Alopi Parshad & Sons Ltd vs Union of India Case interpreted Section 56 of Indian Contract Act 1872 differently, where it held that unless the contract becomes impossible or unlawful, no one can take the defence of the doctrine of frustration of contract. Merely because the contract became difficult to perform can’t be included in the doctrine of frustration.

BENCH:

• SHAH, J.C.
• DAS, S.K.
• WANCHOO, K.N.

RELEVANT PROVISIONS:

Indian Contract Act 1872: Section 56

FACTS:

• Union of India recruited the plaintiffs in order to provide ghee to the army personnel in return or consideration as per the contract.
• After three years past the beginning of World War II, the government in the matter of increasing demand of ghee varied the Genuine Contract by mutual consent under which the Original price consideration was substituted by decreased price.
• A year later, plaintiffs demanded sale of goods to be intensified in the views of rising flow of the obligations followed by an assurance by the government that it “might be entertained”.
• Plaintiffs kept on the supply but the “assurance” was never considered.

ISSUES:

1. If the original contract was supposed to be imposed regarding price as discussed then or in an account of the mutual variation by parties, consideration paid by the government as per the substituted price was genuine and subsisting?

• If the contract had become preposterous to act in view of rising onerous supply of commitment by the plaintiffs never observed by them at the time of entrance into it?

• Whether the contractor must set the commitment of the government to pay the sale price on in view of uncontrollable circumstances that led to change to onerous supply of sale by plaintiffs, claim for quantum meriut be considered?

RATIO DECIDENDI:

A party is not absolved from liability to perform his/her part of the contract merely because performing the contract has become onerous, i.e. difficult, and needs a lot of effort to perform the contract.

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DECISION:

• In the matter of M/s Alopi Prashad & Sons Ltd vs UOI, 1960 the court held that when an agreement is varied mutually (S.62) then commitments under the original/genuine contract thereof becomes void for both parties.
• In Alopi Prasad vs UOI case, the effects of mutual variation in the original contract regarding the price of goods discharged were that it now enclosed the government to pay the agreed decreased price and not the price which was laid down earlier in the original contract.
• Though plaintiffs incurred losses, they received the consideration as mentioned in the varied agreement; hence, no action for additional payment is held valid.
• Besides that the argument of the plaintiffs regarding the assurances by the government, latter was estoppel to go back on it, could not hold valid for vague assurances do not alter the contract and neither can be invoked to have any action regarding promissory estoppel for it was never intended to be lawfully binding.
• S.56 (Impossibility to perform): If a consideration of the terms of the contract, regarding the situations in which it was clarified that parties never agreed to be bound in a distinct scenario now unexpectedly aroused, the contract operates not because it is just and reasonable to fulfill the terms but because on its genuine construction; it does not hold applicable in that situation.
• There is nothing in the Indian Law which justifies that variation in circumstances ‘wholly outside the contemplation of the parties’ from the time of drafting the contract will justify a Court to acquit a party from express terms thereof.
• A contract is not irritating just because of varying situations. Hence, instead of ‘intention of the parties, as rational men’, focusing on ‘correct interpretation of the contract.’

INDIAN CONTRACT ACT, 1872 (Bare Act) (Latest Edition)

RELEVANCE TODAY or REPEALED:

In this matter, it was held that Quantum Meriut is a valid compensation granted on the implication of a contract to reimburse, and assuming can not replace an explicit condition governing the relationship between the parties under the contract that such condition isn’t sensible. When work is completed following the terms of the contract, if it fixed reimbursement in accordance, quantum meriut restitution claim doesn’t lie.

As in the present case, both the parties fully performed the contract, as per the explicit terms of the contract, no dispute regarding any additional or justified payment for any commitment burdened can be unjust and the plaintiff’s appeal is dismissed.