Doctrine of Frustration

Doctrine of Frustration

The doctrine of frustration is a legal principle that comes into play when an unforeseen event occurs after the formation of a contract, making it impossible or fundamentally different to fulfill the original terms of the contract. Essentially, it discharges the parties from their contractual obligations due to events beyond their control that alter the circumstances drastically.

Essential of Doctrine of Frustration:

  1. Unforeseen Event: The doctrine of frustration applies when an unforeseen event occurs after the formation of a contract, making it impossible to fulfill the contract’s terms.
  2. Impossibility or Fundamental Change: The event should render the performance of the contract impossible, illegal, or result in a significant change in the nature of the contract.
  3. No Fault of Either Party: The event should not be due to the fault or negligence of either party involved in the contract.
  4. Not Contemplated by Parties: The event should not have been contemplated or accounted for by the parties at the time of contract formation.
  5. Contract Becomes Unworkable: The frustrating event must make the contract substantially different from what the parties initially agreed upon.
  6. Automatic Termination: Frustration leads to an automatic termination of the contract, releasing both parties from their contractual obligations.
  7. Restitution of Benefits: Any benefits received by either party before the frustrating event must be restored or compensated for appropriately.

In the case of Tarapore & Co., Madras vs. M/S. V/O Tractors Export, Moscow, the doctrine of frustration was applied because of unexpected export restrictions imposed by the Indian government. Tarapore & Co. had a contract to supply tractor parts to M/S. V/O Tractors Export. However, due to these unforeseen government restrictions, Tarapore & Co. couldn’t export the parts as initially agreed upon.

This unforeseen event (the government restrictions) made it impossible for Tarapore & Co. to fulfill their contractual obligations as per the original terms. The court recognized this unforeseen circumstance as an instance of frustration. According to the doctrine of frustration, since the contract became impossible to perform due to an external event beyond the control of the parties (government restrictions), Tarapore & Co. was excused from further performing the contract.

In this case, the doctrine of frustration allowed the court to release Tarapore & Co. from the contract, ensuring fairness and equity in the face of unexpected changes in circumstances that made the contract unworkable. It upheld a balance between contract principles and the realities of unforeseen events in business transactions.