Discharge by impossibility of performance (Doctrine of Frustration) — MCQs

All questions with answers and explanations

Read the full set here, or use the practice card above to test yourself one question at a time.

1. Section 56's first paragraph deals with:

   • Supervening impossibility
   • An agreement to do an act impossible in itself, void from the start (correct answer)
   • Compensation for breach
   • Joint liability

   Explanation. The first paragraph of Section 56 states that an agreement to do an act impossible in itself is void from the moment it is made.

2. According to Satyabrata Ghose v. Mugneeram Bangur & Co. (1954), "impossible" under Section 56 means:

   • Only literal, physical impossibility
   • Also includes performance that has become impracticable and useless given the object of the contract (correct answer)
   • Only impossibility caused by the government
   • Impossibility that lasts more than five years

   Explanation. The Supreme Court held that "impossible" in Section 56 is not confined to literal impossibility — it also covers practical impracticability from the standpoint of the contract's object and purpose.

3. In Taylor v. Caldwell (1863), the destruction of the music hall by fire:

   • Made the defendants liable for breach
   • Excused both parties from further performance (correct answer)
   • Had no legal effect on the contract
   • Entitled the plaintiffs to double damages

   Explanation. The court held that the accidental destruction of the hall, essential to performance, excused both parties from further obligations under the contract.

4. In Alopi Parshad & Sons Ltd. v. Union of India (1960), the Supreme Court held that:

   • Any rise in cost automatically frustrates a contract
   • Mere hardship or increased cost is not impossibility (correct answer)
   • The government is always excused from wartime contracts
   • Arbitrators may rewrite contract terms freely

   Explanation. The Supreme Court held that hardship or a rise in cost alone does not amount to impossibility — parties remain bound by their bargain.

5. In Krell v. Henry (1903), a flat was hired for the days of the coronation processions, and the processions were cancelled. The Court of Appeal held that the contract was:

   • Not affected, because the flat still existed
   • Frustrated, because the processions were the foundation of the contract (correct answer)
   • Voidable only at the owner's option
   • Void from the start

   Explanation. The flat still existed, but the processions were the foundation of the contract. When they were cancelled, the contract was frustrated.

6. Under Section 56's third paragraph, if a promisor knew (or should have known) that an act was impossible, but the promisee did not know this, the promisor must:

   • Face criminal prosecution
   • Compensate the promisee for any loss caused by non-performance (correct answer)
   • Automatically forfeit double the contract value
   • Nothing — the promisee bears the loss

   Explanation. Section 56's third paragraph requires a promisor who knew or should have known of the impossibility to compensate the promisee for resulting loss, if the promisee was unaware.

7. Under Section 65, if a party has already received an advantage under an agreement that later becomes void, that party must:

   • Keep the advantage with no obligation
   • Restore the advantage or compensate the other party for it (correct answer)
   • Pay a penalty to the government
   • Forfeit all future contractual rights

   Explanation. Section 65 requires a party who has received an advantage under a now-void agreement to restore it or compensate the other party.

8. Which of these is NOT a recognised ground of frustration?

   • Destruction of the subject matter
   • A change in law making performance illegal
   • A party simply finding the contract less profitable than expected (correct answer)
   • Death or incapacity in a personal-service contract

   Explanation. Reduced profitability or mere commercial hardship is not a recognised ground of frustration — courts have consistently rejected this as insufficient (Alopi Parshad).

9. A contracts to take in cargo for B at a foreign port. A's Government declares war on that country. The contract:

   • Remains valid
   • Becomes void when war is declared (correct answer)
   • Is voidable at B's option
   • Is void from the start

   Explanation. Section 56, Illustration (d): the contract becomes void when war is declared.

10. In Energy Watchdog v. CERC (2017), the Supreme Court held that a rise in coal price was:

    • Frustration under Section 56
    • Neither frustration nor force majeure (correct answer)
    • Force majeure only
    • Change in law

    Explanation. A rise in coal price is neither frustration nor force majeure (paras 40, 45).