Answer By law4u team
Frustration of Contract and Breach of Contract are two distinct legal concepts under contract law. Both relate to situations where one party's ability to perform their obligations under a contract is compromised, but they differ in terms of the causes, the legal consequences, and how the parties are treated. Here's a detailed explanation of both: Frustration of Contract Frustration of contract occurs when a contract becomes impossible to perform due to unforeseen circumstances or events that are not the fault of either party. In such cases, the contract is terminated by law, and neither party is required to fulfill their obligations under the contract. This doctrine is generally applied in cases where performance becomes impossible, illegal, or radically different from what was originally agreed upon. Key Points about Frustration of Contract: 1. Unforeseen Events: The event causing frustration must be unforeseen and beyond the control of both parties. Common examples include: Death or incapacity of a party to the contract (in personal contracts). Destruction of the subject matter of the contract (e.g., a building that was to be sold burns down). Government action, such as a ban or new legislation that makes the performance of the contract illegal. Natural disasters (like earthquakes or floods) that prevent performance. 2. Effect of Frustration: Once a contract is frustrated, it is automatically terminated, and the parties are released from their obligations. In many jurisdictions, the contract is considered void from the moment of frustration. For example, if a contract becomes impossible due to the destruction of the subject matter, the contract is deemed to have never existed. 3. Legal Basis: The concept of frustration is typically governed by legislation or case law. In India, the Indian Contract Act, 1872 (under Section 56) recognizes the doctrine of frustration. It states that a contract is void if it becomes impossible to perform due to unforeseen events. 4. No Liability for Non-performance: When frustration occurs, neither party is liable for non-performance. The parties are freed from the terms of the contract, and the law will determine how to deal with any payments or benefits already exchanged (e.g., return of money or reimbursement for partial performance). Example of Frustration: Scenario: A contract is made to perform at a concert hall, but the venue burns down before the performance. The contract is frustrated because the venue no longer exists, making performance impossible. Breach of Contract Breach of contract occurs when one party fails to perform their obligations as stipulated in the contract without a lawful excuse. A breach can occur in various forms, including non-performance, delayed performance, or incomplete performance. Key Points about Breach of Contract: 1. Failure to Perform: A breach happens when one party fails to perform their contractual duties. There are different types of breach: Actual Breach: Occurs when one party refuses to perform the contract at the time specified, or does not perform it at all. Anticipatory Breach: Occurs when one party notifies the other party in advance that they will not be able to perform their obligations under the contract. Minor Breach: Involves partial performance or minor defects in performance but does not defeat the overall purpose of the contract. Material Breach: A significant breach that goes to the heart of the contract and defeats its purpose, leading to a termination of the contract. 2. Effect of Breach: When a breach occurs, the injured party is typically entitled to remedies. These remedies could include: Damages: Compensation for losses suffered due to the breach. Specific Performance: A court order requiring the breaching party to fulfill their obligations. Rescission: Canceling the contract and relieving both parties of their obligations. Reparation: Returning benefits that may have been received under the contract. 3. Liability for Non-performance: The party that commits the breach may be held liable for any losses or damage caused by the failure to perform. Unlike frustration, the breaching party is generally responsible for the breach and must compensate the other party. Example of Breach: Scenario: A company hires a performer for a concert, but the performer cancels the show at the last minute without any valid reason. This is a breach of contract, as the performer failed to fulfill their obligations. Key Differences between Frustration and Breach of Contract 1. Cause of Non-Performance: Frustration: The non-performance is caused by unforeseen events or circumstances beyond the control of either party, such as natural disasters, death, or changes in the law. Breach: The non-performance is due to the failure of one party to fulfill their obligations under the contract, either intentionally or negligently. 2. Responsibility: Frustration: No party is at fault; both parties are relieved from their obligations due to circumstances beyond their control. Breach: The breaching party is responsible for the failure to perform and may be held liable for any resulting damage. 3. Termination of Contract: Frustration: The contract is automatically terminated by law, and it is considered void or discharged. The parties are not held liable. Breach: The injured party may terminate the contract or seek a remedy, such as damages or specific performance. 4. Legal Remedy: Frustration: The remedy is typically termination of the contract, with an automatic release from performance. The parties may have to return any benefits received under the contract. Breach: The non-breaching party can seek legal remedies, including damages, specific performance, or rescission. 5. Nature of the Event: Frustration: Involves an external event or condition (e.g., a natural disaster, government intervention, or destruction of the subject matter). Breach: Involves a party's failure to fulfill obligations, either intentionally or due to negligence or incapacity. Conclusion In simple terms: Frustration of contract occurs when unforeseen external events make performance of the contract impossible, and the contract is automatically terminated without any liability. Breach of contract occurs when one party fails to fulfill their obligations as agreed in the contract, and the other party is entitled to a remedy for the breach. While frustration is related to an external event that makes the contract impossible to perform, breach is related to a failure by one party to meet their obligations, which typically leads to liability and legal consequences.
