Q. ‘X’ and ‘Y’ entered into a contract by which ‘Y’ agrees to let ‘X’ have the use of a Music Hall belonging to ‘Y’ for the purpose of giving a concert. ‘X’ pays Rs. 10,000 as an advance and agrees to pay Rs. 10,000 more after the concert. After making this contract and a day before the concert, the Hall is destroyed by fire without the fault of either party. ‘X’ claims from ‘Y’ the refund of the advance and also damages for not holding the concert. ‘Y’ on the other hand claims the balance of Rs. 10,000. How will you decide this case?
Civil Services (I.A.S.) Exam. 1974.
Ans: ‘X’ is entitled to refund of advance but not entitled to damages AND ‘Y’ is not entitled to balance of Rs. 10,000—Section 56 (para 2) AND Section 65.
Reasons: Second paragraph of Section 56 which is known as doctrine of ‘Frustration’ provides that when a contract is possible to perform while it is made but becomes impossible because of subsequent event not in control of parties, the contract becomes void and in such cases parties are discharged from their rights and liabilities regarding contract.
Further relevant part of Section 65 on which this problem is based provides that when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it.
In the given problem the Music Hall is destroyed by fire without the fault of either party. Thus, according to second para of Section 56 contract between ‘X’ and ‘Y’ becomes void and ‘X’ and ‘Y’ are discharged from their rights and liabilities.
Further according to relevant part of Section 65 mentioned above ‘X’ is entitled to refund of Rs. 10,000 given to ‘Y’ as advance but not entitled to claim damages for not holding the concert and ‘Y’ cannot claim the balance money Rs. 10,000 from ‘X’.
Source: Kishor Prasad