3.

Discharge by Subsequent or Supervening Impossibility or Illegality

Impossibility of contract :

Sometimes, the performance of a contract is impossible. In such a case, the contract is

discharged. This is based on the principle that the Law does not recognize what is impossible.
The impossibility of performance may be of two types, namely

Initial impossibility or pre-contractual impossibility:

Sec 56(1) Initial impossibility or pre-contractual impossibility exists at the time of making a
contract. The initial impossibility may be:

Known impossibility:
It means one or both the parties have knowledge that a promise to perform is impossible even
though they enter into an agreement.

Example
X agrees with Y to bring a dead man to life. It is known to the parties at the time of making the
agreement that the performance is impossible. The agreement is void-ab-initio.

Unknown impossibility:
It means both the parties genuinely believe that the performance of a promise is possible, but in
reality it is impossible to perform. It can also be said that, there is a bilateral mistake of parties.

Example
A agrees to sell certain goods to B, which were supposed to be on their way from Goa to
Chennai in a certain ship. Unknown to both the parties, the ship had already sunk in the deep
sea, and the goods ceased to exist at the time of contract. The contract becomes void when the
impossibility of performance is discovered.

Supervening impossibility:

Sec 56(2) an impossibility which arises subsequent to the formation of the contract shall make
the contract void. Such an impossibility is called supervening impossibility. It is also termed as
the doctrine of frustration. A contract becomes void on account of the subsequent impossibility
only if the following conditions are satisfied:

The act should have become impossible after the formation of the contract

The impossibility should have been caused by a reason of some event which was
beyond the control of the promisor

The impossibility must not be the result of some act or negligence of the promisor
himself

A contract is discharged by supervening impossibility in the following cases:

Destruction of subject matter:
Sometimes the very contract of the subject matter gets destroyed. The contract is discharged if
the subject matter of the contract is destroyed after the formation of the contract without any
fault of either party.

Note: If the destruction of the subject matter is due to the fault of any party, he is liable for the
damage caused to the other party.

Example:
A music hall was let out for some musical performance on a certain date. But before the date
fixed for the musical performance e, the music hall was destroyed by fire. The music hall was an
essential to the subject matter of the contract, the destruction of the music hall brings an end to
the contract and the owner is not liable.

Death or personal incapacity:

The contract is discharged on the death or incapacity or illness of a person if the performance of
a contract depends on his personal skill or ability.

Example:
R agreed to sing on a specified day. R fell seriously ill and could not perform on that day. The
contract was discharged.

Declaration of war:
The pending contracts at the time of declaration of a war are either suspended or declared as
void. Generally, the contract at the time of declaration of a war is void, when the contract is
against public interest or national interest.

Example:
D contracts to take in cargo for G at a foreign port. Ds Government later on declares war
against the country in which the port is situated. The contract becomes void when the war is
declared.

Note: If the war has broken out in some parts of the world not involving the two countries of
contracting parties, it will not affect the contract even if the performance as become difficult
because of disruption of traffic routes.

Change of Law:
Sometimes when the contract is entered into is completely fine and enforceable but due to
subsequent change in law the contract is rendered impossible. The contract is discharged if the
performance of the contract becomes impossible or unlawful due to change in the Law after the
formation of the contract.

Example:
A contract between two persons for sale of forest trees was held to have become void when the
government banned cutting of trees in the forest.
Failure of ultimate purpose:
A contract may have been made with one particular purpose known to both the parties. An
event frustrates the purpose even before the contract is performed. The contract shall become
void.

Example:
R and S contract to marry each other. Before the time fixed for the marriage, R goes mad. The
contract becomes void.

Cases not Covered by Supervening Impossibility

Impossibility of performance is, as a rule, not an excuse from performance. It means that when
a person has promised to do something, he must perform his promise unless the performance
becomes absolutely impossible. A contract is not discharged by the supervening impossibility in
the following cases:

Difficulty of performance
A contract is not discharged simply on the ground that its performance has become difficult.
Difficulty is not impossibility. A party is bound to perform it even though with more effort or
hardship.

Example:
P to supply coal within a specified time to R. He failed to supply on time because of the
Governments restriction on the transport of coal from collieries. Here, P will not be discharged
because the coal was available in the open market from where P could have obtained it.

Commercial impossibility
A person may find that because of some unexpected events, his contract with another person, if
performed, would cause losses to him. A contract is not discharged simply on the ground of
commercial impossibility, i.e. when the contract becomes commercially unviable or unprofitable.

Example
M, a furniture manufacturer agreed to supply certain furniture to B at an agreed rate. Later on,
there was a sharp increase in the rates of timber and rates of wages. Since, it was no longer
profitable to supply at the agreed rate, M did not supply. He will not be discharged on the ground
of commercial impossibility.

Default of a third party

If a promisor could not perform the promise because of default of a third party, he cannot make
an excuse and claim that it is impossible to perform the promise. The third partys fault or
conduct has nothing to do with the contract. The contract is not discharged because of a third
partys default.
 Example:
K, a cycle distributor enters into a contract with R to supply 100 bicycles. The bicycle
manufacturer, K did not manufacture bicycles due to which k is unable to procure the bicycle
and therefore couldnt honor his obligation to the contract. K is liable to pay the damages
caused to R because of non-performance of the contract.

Strikes, lockouts and civil disturbances

A contract is not discharged on the grounds of strikes, lockouts and civil disturbance unless
otherwise agreed by the parties to the contract.

Example:
The lessor of certain salt pans, failed to repair them according to the terms of the contract, on
the ground of a strike of the workmen. Held, a strike by the workmen was not sufficient reason
to excuse performance of the contract

Failure of one of the objects of the contract

Sometimes the parties enter into a contract intending to fulfill more than one object. The failure
of one of the objects does not discharge the entire contract as one of the objects can still be
fulfilled. But, if all the objects of the contract fail, the contract becomes discharged.

Example:
A agreed to let a boat to R to view naval review at the coronation of the king and to cruise round
the fleet. Due to the illness of the king, the naval review was cancelled but the fleet was
assembled and the boat could have been used to cruise round the fleet. It was held that the
contract was not discharged since it was the failure of one of the objects.