No Frustration Of Contract Due To Mere Commercial Hardships Caused By Pandemic: Kerala High Court

The Kerala High Court has recently ruled that the occurrence of a commercial difficulty or hardship to perform a contract is not an excuse to back out from contractual obligations which the parties had agreed to in the first place.  

A Division Bench of Justice Anil K. Narendran and Justice P.G. Ajithkumar while dismissing a petition, observed that merely because the pandemic has made the performance of a contract inconvenient, it was not a good reason for a party to retract from their obligations. The doctrine of frustration as per Section 56 of the Contract Act will not apply merely because of commercial hardships.

"Frustration of contract happens when the execution of contract is wholly impossible. The supervening events followed by the pandemic have not made the execution of contract wholly impossible, though it might have made the performance of contract more onerous and difficult. Occurrence of commercial difficulty, inconvenience or hardship in performance of the conditions agreed to in the contract can provide no justification to wriggle out of the contractual obligations which the parties had accepted with open eyes."

The petitioner was the successful bidder in the auction conducted by the Board for the sale of pooja items and flower garlands inside Valliyamkavu Devi Temple from 01.04.2021 to 31.03.2022. However, he failed to deposit some of the instalments required to seal the deal.

So the Administrative Officer was directed not to permit the petitioner to sell near the Temple without remitting the balance instalments.

Accordingly, the petitioner moved the Court through Senior Advocate Abraham Vakkanal seeking a writ of mandamus commanding the respondents not to interfere with the functioning of the petitioner's stall in the premises of the Temple.

Standing Counsel for the Board Advocate G. Biju, Advocates D. Ajithkumar and K. Satheeshkumar Nedumangad appearing for the respondents submitted that after finalisation of the tender proceedings, the petitioner was to execute a formal agreement, which he deliberately evaded from.

According to them, the petitioner was merely trying to evade from performing his part of the contract by not executing the agreements. Taking advantage of such breach, the petitioner was now contending that he is not liable to make payment of the balance amount .

The Court noted that by submitting his bids, the petitioner had made his offer and it was accepted by the Travancore Devaswom Board. Therefore, the contract between the petitioner and the Board was completed when the petitioner remitted the first instalment of the bid amount.

Further, it was held that the petitioner cannot be permitted to beat a retreat to his convenience whenever unfavorable turn of events take place.

Reliance was placed on the decision of Suresan Nair T.S. & Ors v. Travancore Devaswom Board & Ors [2021 (6) KHC 837] where it was held that the prescription for the execution of a formal agreement was only to embody the terms and conditions of the contract already concluded by the acceptance of the bid. 

It was also noted that the absence of a formal contract cannot lead to an inference that there is no concluded contract when the contract is completed by the acceptance of bid and deposit of the requisite portion of bid amount by the petitioners

With the said finding, the petition was dismissed.

Case Title: Suneesh K.S. v. Travancore Devaswom Board & Ors