When does the doctrine of frustration apply to contracts?

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The Doctrine of Frustration Applies When Contractual Performance Becomes Impossible Due to Unforeseen Circumstances

The doctrine of frustration applies to contracts when an unforeseen change in circumstances after the contract's execution renders performance legally or physically impossible. This principle is codified under section 57(2) of the Contracts Act 1950, which stipulates that such frustrated contracts are terminated. It is important to note that a contract is not considered frustrated simply because performance becomes more difficult or expensive.
Conditions for Frustration of Contract

For a contract to be deemed frustrated, the circumstances must fundamentally alter the nature of the contractual obligation. This occurs when, without the fault of either party, a contractual obligation becomes incapable of being performed. Alternatively, frustration can occur if the unforeseen circumstances result in a contract that is radically different from the one originally intended by the parties.
Distinction from Difficulty or Onerous Performance

Courts generally aim to uphold contracts, meaning the threshold for establishing frustration is high. A contract will not be frustrated merely because performing its obligations becomes more difficult or financially burdensome than initially anticipated. The change in circumstances must be so profound that it makes performance impossible in a legal or physical sense, rather than just less desirable.
Partial Frustration and Potential Outcomes

In certain situations, a contract may experience partial frustration. This can happen if a portion of the subject matter of the contract ceases to exist, but the contract is not entirely impossible to perform. In such cases, a court has the discretion to direct specific performance of the remaining obligations or award compensation for any losses incurred.

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When does the doctrine of frustration apply to contracts?

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