Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Discharge of Contract by Impossibility and Supervening Events

Updated 10 October 2026 · Fact-checked

Under Section 56 of the Indian Contract Act, 1872, an agreement to do an impossible act is void. A contract that becomes impossible or unlawful to perform after it is made, through no fault of the parties, also becomes void. The parties are then freed from their promises, and money received must be returned.

Understand Discharge by Impossibility and Supervening Events

Normally, if you promise something, you must do it. Hard luck or higher cost is not an excuse. Section 56 gives a narrow exception: the law excuses you when performance becomes truly impossible.

There are two situations. In initial impossibility, the act is impossible at the time the agreement is made. For example, A agrees to discover treasure by magic. The agreement is void from the start.

Para 3 of Section 56 adds a separate compensation rule. It applies where the impossibility or unlawfulness already exists at the time of the promise. If the promisor knew, or with reasonable diligence could have known, of it and the promisee did not, the promisor must compensate the promisee for loss sustained through non-performance.

In subsequent (supervening) impossibility, the contract is valid when made. Later, an event makes performance impossible or unlawful, and neither party caused it. The contract becomes void at the moment the act becomes impossible. This is also called the doctrine of frustration.

The English case Taylor v Caldwell is the classic example: a music hall was hired for concerts and was destroyed by fire before the events. The contract was held discharged because the hall was essential to it. In India, Satyabrata Ghose v Mugneeram Bangur & Co. is the leading Supreme Court case. It held that the word impossible in Section 56 is used in a practical sense, not only a literal one. If the very object of the contract is defeated by an unforeseen event, the contract is frustrated.

Important limits: mere difficulty, increased cost, or delay is not impossibility. A contract is not frustrated if the event was foreseen, was caused by the promisor's own act, or if the contract itself provided for it.

Key formulas to remember

Agreement to do an impossible act (Section 56, para 1): Agreement to do an act impossible in itself = void; Void from the beginning. It is not a valid contract at all. Compensation under para 3 is a separate rule that can apply alongside it, as explained below.
Subsequent impossibility (Section 56, para 2): Contract valid when made + act later becomes impossible or unlawful (event not caused by promisor) = contract becomes void; Void when the act becomes impossible or unlawful, not from the start.
Promise known to be impossible or unlawful (Section 56, para 3): Impossibility or unlawfulness exists at the time of the promise + promisor knew (or with reasonable diligence might have known) + promisee did not know = promisor compensates promisee for loss through non-performance; This applies where the act was already impossible or unlawful when the promise was made. The promisor must compensate the promisee for the loss caused by non-performance. Do not mix it up with para 1: para 1 makes the agreement void, while para 3 gives the uninformed promisee a right to compensation.
Restitution on frustration (Section 65): Benefit received under a void agreement or contract that becomes void must be restored or compensated for; Advance money must generally be returned.

How to solve Discharge by Impossibility and Supervening Events questions

Use this order for any scenario question on impossibility.

1Read the facts and find the promise that is said to be impossible.
2Ask when the impossibility arose: before or at the time of the agreement (initial) or after the contract was made (supervening).
3If initial, the agreement is void under para 1. Then check separately whether the para 3 compensation rule applies, since it covers impossibility existing at the time of the promise: did the promisor promise an act he knew, or with reasonable diligence might have known, to be impossible or unlawful, while the promisee did not know? If so, compensation for loss through non-performance may be due.
4If supervening, check that the event was unforeseen and not caused by either party's act or default.
5Check that the very object of the contract is defeated. Higher cost, delay or inconvenience is not enough.
6Check whether the contract itself provided for the event. If it did, the contract terms apply.
7State the effect: the contract becomes void, parties are released, and benefits received must be restored.

Quickest way: Three-question filter

When to use it: Use it for MCQs that describe an event after a contract is made and ask whether the contract is discharged.

Question 1: Did the event happen after the contract was made? If it existed at the start, think initial impossibility.
Question 2: Is performance impossible or unlawful, or just costlier or harder? Costlier means the contract still stands.
Question 3: Was it the promisor's own fault, or was it foreseen or provided for? If yes, there is no discharge.
If all three answers point to a genuine unforeseen event, pick the option saying the contract becomes void.

Common mistakes in Discharge by Impossibility and Supervening Events

Treating a rise in cost or price as impossibility.
Students feel the contract has become unfair, so they assume the law will excuse it.
Fix: Remember that hardship, loss or inconvenience does not discharge a contract. Only real impossibility or unlawfulness does.
Saying a supervening impossibility makes the contract void from the start.
Students mix it up with initial impossibility.
Fix: Initial impossibility is void from the beginning. Supervening impossibility makes a valid contract void only from the time the event occurs.
Applying Section 56 when the promisor caused the impossibility.
Students focus on the event and ignore who caused it.
Fix: Always check fault. Self-induced impossibility does not excuse the promisor, who is liable for breach.
Forgetting to return advance money after frustration.
Students stop at saying the contract is void.
Fix: Add the effect: the parties are released and benefits received, such as advance payments, must be restored under Section 65.
Assuming a contract is frustrated whenever a war or strike happens.
Students remember such events as common examples.
Fix: Ask whether the event actually defeats the object of the contract. If performance is still possible, the contract continues.

Worked examples

Example 1

Meera books a hall in Pune for her wedding reception on 10 March and pays ₹50,000 as advance. On 5 March, the hall is destroyed by a fire that was not caused by anyone's fault. Is the contract discharged? What happens to the advance?

Show the solution

The contract was valid when made, so this is subsequent impossibility.
The fire occurred after the contract, and no party caused it.
The hall is essential to the contract, so performance becomes impossible. This is like Taylor v Caldwell.
Under Section 56, the contract becomes void when the hall is destroyed.
Under Section 65, the hall owner must return the advance.

Answer: Yes. The contract is discharged as it becomes void under Section 56, and the owner must return the ₹50,000 advance.

Example 2

Ravi agrees to sell 100 bags of rice to Sunil at ₹2,000 per bag. Before delivery, the market price rises sharply, so Ravi finds the contract unprofitable. Ravi says performance is impossible. Is he right?

Show the solution

The contract was valid and the rice can still be delivered.
The only change is that the contract has become less profitable for Ravi.
Higher price or hardship is not impossibility under Section 56.
No event has defeated the object of the contract.

Answer: Ravi is not right. The contract is not discharged, and if he refuses to deliver, he commits a breach and is liable for damages.

Exam tips

Most MCQs test one point: is the event impossibility or only difficulty? Eliminate options that excuse a party for extra cost.
Remember the timing: initial impossibility means void ab initio, and supervening impossibility means void when the event occurs.
Link names to ideas: Taylor v Caldwell for destruction of subject matter, and Satyabrata Ghose for the practical meaning of impossible under Section 56.
Watch for options saying the contract becomes voidable. Frustration makes it void, not voidable.

Practice questions from Discharge of Contracts

Discharge by Impossibility and Supervening Events: frequently asked questions

What is the difference between initial and subsequent impossibility?

In initial impossibility, the act is impossible when the agreement is made, so the agreement is void from the start. In subsequent impossibility, the contract is valid when made, and it becomes void only when a later event makes performance impossible or unlawful.

What did Taylor v Caldwell decide?

A music hall was hired for concerts but burned down before the events, without fault of either party. The court held that both parties were released because the continued existence of the hall was essential to the contract. It is the origin of the doctrine of frustration.

Why is Satyabrata Ghose v Mugneeram Bangur important?

The Supreme Court held that the word impossible in Section 56 is to be understood in a practical sense, not only as literal impossibility. If an unforeseen event destroys the very basis of the contract, it becomes void under Section 56.

Does increased cost of performance discharge a contract?

No. A contract is not discharged merely because performance becomes more expensive, difficult or less profitable. The promisor must still perform or pay damages for breach.