The Doctrine of Supervening Impossibility: An overview
Sometimes, subsequent to the formation of a contract, an impossibility arises with regard to its performance. Even though the contract could be very well performed at the time it was entered into, some circumstances may hinder the performance of a contract after its formation. This is called the doctrine of supervening impossibility or post-contractual impossibility.
According to Section 56, para 2 of the Indian Contract Act, 1872, in case of the doctrine of supervening impossibility where a contract becomes impossible or unlawful to perform subsequent to its formation, it shall become void.
Now, it is interesting to note here that as a general rule, an impossibility of the performance of a contract is not an excuse for not performing it. It is only applicable when this impossibility arises on account of reasons beyond the control of the parties. Only, in that case, they can be discharged from further obligations under the contract.
Cases of Doctrine of supervening impossibility
In the following cases, a contract may be discharged by supervening impossibility, i.e., the parties may be discharged from their obligations when the contract is found impossible to perform after it has been entered into.
1. Destruction of Subject-matter of Contract
If after the formation of a contract, its subject matter is destroyed without the fault of any of the parties, the contract is discharged.
In the case of Taylor vs Caldwell [1863] 3 B. & S. 826, C had let a music hall to T for the purpose of holding a few concerts for a particular number of days. However, the music hall got accidentally burnt even before the arrival of date of the first concert. Hence, the contract was held to be void.
2. Non-existence or non-occurrence of a particular state of things
There are times when a contract is entered into on the basis of the existence or occurrence of a particular state of things. However, if the state of things that constituted the very basis of the contract no longer exists or there is a change in them, the contract is discharged.
For instance, in the case of Krell v Henry [1903] 2 K.B. 740, H had taken a flat on hire from K for witnessing a coronation procession that was supposed to occur on a pre-determined date. Although the contract did not contain any reference to this, the parties were aware of this purpose. Later, due to the illness of the King, the coronation procession was cancelled. It was held that H should be discharged from paying rent for the flat since the occurrence of the procession was the very basis of the contract. And its cancellation made the contract void. This kind of situation where the object of a contract fails is often known as ‘frustration of contract”.
3. Death or incapacity for service
A contract is also discharged by supervening impossibility if its performance is dependent upon the qualification or personal skills of a party and death/illness/incapacity of that party renders the contract void. This is so because a man’s life is an implied condition to the contract.
Say an artist (piano player) agreed to perform at a concert and for a certain pre-defined price. But before she could do so, she got seriously ill. Hence, the contract gets discharged on account of illness. [Robinson v Davison (1871) L.R. 6 Ex. 269].
4. Change of law or stepping in of a new law
It might be possible that, after the formation of a contract, law changes or any amendment takes place in some Ordinance, Special Act, or Government rules. Due to such change, the performance of the contract becomes impossible and as such, the contract is discharged.
For example, on 1st March, D entered into a contract with P for supplying some imported goods in the month of September. However, in June of the same year, the import of those goods was banned by an Act of Parliament. Hence, the contract was discharged.
5. Outbreak of war
If two parties of different countries enter into a contract with one another and afterward, a war is declared between the nations, the contract normally becomes unlawful, impossible to perform, and hence void.
The general rule of impossibility
As previously discussed, the impossibility of performance is not an excuse for the non-performance of a contract. Normally, when a party agrees to do something, he must do so except when its performance becomes completely impossible due to any of the reasons provided above.
Exceptions to Doctrine of supervening impossibility
A contract cannot be discharged on the ground of doctrine of supervening impossibility in the below-mentioned cases:
- Difficulty of performance
The mere fact that a contract has become difficult to perform due to some events or delays not contemplated before, does not hold the contract as discharged.
For example, in the case of Blackburn Bobbin Co. vs. Allen & Sons. (1918) 1 K.B. 540, A sold a particular amount of Finland timber to B, which was to be delivered between July and September. Before any timber could be delivered, war broke out in August, and transportation was disrupted, preventing A from bringing timber from Finland. While it is true that the outbreak of war altered the situation, the failure of only one source of supply was the most important aspect in this case. Considering this, the plea of the outbreak of war could not be invoked here.
It was argued that because the purchaser was ignorant that the timber had to be brought from Finland, he may have made one of several assumptions. For example, he may have assumed that the supplier had stored timber in the UK or that supplies were readily available from other Scandinavian nations. As a result, only the seller’s expectations were not met, and the risk of loss was carried to the seller. He may have taken action early to ensure that the deal was completed on schedule. As a result, the difficulties in obtaining the timber from Finland did not excuse A from performance.
- Commercial impossibility
If an expectation of higher profits does not get realized, or the required raw material becomes available at a very high price because of the outbreak of war, or if a sudden depreciation of currency occurs, a contract is not discharged for these reasons.
For example, in the case of Karl Ettlinger v. Chagandas & Co. held on 6 August 1915, A undertook to send some goods from Bombay to Antwerp in the month of September. Before sending the goods, war broke out, and consequently, there was a huge rise in shipping rates. It was held that mere difficulty or the requirement to pay higher prices does not bring the case under Section 56 of the Indian Contract Act. Hence, the contract was not discharged.
- Impossibility due to failure of a third party
A contract is also not discharged if it could not be performed due to the default of a third party on whom the promisor had relied.
Assume a wholesaler (A) undertook to sell to B, a particular type of cloth to be manufactured by a third person, C. When C did not manufacture that cloth, A was held liable to B for damages. [Harnandrai Fulchand vs. Pragdas, A.I.R. (1923) P.C. 54]
- Strikes, lock-outs, and civil disturbances
Unless the parties to a contract have specifically agreed to such terms at the time of entering into the contract, events like strikes, lock-outs, or civil disturbances do not discharge a contract.
- Failure of one of the objects
In addition to the above cases, if a contract is entered into for a number of objects, then mere failure of one of those objects does not discharge the contract.
Impacts of Doctrine of supervening impossibility
As stated earlier, pursuant to the doctrine of supervening impossibility, if the performance of a contract becomes impossible or unlawful after it has been entered into, the contract becomes void. However, what matters here is that non-performance of the contract must be owing to factors outside the control of the parties.
Further, there are certain provisions that provide for compensation of loss in the case of such contracts.
Firstly, Section 56, para 3 of the Indian Contract Act of 1872, says that if the promisor, while making the promise, knew or might have known with reasonable diligence that the performance of a contract is impossible or unlawful (of which the promisee had no clue), the promisor must compensate the promisee for any loss caused due to the non-performance of such contract.
Secondly, if an agreement or contract becomes void, any person who has received any advantage under the said agreement/contract is bound to return the same or to compensate the person from whom he has received it. [Section 65 of the Indian Contract Act of 1872]
Conclusion
A contract may be possible to perform at the time of its formation. But later, if it becomes impossible or unlawful to perform owing to reasons beyond the control of the parties, it shall be treated as discharged by supervening impossibility. This means that a contract cannot be performed and hence, it is void.
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