Contract Law

Ganga Saran v. Firm Ram Charan Ram Gopal

AIR 1952 SC 9

Facts

The respondent firm agreed to deliver 61 bales of cloth to Ganga Saran by a specified date.
The agreement referred to cloth manufactured by Victoria Mills.
It stated that the respondents would supply the goods as they received them from the Mills.
The respondents failed to deliver the full quantity.
They argued that Victoria Mills had not supplied enough cloth to them.
According to them, their own obligation was conditional upon receipt of the cloth from the Mills.
They alternatively claimed that the contract had become impossible or frustrated because the Mills failed to supply the goods.

Whether receipt of cloth from Victoria Mills was a contingency upon which the respondents’ obligation depended.
Whether the failure of the Mills to supply cloth frustrated the contract.

Courts must primarily apply Sections 32 and 56 of the Indian Contract Act when examining contingent contracts and frustration.
Section 32 applies where the contract itself makes performance conditional upon a specified uncertain event.
Section 56 applies where a contract, not framed around such a condition, later becomes impossible or unlawful.
Frustration cannot be invoked where:
the alleged impossibility arose from the promisor’s own default;
the promisor merely relied on a particular supplier;
performance remained legally and physically possible from another source.
Commercial difficulty or inconvenience is not impossibility.

The Supreme Court interpreted the agreement as a whole.
The reference to Victoria Mills described the expected source or manner of supply.
It did not clearly state that the respondents would be completely free from liability if the Mills failed to supply them.
The respondents had undertaken an obligation to deliver 61 bales by the specified date.
They could not transform that obligation into a purely conditional promise without clear contractual wording.
The failure of one particular supplier did not make cloth unavailable in an absolute sense.
The respondents had assumed the commercial risk associated with sourcing the goods.
They could not rely on their arrangement with the Mills to defeat the buyer’s contractual right.
The Court also observed that frustration cannot arise from the promisor’s own failure to make adequate arrangements.
The case was therefore not one in which the subject matter was destroyed or performance became unlawful.
At most, the respondents experienced supply difficulty.
That did not discharge the contract.

The Supreme Court held that the respondents remained liable for non-delivery.
Receipt from Victoria Mills was not a condition that completely excused performance.
The contract was not frustrated merely because the expected supplier failed to deliver.
Use this case for: failure of a chosen supplier does not frustrate a contract where performance remains possible and the risk was assumed by the promisor. (Indian Kanoon)