“The sanctity of a contract is the foundation of the law of contract and the doctrine of impossibility cannot be permitted to become a device for destroying this sanctity”. Discuss the implications of this statement.

Question: “The sanctity of a contract is the foundation of the law of contract and the doctrine of impossibility cannot be permitted to become a device for destroying this sanctity”. Discuss the implications of this statement. [BJS 2006]

Find the answer to the mains question only on Legal Bites. [“The sanctity of a contract is the foundation of the law of contract and the doctrine of impossibility cannot be permitted to become a device for destroying this sanctity”. Discuss the implications of this statement.]

Answer

The Hon’ble Supreme Court has held in Satyabrata Ghose v. Mugneeram Bangur and Co., [AIR 1954 SC 44] that the word ‘impossible‘ in Section 56 of the Contract Act has not been used in the sense of physical or literal impossibility.

The court has further observed as therein under

“The sanctity of contract is the foundation of our law of contract and the doctrine of impossibility does not displace that principle, but merely enables the Court to enforce it equitably. It releases a party from its obligations to perform a contract where performance has become Impossible as a result of events out of the control of that party.

An agreement for the sale of a house, for example, cannot be performed if the house is destroyed by enemy action or any other cause, in such cases the principle of sanctity of contract is not compromised if the court holds that it has become impossible for the seller to perform the agreement.

But the doctrine of impossibility cannot be applied in a manner which will weaken the sanctity of contract. The plea of impossibility will not be entertained by the Court if in spite of supervening events, the object and purpose of the parties is not rendered useless and the contract can be performed substantially in accordance with the original intention of the parties though not literally in accordance with the language of the agreement.

The Court will not apply the doctrine of impossibility to assist a party which does not want to fulfill his obligations under the contract and relies on literal impossibility to back out of it. The doctrine of impossibility, which is based on equity and common sense cannot be permitted to become a device for destroying the sanctity of contract.”

To the same effect is the following statement of Lord Wright in Twentsche Overseas Trading Co Ltd v. Uganda Sugar Factory Ltd, [(1945) 58 LW315] said: “The word frustration is here used in a technical legal sense. It is a sort of shorthand: it means that a contract has ceased to bind the parties because the common basis on which by mutual understanding it was based has failed. It would be more accurate to say, not that the contract has been frustrated, but that there has been a failure of what in the contemplation of both parties would be the essential condition or purpose of the performance.”

Thus, the doctrine of frustration comes into play in two types of situation, first, where the performance is physically cut off, and, second, where the object has failed. The Supreme Court of India has held that Section 56 will apply to both kinds of frustration.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X