Introduction

• This case deals with frustration of contract under the Indian Contract Act.
• Section 56 of the Indian Contract Act, 1872 (ICA) deals with the contract becomes void if parties are unable to perform due to circumstances under the act.

Facts

• In this case, the Union of India appointed plaintiffs to supply Ghee to the army personnel.
• When World War II commenced, the Government, after three years, mutually agreed to change the price, substituting the original price with a reduced one.
• A year later, the plaintiffs requested an increase in the sale price of the goods due to the increasingly burdensome discharge of their obligations.
• The government gave assurance that the request "might be entertained", yet no action was taken on this assurance while the plaintiffs continued their supply.

Issues Involved

• Whether the contract should be considered with respect to original contract price or price paid by the Government from substituted price was valid?
• Whether the contract become impossible to perform in light of increasingly onerous discharge of obligations by the plaintiffs never contemplated by them while entering into it?

Observation

• The court noted that if both parties mutually modify an agreement, the original contract becomes unnecessary for performance.
• In the current case, when the original agreement's price for supplied goods was altered by mutual agreement, the government became obligated to pay the newly agreed decreased price, not the originally stipulated price.
• The court emphasized that the government cannot alter the contract regarding assurances provided.
• Despite the plaintiffs suffering losses, they received the consideration outlined in the modified agreement; therefore, no further action for additional payment is deemed legitimate.
  • A contract does not become void due to changing circumstances.
• Thus, the emphasis should be on the 'correct interpretation of the contract' rather than the 'intention of the parties, as rational men'.

Conclusion

• The Court ruled that a party cannot excuse themselves from fulfilling the contract simply because carrying it out has become burdensome, meaning it is difficult and requires significant effort.