The doctrine of frustration under Section 56 of the Indian Contract Act

---

 

Does the Indian judiciary’s application of the doctrine of frustration under Section 56 of the Indian Contract Act effectively undermine the principle of sanctity of contract, and if so, should India adopt a more narrowly tailored force majeure framework akin to that used in civil law jurisdictions?

Introduction

Contracts are essential in both business and personal interactions. A fundamental principle of contract law is that once an agreement is made, it must be honoured — this is known as the sanctity of contract. However, what occurs if an unforeseen event arises that prevents the fulfilment of the contract?

This is where the doctrine of frustration, outlined in Section 56 of the Indian Contract Act, 1872, becomes relevant. It states that if an event occurs after a contract is established that renders performance impossible or illegal, the contract is deemed void.

Although this law serves a vital purpose in genuinely difficult situations, some argue that Indian courts apply it too broadly, resulting in contracts feeling less dependable. This raises an important question: Should India implement a more defined legal framework for addressing such situations, similar to the force majeure system used in other nations?

What Is the Doctrine of Frustration?

Explaining Section 56

Section 56 states that “An agreement to do an act impossible in itself is void.”[1] For this to apply:

1. Something unexpected must happen after the contract is made.
2. This event must make the contract impossible or very different from what was agreed.
3. Neither party should be responsible for the event.

Cases like Satyabrata Ghose v. Mugneeram Bangur & Co. (1954) and the English case Taylor v. Caldwell (1863) explain that frustration is only used when the core purpose of the contract is destroyed.

Sanctity of Contract vs. Doctrine of Frustration

The idea of the sanctity of contract means that people should stick to their promises. “It is elementary law that where parties have entered into a contract or an agreement, they are bound by the provisions of the contract or agreement. This is because a party cannot ordinarily resile from a contract agreement just because it later found the conditions of the contract or agreement are not favourable to it. This is the whole essence of the doctrine of sanctity of contract or agreement. The court is bound to construe the terms of the contract and the terms only in the event of an action arising therefrom. Hence, a party cannot midstream want to alter the terms of the agreement.”[2]

However, the doctrine of frustration allows exceptions when it becomes impossible to complete the contract. It allows parties to be excused from their contractual obligations when an unforeseen event, beyond their control, makes the contract impossible or illegal to perform. This doctrine ensures fairness by preventing parties from being bound to agreements that have become significantly altered due to circumstances they couldn’t foresee or prevent.

Some experts believe that Indian courts sometimes stretch this rule too far. Instead of using it only in serious cases, they sometimes allow it when performance is just difficult or expensive — not completely impossible. This can create confusion and reduce faith in contracts.

Force Majeure Concept and Contrasting it with Rule in India

Unlike the common law doctrine of frustration, which is invoked after an event happens, force majeure (meaning “superior force”) is a clearly defined principle in civil law systems such as France and Germany. Contracts in these jurisdictions expressly include force majeure clauses  to allocate risks associated with unforeseen disruptions. These clauses usually list specific events—such as natural disasters, wars, or government actions—that would excuse non-performance. Courts in civil law jurisdictions enforce these clauses strictly, leading to greater predictability in contractual disputes. The force majeure framework offers several advantages over the doctrine of frustration. Firstly, it ensures greater certainty, as parties can clearly define in advance which events will justify non-performance, thus minimising litigation. Secondly, it provides flexibility, allowing contracts to specify whether performance is temporarily suspended or permanently terminated due to unexpected events. Lastly, it promotes better risk allocation, enabling parties to negotiate who bears the risk of such disruptions.

In India, although some commercial contracts contain force majeure clauses, many continue to rely on Section 56, resulting in judicial discretion and inconsistent outcomes.

Difference between Force Majeure and Doctrine of Frustration

Contracts do more than outline the responsibilities of the parties; they also aim to address unforeseen circumstances that may hinder or prevent fulfilling those responsibilities. The COVID-19 pandemic serves as a prime example, altering the execution of many contracts. Two key legal principles assist in managing such situations: force majeure and the doctrine of frustration. Force majeure is a provision included in contracts that releases parties from their obligations if uncontrollable events—such as natural disasters, warfare, pandemics, or governmental actions—occur. This allows for a suspension or modification of responsibilities during these interruptions. Conversely, the doctrine of frustration, originating from common law, applies when an unexpected event- unrelated to either party and not specified in the contract- renders performance impossible or fundamentally alters the contract’s intent. When frustration occurs, the contract automatically terminates, freeing both parties from any subsequent obligations. In common law jurisdictions (like India or the UK), frustration is applicable only in very specific and serious circumstances, leading parties to depend more on force majeure clauses. However, in civil law jurisdictions (such as France or Germany), force majeure is more extensively recognized by the legal framework itself, even if it isn’t specified in the contract. Consequently, courts in civil law countries generally exhibit more leniency in relieving parties from liability during extraordinary events. Thus, while both legal systems utilise force majeure, civil law provides it with a broader legal foundation, whereas common law is more contingent upon contract drafting quality.

Should India Shift to a Force Majeure System?

There are some strong reasons why India could benefit from adopting a proper force majeure system through legislation. Firstly, it would make contracts more predictable. If the law clearly mentions which unexpected events can excuse a party from performing the contract, it would reduce confusion and limit how much courts need to interpret things on their own. Secondly, it would push people to draft better contracts. Knowing that force majeure is legally supported, parties would be more careful to write detailed clauses that suit their needs. Lastly, it would help India match up with international standards. Many global contracts already use force majeure clauses, so this change could make cross-border business smoother and more trustworthy.

However, there are also some challenges. Small businesses or people without legal help might not know how to write good force majeure clauses, which could put them at a disadvantage. Also, even with a written law, courts might still interpret these situations differently, keeping some level of uncertainty. So if India does move to a force majeure-based system, it would be important to also create clear legal guidelines and train judges on how to apply them consistently.

Conclusion

The doctrine of frustration under Section 56 plays an important role by helping people in situations where it’s truly impossible to carry out a contract. But when courts apply it too broadly or inconsistently, it can weaken the seriousness with which contracts are made and followed. A balanced or hybrid approach might be the best solution. Section 56 should still be used for real cases of impossibility, but at the same time, parties should be encouraged to include force majeure clauses in their contracts to better deal with unexpected events.

To make this easier—especially for small businesses or individuals who might not have legal help—the government could provide sample force majeure clauses. This would help standardize contracts and reduce confusion.

Overall, if India takes a more organized approach like this, it can protect the value of contracts while also being fair in unexpected situations. It would also make Indian contract law more in line with international practices, giving businesses more confidence and clarity.

[1] The Indian Contract Act, 1872, §56.

[2] ARJAY LTD. & ORS V. AIRLINE MANAGEMENT SUPPORT LTD, (2003) JELR 44844 (Nigeria)