitution (Return benefits).
3. One Party Refuses → Did they fail to perform without a legal reason?
   • If YES → Breach → Legal Remedies (Suit for Damages/Specific Performance).
4. Operation of Law → Did a party die or become insolvent?
   • If YES → Discharge by Operation of Law.

8. Exam “Golden Key”

Latin Maxim: Nemo debet locupletari ex aliena jactura (No one should be enriched by another’s loss). Use this to explain Quasi-Contractual Obligations (Sections 68–72)—it is the core principle that prevents “unjust enrichment”.

Master Tip: Remember that Commercial Hardship (e.g., the price of raw materials went up and it’s no longer profitable) is NOT a ground for frustration. You are still legally bound to perform!