Business &

Co. Law
Maam Qurat-ul-Ain

Muhammad Umar Raza

BE-13-30

Impossibility and Frustration of the Contract

Impossibility may exist at the time of the contract or may arise subsequently. It may be physical or legal
impossibility. In either case, the agreement is void ab-initio. The object being that the law cannot
compel the impossible. When the subject matter is destroyed, the contract is frustrated by virtue of
physical impossibility. Even where the object contemplated by the parties fails to materialize the
contract is frustrated.
Example: Where a flat was hired for purposes of witnessing coronation ceremony on fixed announced
days and subsequently the coronation ceremony was cancelled, it was held that as the object of the
contract was frustrated by the non-happening of the coronation, the defendant was not liable to pay
balance of rent.
A contract to do an act which after the contract is made becomes impossible or unlawful by some event
which the promisor could not prevent, becomes void when the act becomes impossible or unlawful.
When the impossibility of performance cannot reasonably be supposed to have been in contemplation
of the contracting parties when the contract was made, performance or further performance of the
promise is excused.
The contract may be impossible of performance due to supervening impossibility or illegality or due to
frustration of a contract by occurrence of an unexpected event or a change of circumstances beyond the
contemplation of parties or over which the parties have no control. A contract may be frustrated by
emergency, regulations and restrictions. Impossibility may also be created by change of law or
destruction of subject matter. Where an act becomes unlawful, the performance of the contract can be
excused on the ground of impossibility. However, if impossibility is brought about by an act of a party to
the contract, the performance of the contract is not excused. The impossibility of performance must be
in respect of a term of the contract. However, if contract can be performed in any other manner, the
contract is not frustrated. There is a general principle that a party prevented from doing an act by some
circumstances beyond his control, can do so at the first subsequent opportunity.
Impossibility does not include commercial impossibility; for example, where the performance of the
contract becomes onerous. Where A wants to avoid the construction of a building as the building cost
has become costlier, it has been held that this is a case of commercial impossibility and the performance
is, therefore, not excused. Similarly, restrictions imposed by Government on trade or export are cases of
commercial impossibility.
When there is frustration, the dissolution of the contract occurs automatically. It does not depend on
the choice or election of either party.
The doctrine of frustration cannot be availed of by the person when the non-performance of the
contract was attributable to his own default.

Institute of Management Sciences, B.Z.U Multan

To summarize, the contract becomes impossible of performance or is frustrated in any of the following
cases:
1) Where the subject matter of the contract ceases to exist.
2) Where circumstances arise which make the performance of the contract impossible.
3) Where object contemplated by the parties or the event contemplated does not occur, the
contract is frustrated.
4) Where the party who is to only perform the contract dies, or is incapacitated from performing
the contract.
5) Where enactment of legislation or Government interference prevents the performance of the
contract.
6) Where act becomes unlawful.

Effects when the contract becomes impossible:

When the contract becomes impossible, the party who has received any advantage under it must
restore it to the other party or make compensation for it.
Where one person has promised to do something, which he knew, or with diligence, might have known,
and which the promise did not know to be impossible or unlawful, such promisor must make
compensation to such promise for any loss which such promise sustains through the non-performance
of the promise. Party cannot take advantage of impossibility caused by his own default.

Thank You!!

Institute of Management Sciences, B.Z.U Multan