V.L.Narasu, Narasu Pictures Circuit v P.S.

V Iyer and others

Madras High Court

Facts: the def who owned a cinema house called ‘paragon talkies’ entered into a contract with
the producer of a film ‘rukmangadan’ for exhibiting this picture. It was running successfully for
about 2 months after which heavy rains led to a portion of the rear wall of the talky to collapse
and be certified unfit for the purpose of performances by the police and corp. Commissioner who
further advised that the theatre be pulled down and their necessary licences were also cancelled.
The def wrote to plaintiff that they would not be able to perform their part because of
impossibility. Plaintiffs sued for damages from breach, stating the performance to be an absolute
obl.

The court of first instance gave verdict for the plaintiffs stating breach of implied warranty and
held it to be absolute obligation and attributed neglect on part of def in maintaining premise. Def
appealed

Issues:

1. Whether the obligation was absolute thus implying breach f=of implied warranty
or whether there was discharge by frustration due to impossibility.
2. Whether there was any neglect or default on the part of def.
(Basically deals with Self induced impossibility and frustration)

Arguments:

Plaintiff:

1. Absolute obligation: the existence of the theatre was fundamental to the contract
and was thus an absolute obligation and thus it is a breach of implied warranty.
2. The impossibility was just temporary in nature and the def could have given a
declaration that contract was subsisting and could have reconstructed it earlier.
3. Self induced impossibility: Negligence or default on part of def in not maintaining
the premise properly.
 Rationale and Analysis:

 Termination in spite of positive contract due to impossibility before performance: the

duty of the court is only to interpret terms of the agr., but in certain cases where parties
while framing the agr. Had not contemplated the possibility of a disaster then the general
rule of contracts applies. It was held that where from the nature of contract and
surrounding circumstances that the parties have contracted on the basis of some
specified thing without which the contract cannot be fulfilled the contract though in
absolute terms, is to be construed as being subject to implied condition that if before
breach, performance becomes impossible without the default of either party owing
to circumstances that were not contemplated by both when the contract was made,
the parties are to be excused from further performance. Exception to this rule is if
contrary intention is inferred from the terms of the contract Eg. Contract which provides
for that specific contingency, which is not the present case.
Given the facts that the continued existence of theatre was fundamental to the
performance and this performance is discharged by impossibility because of cancellation
of licence or demolition of theatre. There was no warranty given by the defendants and it
cannot be implied. Also the argument of no frustration of contract in which performance
is continuing for indefinite period was rejected.
 Change of circumstances are permanent and not temporary as alleged: where interruption
is one of a interim character and likely to cease soon as to leave the rest of the period free
for the revival of the rights and duties of parties the contract is merely suspended by a
declaration and is not destroyed. But if the changes are sweeping they can destroy the
contact itself.
Nature of trade is imp. Element, it is well known that cinema have ephemeral existence
and lose their hold in some time, in such a case telecasting the movie in the newly
constructed theatre of 1948 would be a commercial proposition totally diff from that
which the contract contemplated. Also the new theatre was diff than the old one in
structure, earning capacity and accommodation. It has been held that where the delay
frustrated agreement as a commercial venture both parties were released. Moreover the
theatre had to obey the orders of the corporation and police directing demolition it had no
option. Thus these orders struck the very foundation of the contract and the impossibility
was not one of temporal character and entire cont. Is frustrated.
 No self induced impossibility: termination due to frustration should be without the default
or neglect of either party. A man is never entitled to take advantage of circumstances as
frustration of contract if he has bought them about himself. Self-induced frustration
involves making of deliberate choices or election on part of one party to escape from
performance. It includes positive acts against the faith of contract. Thought sec. 56 deals
with the issue of impossibility the cases of self induced frustration will be governed by
sec. 39 of the act which mentions that when one party repudiates his obligations there
under the other party has the right to treat the contract as cancelled. It should be noted
that not every act of negligence which could be traced to frustration can be held to be
default or neglect. Mere failure to perform cannot be said to be repudiation. It should be
of a character that might be fairly inferred that the promisor has no intention of
performing it and has in effect repudiated it. The conduct must be such as would amount
to repudiation within the meaning of sec. 39. The combined effect of sec. 56 and 39
would be is that frustration renders a contract void unless there has been a conduct
antecedent to the frustration amounting to repudiation and this view will be in accordance
with the judicial opinion in England as to meaning of default or neglect.
In the present case the theatre has a brief history of owners before the def, moreover the
fact that the theatre was inspected periodically and licences were renewed regularly
suggests that it was in good condition when the plaintiff bought it. Thus there is no
sufficient evidence to show that the def was aware of the defect of the building. Also no
proof of his negligence has also been established and even in case there was negligence
in not ensuring proper maintenance of the theatre, he was not actuated by any intention to
break the contract; he did nothing against the faith of the contract. Also he had no chance
of election in order to get out of the arrangement. The def before the collapse of wall
published advertisement for the next movie to be telecasted after the present one
indicating they wanted to carry out their normal business, in such circumstances it cannot
be held that they had any spite against the plaintiffs. There is no case of self induced
frustration, he can rely on frustration to put an end to contract.

Conclusion: v.l.narasu [def wins] he succeeds in relying on frustration and appeal is

allowed, and def has to pay 2000 rs damage to plaintiffs.