1. Facts of the Case
- ‘A’, a merchant, entered into a contract with ‘B’ to sell 100 quintals of groundnut oil.
- The contract was valid and enforceable, and the goods were identified and ready for delivery.
- Before ‘A’ could deliver the oil to ‘B’, the Government of India requisitioned the entire stock of oil in public interest, under its statutory powers.
- As a result, ‘A’ became unable to deliver the goods to ‘B’.
- ‘B’, feeling aggrieved, intends to sue ‘A’ for breach of contract, claiming that the seller failed to perform the obligation to deliver the goods.
The issue for consideration is whether A’s non-performance, caused by government requisition, amounts to breach of contract under Indian Contract Law.
2. Issues in the Case
- Whether the requisition of goods by the Government constitutes a supervening impossibility under Section 56 of the Indian Contract Act, 1872.
- Whether ‘A’ can be held liable for breach of contract when the performance became impossible due to reasons beyond his control.
- Whether ‘B’ can legally claim damages from ‘A’ for non-delivery of goods when performance was frustrated by law.
- Whether the contract between ‘A’ and ‘B’ becomes void upon such government intervention.
3. Legal Principles Covered
a) Section 56 – Agreement to do an Impossible Act
- The Indian Contract Act, 1872, under Section 56, states: “An agreement to do an act impossible in itself is void.
A contract to do an act which, after the contract is made, becomes impossible or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.” - This section deals with supervening impossibility or frustration of contract.
- When performance becomes impossible or unlawful due to external circumstances, the contract automatically becomes void, and no party is liable for breach.
b) Doctrine of Frustration
- The doctrine of frustration applies when the performance of the contract becomes impossible or radically different from what was originally agreed upon due to unforeseen events.
- The foundation of this doctrine lies in the principle that the law does not compel a person to do what is impossible.
c) Government Requisition as a Ground of Impossibility
- When the Government lawfully requisitions goods, the seller loses control and ownership of the goods.
- Such government actions make it impossible for the seller to perform the contract, thereby discharging the parties from their contractual obligations.
- Hence, the contract becomes void under Section 56.
d) Relevant Case Laws
- Satyabrata Ghose v. Mugneeram Bangur & Co. (1954 AIR 44 SC)
- The Supreme Court held that Section 56 covers both physical and legal impossibility.
- If the performance becomes impracticable or useless due to external circumstances, the contract is frustrated and becomes void.
- Ganga Saran v. Ram Charan (1952 SCR 36)
- The court ruled that if the Government prohibits the performance of a contract, the contract becomes void due to supervening illegality.
- Taylor v. Caldwell (1863) 3 B & S 826(English Case – Persuasive Authority)
- A music hall hired for concerts was destroyed by fire before the event.
- The court held that the contract was frustrated because performance had become impossible without fault of either party.
- Indian Contract Act, Section 65 – Obligation of Party Benefited by Void Contract
- When a contract becomes void, any benefit received under it must be restored to the other party.
- Thus, if ‘B’ had paid an advance, ‘A’ must refund it.
e) Application of Principles
- In the given case, the Government of India has requisitioned the goods by law.
- This is a supervening legal impossibility that ‘A’ could not prevent.
- Since the act of delivery has become impossible and unlawful, the contract automatically becomes void under Section 56.
- Therefore, ‘A’ cannot be held liable for breach, as the non-performance is excused by law.
- However, if ‘B’ had already made any advance payment, ‘A’ must refund it under Section 65.
4. Possible Judgement
Findings:
- The performance of the contract became impossible due to government requisition, which is a supervening event beyond the control of either party.
- Under Section 56, the contract becomes void when performance becomes impossible or unlawful.
- Consequently, ‘A’ is discharged from the obligation to deliver the oil.
- ‘B’ has no legal right to sue for breach of contract, as there is no fault on the part of ‘A’.
- However, ‘B’ is entitled to restitution of any amount paid in advance under Section 65.
Judgement:
The court would likely hold that the contract between ‘A’ and ‘B’ has become void under Section 56 of the Indian Contract Act, 1872, due to supervening impossibility caused by government requisition.
Therefore, ‘B’ cannot sue ‘A’ for breach of contract.
However, ‘A’ must refund any advance received from ‘B’, as provided under Section 65.
About lawgnan:
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