Law Project
Budget: ₹600 – ₹1,500 INR
Contracts I Project
A v. B
Problem 10
A signs a contract with B for the purpose of renovation of the house. The contract contains a clause that in case of any problem post renovation, the same shall be repaired at the cost of the customer. Further the contract specified clearly that the customer shall have to pay fifty percent of the cost before the commencement of the work. The work commenced on time. However due to Covid-19 lockdown, B delays the completion of the work. A gets his cousin to complete the work and refuse to pay the balance amount to B. Solve the problem scenario and give your opinion.
Table of Contents
Introduction
4
Issues
4
Arguments for Claimant ( B )
5
Arguments for Defendant ( A )
6
Judgement
7
Bibliography
8
Introduction
The Indian Contract Act of 1872 is the governing act for all contractual transactions in India.
The problem concerns Section 56 of the Indian Contract Act, where the Contract to do an act afterwards becomes impossible or unlawful. Section 73 deals with the concept of contract breach and the parties' obligation to pay for that breach. Section 55 of the Act deals with the concepts of time which is the essence of contract.
Issues
1) Whether the contract is frustrated;
2) Whether A breached the contract by hiring his cousin;
3) Whether A is obligated to pay the remaining balance to B;
4) Whether Time is the essence of the contract;
Arguments for Claimant (B)
1. A and B entered into a valid contract according to the clause mentioned in the agreement; A paid 50 per cent of the amount to B in advance, and they started the work on time. But after some time, the COVID-19 virus hit the world with its devastating effect, and as a result, the Government imposed a Lockdown. B, abiding by the Lockdown SOP made by the Government, could not carry with the work and was supposed to put a hold on the work, and B did not have any fault in the delay or discontinue the work. Hence, section 56 would apply here.
The Indian Contract Act,1872, says that if a contract becomes practically impossible to perform , contract is discharged due to supervening impossibility or illegality of the act. This doctrine applies when an unexpected event is beyond what the parties contemplate.
In Satyabrata Ghose v Mugneeram Bangur & Co, the Supreme Court held that the second paragraph enunciates the law to discharge of contract because of supervening impossibility or illegality of the act agreed to be done. Here, the word “impossible” has not been used in the sense of physical or literal impossibility. The Supreme Court holds that the law does not compel a man to do what he cannot possibly perform. There could be frustration in this case because of COVID-19; it was not possible to complete the work on time, and such interruptions could be held to frustrate the contract.
2. In this case, A, without giving any intimation to B, completed the remaining work with the help of his cousin, which is an act to terminate the contract.
In M/S Hailburton Offshore Services Inc V. Vedanta Ltd. And Anr. (2020), the Delhi high court states that irreparable, irretrievable injury or existence of special circumstances would be sufficient to put a stay on the performance of such contract. But if A waives the obligation, the same shall be communicated to B. Since A did not give any termination notice to B, which he was obligated to discharge, his failure to do so is considered a breach of contract.
3. Section 73, When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, Compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the violation of it. If there is a concluded contract between the parties, Compensation for loss or damage caused by breach of contract is maintainable. In this case, A is obligated to pay the remaining balance to B, because A and B entered into a valid contract and A breached the contract by hiring his cousin.
4. The contract between A and B did not expressly mention any time clause, and the delay did not happen at B’s fault and did not create any injury to A. Because of COVID, it was not possible to perform. That’s why; in this case, time is not of the essence of a contract.
Arguments for Defendant (A)
1. B had signed a valid contract for renovating A’s house. Therefore, B is liable or obligated to complete the work on time. But B suddenly stopped the work and did not make any prior intimation to A. A have to have the house renovated in time. For this reason, A took his cousin to complete the remaining work. COVID-19 is an extraordinary event and could not be foreseen the duration of it, and the contract seems to be void according to the Doctrine of Frustration of the Indian Contract Act. Section 56, an agreement to do an impossible act, is void. Since the contract between A and B becomes void.
2. Section 56, an agreement to do an impossible act, is void. In a void contract, neither party is obligated to discharge their promises. Section 2(j) of the Act defines a void contract as “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. A void contract means neither party can enforce the contract. Therefore, A’s Act of not intimating B and hiring his cousin to complete the remaining work is not a breach of contract. Since A did not give any termination notice to B, which he was not obligated to discharge, his failure to do so is not considered a breach of contract.
3. The contract between A and B is void because of that impossible act. B suddenly stopped the work and did not make any prior intimation. A have the necessity; that’s why he took his cousin to complete the remaining work. Now, he cannot pay B because his cousin completes the work.
4. Time is to be considered of the essence where the parties have expressly agreed to treat it as the essence of the contract, where delay operates as an injury or where the nature and necessity of the contract require it to be so construed. A needed to renovate the house on time. That’s why, in this case, time is the essence of the contract.
Judgement
1. Addressing the first issue, we should look into the case of Satyabrata Ghose v Mugneeram Bangur & Co, where the Supreme Court held that the second paragraph enunciates the law to discharge of contract because of supervening impossibility or illegality of the act agreed to be done. The COVID-like situation was temporary; therefore, the doctrine of frustration is applied until normalcy is restored. Referring to the precedent mentioned above, we can connote that the contract is frustrated, and the non-performance of B in the present contract is justified.
2. Addressing the second issue, we should look into the case of M/S Hailburton Offshore Services Inc V. Vedanta Ltd. And Anr. (2020), where the Delhi high court states that irreparable, irretrievable injury or existence of special circumstances would be sufficient enough to put a stay on the performance of such contract. But if customer A waive the obligation, the same shall be communicated to the service providers. In the present case, A has not given any notice to B. Now, A is liable for for breach of contract.
3. Addressing the third issue, we should look into the interpretation of section 73, which states that the person who breached the contract would be liable to pay compensation. Here, A is obligated to pay the remaining balance to B because A and B entered into a valid contract, and A breached the contract by hiring his cousin.
4. Addressing the Fourth issue, the court held that in this case, Time is of the Essence of the contract because of Covid, the contract is now being frustrated. A needed to renovate the house on time the nature and necessity of the contract require it to be done.
Bibliography
BOOKS / SECONDARY SOURCES
1. Textbook on Law of Contract & Specific Relief by Avatar Singh
2. Pollock And Mulla, The Indian Contract And Specific Relief Act
STATUTES / PRIMARY SOURCES
1. Indian Contract Act, 1872
CASES
1. Satyabrata Ghose vs Mugneeram Bangur & Co., And Anr.
2. M/S Hailburton Offshore Services Inc V. Vedanta Ltd. And Anr. (2020)
A v. B
Problem 10
A signs a contract with B for the purpose of renovation of the house. The contract contains a clause that in case of any problem post renovation, the same shall be repaired at the cost of the customer. Further the contract specified clearly that the customer shall have to pay fifty percent of the cost before the commencement of the work. The work commenced on time. However due to Covid-19 lockdown, B delays the completion of the work. A gets his cousin to complete the work and refuse to pay the balance amount to B. Solve the problem scenario and give your opinion.
Table of Contents
Introduction
4
Issues
4
Arguments for Claimant ( B )
5
Arguments for Defendant ( A )
6
Judgement
7
Bibliography
8
Introduction
The Indian Contract Act of 1872 is the governing act for all contractual transactions in India.
The problem concerns Section 56 of the Indian Contract Act, where the Contract to do an act afterwards becomes impossible or unlawful. Section 73 deals with the concept of contract breach and the parties' obligation to pay for that breach. Section 55 of the Act deals with the concepts of time which is the essence of contract.
Issues
1) Whether the contract is frustrated;
2) Whether A breached the contract by hiring his cousin;
3) Whether A is obligated to pay the remaining balance to B;
4) Whether Time is the essence of the contract;
Arguments for Claimant (B)
1. A and B entered into a valid contract according to the clause mentioned in the agreement; A paid 50 per cent of the amount to B in advance, and they started the work on time. But after some time, the COVID-19 virus hit the world with its devastating effect, and as a result, the Government imposed a Lockdown. B, abiding by the Lockdown SOP made by the Government, could not carry with the work and was supposed to put a hold on the work, and B did not have any fault in the delay or discontinue the work. Hence, section 56 would apply here.
The Indian Contract Act,1872, says that if a contract becomes practically impossible to perform , contract is discharged due to supervening impossibility or illegality of the act. This doctrine applies when an unexpected event is beyond what the parties contemplate.
In Satyabrata Ghose v Mugneeram Bangur & Co, the Supreme Court held that the second paragraph enunciates the law to discharge of contract because of supervening impossibility or illegality of the act agreed to be done. Here, the word “impossible” has not been used in the sense of physical or literal impossibility. The Supreme Court holds that the law does not compel a man to do what he cannot possibly perform. There could be frustration in this case because of COVID-19; it was not possible to complete the work on time, and such interruptions could be held to frustrate the contract.
2. In this case, A, without giving any intimation to B, completed the remaining work with the help of his cousin, which is an act to terminate the contract.
In M/S Hailburton Offshore Services Inc V. Vedanta Ltd. And Anr. (2020), the Delhi high court states that irreparable, irretrievable injury or existence of special circumstances would be sufficient to put a stay on the performance of such contract. But if A waives the obligation, the same shall be communicated to B. Since A did not give any termination notice to B, which he was obligated to discharge, his failure to do so is considered a breach of contract.
3. Section 73, When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, Compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the violation of it. If there is a concluded contract between the parties, Compensation for loss or damage caused by breach of contract is maintainable. In this case, A is obligated to pay the remaining balance to B, because A and B entered into a valid contract and A breached the contract by hiring his cousin.
4. The contract between A and B did not expressly mention any time clause, and the delay did not happen at B’s fault and did not create any injury to A. Because of COVID, it was not possible to perform. That’s why; in this case, time is not of the essence of a contract.
Arguments for Defendant (A)
1. B had signed a valid contract for renovating A’s house. Therefore, B is liable or obligated to complete the work on time. But B suddenly stopped the work and did not make any prior intimation to A. A have to have the house renovated in time. For this reason, A took his cousin to complete the remaining work. COVID-19 is an extraordinary event and could not be foreseen the duration of it, and the contract seems to be void according to the Doctrine of Frustration of the Indian Contract Act. Section 56, an agreement to do an impossible act, is void. Since the contract between A and B becomes void.
2. Section 56, an agreement to do an impossible act, is void. In a void contract, neither party is obligated to discharge their promises. Section 2(j) of the Act defines a void contract as “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. A void contract means neither party can enforce the contract. Therefore, A’s Act of not intimating B and hiring his cousin to complete the remaining work is not a breach of contract. Since A did not give any termination notice to B, which he was not obligated to discharge, his failure to do so is not considered a breach of contract.
3. The contract between A and B is void because of that impossible act. B suddenly stopped the work and did not make any prior intimation. A have the necessity; that’s why he took his cousin to complete the remaining work. Now, he cannot pay B because his cousin completes the work.
4. Time is to be considered of the essence where the parties have expressly agreed to treat it as the essence of the contract, where delay operates as an injury or where the nature and necessity of the contract require it to be so construed. A needed to renovate the house on time. That’s why, in this case, time is the essence of the contract.
Judgement
1. Addressing the first issue, we should look into the case of Satyabrata Ghose v Mugneeram Bangur & Co, where the Supreme Court held that the second paragraph enunciates the law to discharge of contract because of supervening impossibility or illegality of the act agreed to be done. The COVID-like situation was temporary; therefore, the doctrine of frustration is applied until normalcy is restored. Referring to the precedent mentioned above, we can connote that the contract is frustrated, and the non-performance of B in the present contract is justified.
2. Addressing the second issue, we should look into the case of M/S Hailburton Offshore Services Inc V. Vedanta Ltd. And Anr. (2020), where the Delhi high court states that irreparable, irretrievable injury or existence of special circumstances would be sufficient enough to put a stay on the performance of such contract. But if customer A waive the obligation, the same shall be communicated to the service providers. In the present case, A has not given any notice to B. Now, A is liable for for breach of contract.
3. Addressing the third issue, we should look into the interpretation of section 73, which states that the person who breached the contract would be liable to pay compensation. Here, A is obligated to pay the remaining balance to B because A and B entered into a valid contract, and A breached the contract by hiring his cousin.
4. Addressing the Fourth issue, the court held that in this case, Time is of the Essence of the contract because of Covid, the contract is now being frustrated. A needed to renovate the house on time the nature and necessity of the contract require it to be done.
Bibliography
BOOKS / SECONDARY SOURCES
1. Textbook on Law of Contract & Specific Relief by Avatar Singh
2. Pollock And Mulla, The Indian Contract And Specific Relief Act
STATUTES / PRIMARY SOURCES
1. Indian Contract Act, 1872
CASES
1. Satyabrata Ghose vs Mugneeram Bangur & Co., And Anr.
2. M/S Hailburton Offshore Services Inc V. Vedanta Ltd. And Anr. (2020)