Discharge of Contract by Impossibility
If the performance of a contract is impossible, the contract is discharged. This is because the parties cannot perform their respective obligations.
Types of Impossibility of Performance
The impossibility of performance may be of two types namely,
- Impossibility at the time of agreement.
- Impossibility arising subsequent to the formation of contract.
1. Impossibility at the Time of Agreement: It exists at the time of formation of a contract. It makes the contract void ab initio i.e., void from the beginning. Thus, such a contract does not create any rights and obligations on the contracting parties.
The existence of impossibility at the time of formation of contract may be-
- Unknown to both the parties, and
- Known to both the parties.
a. Impossibility Unknown to both the Parties: Where the impossibility is unknown to both the parties, the contract becomes void when the impossibility is discovered.
b. Impossibility Known to both the Parties: When the impossibility of performance is known to both the parties, the agreement is void ab initio. It does not create any rights and obligations on the contracting parties.
2. Impossibility arising Subsequent to the Formation of Contract or Doctrine of Frustration: It is the impossibility, which arises subsequent to the formation of the contract. It is also known as post-contractual or supervening impossibility. Such impossibility makes the contract void and the parties are discharged from performing the contract further. Thus the contract is discharged.