A contract is not frustrated merely because the circumstances in which it was made are altered. The courts have no general power to absolve a party from the performance of his part of the contract merely because its performance has become onerous on account of an unforeseen turn of events.

Headnote:
CONTRACT - Frustration - Impossibility of performance - Change in Government policy - Whether contract discharged - Arbitration clause - Whether survives frustration.
Fact of the Case:

The appellants agreed to purchase and the respondents agreed to sell two thousand bales of Saidpur N. C. Cuttings. The contract provided that shipment or rail despatch from agencies was to be made during August and/or September and/or October and/or November, 1958. As the import of Pakistan jute required an import licence the contract provided that if the buyers failed to provide the sellers with the import licence within November 1958 then the period of shipment would be upto December, 1958 and the price mentioned in the contract would be increased by 50 nP. If buyers fail to provide licence by December 1958 then the contract would be settled at the market price prevailing on January 2, 1959 for goods of January and February 1959 shipment. The appellants applied for an import licence but it was refused by the Jute Commissioner on the ground that they had sufficient stock to carry on their factory for some months more. The appellants thereafter filed an application to set aside the award passed by the Arbitration Tribunal.
Finding of the Court:

The court held that the contract could not be said to have been discharged by frustration, that the arbitration clause was wide enough to include the dispute whether there was frustration or not, and that the arbitrators were competent to adjudicate such a dispute. The court also found in answer to the appellants' allegation that the arbitrators were guilty of legal misconduct, that the appellants had failed to prove any such legal misconduct.
Issues: 1. Whether the contract was discharged by frustration due to a change in Government policy? 2. Whether the arbitration clause survived the frustration of the contract?
Ratio Decidendi: 1. The court held that the contract was not discharged by frustration as the appellants had taken upon themselves the absolute burden of furnishing the import licence latest by the end of December 1958 and had stipulated that in default they would pay damages on the basis of price prevailing of January 2, 1959. 2. The court held that even if the contract was discharged by frustration, the arbitration clause would still survive as there would be disputes and differences between the parties as to whether (i) there was frustration and (ii) even if so, the consequences thereof.
Final Decision: The appeal was dismissed with costs.

Judgement

SHELAT; J. :- This appeal by special leave is directed against the judgment and order of the High Court of Calcutta rejecting the application by the appellants for setting aside the award in Award Case No. 70 of 1959 passed by the Arbitration Tribunal constituted by the Bengal Chamber of Commerce.

2. The said arbitration arose out of a contract dated July 7, 1958 whereunder the appellants agreed to purchase and the respondents agreed to sell two thousand bales of Saidpur N. C. Cuttings. The contract was in the standard form prescribed by the Indian Jute Mills Association. It provided that shipment or rail despatch from agencies was to be made during August and/or September and/or October and/or November, 1958. As the import of Pakistan jute required an import licence the contract provided :-

"Buyers to provide the sellers with the letters of authority and sellers to open letters of credit. If buyers fail to provide the sel1ers with import licence within November 1958 then the period of shipment would be upto December, 1958 and the price mentioned in the contract would be increased by 50 nP. If buyers fail to provide licence by December 1958 then the contract would be settled at the market price prevailing on January 2, 1959 for goods of January and February 1959 shipment."

One of the printed terms provided :-

"Buyers shall not however be held responsible for delay in. delivering letters if authority or opening letters of credit where such delay is directly or indirectly caused by or due to act of God, war, mobilisation, de-mobilisation, breaking off trade relations between Governments, requisition by or interference from Government or force majeure. In any of the aforesaid circumstances whereby buyers are prevented from delivering letters of authority or opening letters of credit within one month from the date of the contract, there may be a further extension of time (the delivery period to be extended accordingly) by mutual agreement between the buyers and the sellers otherwise the contract shall be deemed to be cancelled and sellers shall have no claim whatsoever against the buyers.

The contract also contained an arbitration clause whereunder all disputes and differences and/or claims arising out of and/or concerning and/or in connection with and/ or in consequence of or relating to the contract whether the contract has been terminated or purported to be terminated or completed were to be referred to the arbitration of the Bengal Chamber of Commerce under their rules for the time being in force. On August 8, 1958 the appellants applied to the Jute Commissioner Calcutta, for an import licence. On August 19, 1958 the Administrative Officer refused to certify the licence on the ground that the appellants had sufficient stock to carry on their factory for some months more. On August 26, 1958 the Licensing Authority refused to issue the licence. On November 29, 1958 the appellants requested the Jute Commissioner to certify the issue of a licence stating that by that time their stock had been considerably reduced. On December 11, 1958 the Jute Commissioner refused to issue the licence and asked the appellants to meet their requirements from purchase of Indian jute. The respondents thereafter by their attorney s letter claimed damages from the appellants on the ground that the appellants had failed to furnish the licence provided by the contract. The appellants disclaimed any liability under the said contract and thereupon the disputes between the parties were referred to the said Tribunal. The Tribunal passed an award holding that the appellants failed to carry out their part of the contract and were liable to pay damages assessed at Rs. 34,000 and interest therein. Thereupon the appellants filed the said application to set aside the award.

3. In their said application, the appellants raised the following contentions; (a) that they could not be held to have committed breach of the contract as they had done all that could be exp

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