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Petitioner: Abdul Waheed VS Respondent: Additional District Judge etc
Court Name: Lahore High Court Judge(s): Tariq Saleem Sheikh Title: Abdul Waheed vs Additional District Judge etc Case No.: Writ Petition No. 1854 of 2021 Date of Judgment:2021-04-19 Reported As: PLD 2021 Lahore 453, 2021 LHC 901 Result: Petition dismissed
JUDGMENT
JUDGMENT Tariq Saleem Sheikh, J. This petition is directed against judgment dated 11.1.2021 passed by the Additional District Judge, Multan, whereby he reversed the order of the Civil Judge and dismissed the Petitioner's application for interim injunction. Facts 2. On 20.7.2019 Respondent No.3 awar ded a contract to the Petitioner for running the Sarai (hostelry) at the Nishtar Hospital, Multan, for one year (23.7.2019 to 22.7.2020) in consideration of a sum of Rs. 6,325,200/- which included the bid amount of Rs. 5,020,000/-, 16% PST (Rs. 803,200/-) and 10% Income Tax (Rs. 502,000/-). As per clause 2 of the agreement, the Petitioner was required to pay the entire money in advance but he deposited only the bid amount and started business. The taxes remained unpaid. A couple of months later COVID-19 pandemic gripped the world and also afflicted Pakistan. In March, 2020, Government of the Punjab took notice of the alarming increase in the coronavirus cases and ordered lockdown to contain it. The outdoor as well as indoor units of the hospitals all over the province were also closed. The Petitioner , vide applications dated 25.3.2020, 30.3.2020 and 3.4.2020, requested Respondent No.3 for permission to close the hostelry but he did not respond. As a result, he had to keep it open although there were very few customers. He incurred heav y losses and asked Respondent No.3 to compensate him either by remitting the "rent" for the lockdown period or extending his contract for a proportionate time. Respondent No.3 constituted a committee to look into the matter and on its recommendation declined his request. Nevertheless, he entered into a new arrangement with him commencing from 21.7.2020. The Petitioner instituted a civil suit for the afore said relief and alongwith the plaint filed an application seeking temporary injunction against recovery of the outstanding utility bills and an order deferring the payment of advance payable under the new contract. The Civil Court directed him to clear the utility bills and, subject to deposit of 50% of the consideration of the new contract, stayed recovery of all other monies. Respondent No.3 appealed. The Additional
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District Judge accepted it vide impugned judgment dated 11.1.2021 and set aside the Civil Court's order . Hence, this petition. Submissions of the learned counsel 3. Learned counsel for the Petitioner contended that the COVID-19 pandemic was an Act of God and the Petitioner was entitled to compensation for the lockdown period. The Additional District Judge had acted perversely while withdrawing the interim relief granted to him by the Civil Court. 4. Learned counsel for Respondent No.3 vehemently opposed this petition. He contended that the relationship between the parties was governed by contract dated 20.7.2019. It had no provision for waiver of rent which the Petitioner could enforce against Respondent No.3. The Civil Court's order was based on misapprehension of law and facts and the Additional District Judge had rightly set it aside. Law and jurisprudence 5. Roman Law and Common Law were rigid in respect of performance of contracts. They considered them absolute and required the parties to abide by them in all eventualities essentially on the principle of pacta sunt servanda ("agreements must be kept"). However , Taylor v. Caldwell, [1863] 3 B & S 826, evolved the theory of "implied condition" or "implied term". In that case the defendants had rented their opera house to the plaintif fs for concerts which was destroyed by fire. Blackburn J. held that "in contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance." The doctrine of frustration or impossibility was initially applied in Engli sh Common Law to the cases where the subject-matter was physically destroyed but was soon extended to the situations where the commercial adventure envisaged by the parties was frustrated. 6. The aforesaid "theory of implied term" was criticized on various grounds. However , the courts in England continued their endeavour to find a more realistic approach to the problem of impossibility to perform and propounded various other theories over time, including, what may be called, the theories of "just and reasonable solution", "disappearance of foundation of contract" and "radical change in obliga tion." Eventually the Parliament enacted the Law Reform (Frustrated Contracts) Act, 1943. 7. Bringham L.J. set out five propositions in J. Lauritzen A.S. v. Wijsmuller B.Y. (The Super Servant Two), [1990] 1 Lloyd's Rep.1 , to describe the essence of the doctrine of frustration. He wrote: "Certain propositions, established by the highest authority , are not open to question: (1) The doctrine of frustration was evolved to mitigate the rigour of the common law's insistence on literal performance of absolute promises. The object of the doctrine was to give effect to the demands of justice, to achieve a just and reasonable result, to do what is reasonable and fair, as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances. (2) Since the effect of frustration is to kill the contract and discharge the parties from further liability under it, the doctrine is not lightly to be invoked, must be kept within very narrow limits and ought not to be extended. (3) Frustration brings the contract to an end forthwith, without more and automatically . (4) The essence of frustration is that it should not be due to the act or election of the party seeking to rely on it. (5) A frustrating event must be some outside event or extraneous change of situation." 8. Today the courts adopt a multi-factorial approach to determine whether a contract has been frustrated. In Edwinton Commercial Corp v. Tsavliris Russ (Worldwide Salvage & Towage) Ltd. (The Sea Angel), [2007] 2 All ER (Comm) 634, the Court of Appeal held that "the application of the doctrine of frustration requires a multi- factorial approach. Among the factors which have to be considered are the terms of the contract itself, its matrix or context, the parties' knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of the contract, at any rate so far as these can be ascribed mutually and objectively , and then the nature of the supervening event, and the parties' reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. Since the subject-matter of the doctrine of frustration is contract, and contracts are about the allocation of risk, and since the allocation and assumption of risk is not simply a matter of express or implied provision but may also depend on less easily defined matters such as 'contemplation of the1 2
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parties', the application of the doctrine can often be a difficult one. In such circumstances, the test of 'radically different' is important: it tells us that the doctrine is not to be lightly invoked; that mere incidence of expense or delay or erroneousness is not sufficient; and that there has to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstances." 9. "Force majeure" is a French term that literally means "greater force" or "a superior force". It has been taken from the Code of Napoleon. In contract law it can be defined as "an event or effect that can be neither anticipated nor controlled; especially , an unprecedented event that prevents someone from doing or completing something that he or she had agreed or officially planned to do. The term includes both, acts of nature (e.g. floods and hurricanes) and acts of people (e.g. riots, strikes and wars)." In Lebeaupin v. Richard Crispin & Co. [1920] 2 K.B. 714, McCardie J. held: "The expression "force majeure" is not a mere French version of the Latin expression `vis major' . It is undoubtedly a term of wider import. Difficulties have arisen in the past as to what could legitimately be included in `force majeure'. Judges have agreed that strikes, breakdown of machinery , which, though normally not included in `vis major' are included in `force majeure' . An analysis of rulings on the subject into which it is not necessary in this case to go, shows that where reference is made to `force majeure' , the intention is to save the performing party from the consequences of anything over which he has no control..." 10. In a nub, "force majeure" refers to events beyond the control of the parties which prevent one or both of them from performing their contractual obligations. 11. The parties may include a force majeure clause in their contract specifying the consequences of certain supervening events. There is no "stan dard" force majeure clause. Generally they focus on impossibility , impracticability and illegality but the partie s may negotiate it like any other term of the contract. The interpretation, scope and application of a force majeure provision would depend on its precise language and the party seeking to avoid the contract has to show that the event falls within its ambit. The covena nts of the force majeure clause would also determine the remedies available to the parties. Some contracts may provide for immediate termination of contract on the happening of a force majeure event while others may stipulate that the contract would be put on hold till the resolution of the force majeure event. Some contracts may make provision for suspension of certain obligations. 12. The provisions relevant to the principle of force majeure and the doctrine of frustration in Pakistan are sections 32 and 56 of the Contract Act, 1872 (the "Contract Act"). Section 32 reads as under: 32. Enforcement of contract contingent on an event happening. - Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void. 13. Sections 32 deals with "contingent contracts" in which performance of contractual obligations is contingent on the happening or non-happening of an event with a stipulation that the contract would become void if that event becomes impossible. This section applies where the contract itself contains an express or implied force majeure clause which provides for contingencies on whose happening the contract cannot be carried out and prescribes its consequences. If there is no such provision or it does not apply , the party may have recourse to section 56 which stipulates: 56. Agreement to do impossible act. - An agreement to do an act impossible in itself is void. Contract to do act afterwards becomi ng impossible or unlawful. - A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the prom isor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for law through non-performance of act known to be impossible or unlawful. - Where one person has promised to do something which he knew , or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise. 14. Section 56 postulates that if performance of an act becomes impossible or unlawful after the execution of contract because of an event which the party undertaking to do it could not prevent, such a contract becomes void.3 4
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Section 56 embodies the doctrine of frustration based on the maxim lex non cogit ad impossibilia which means that "the law will not compel a man to do what he cannot possibly perform." Section 65 ordains that when a contract becomes void, the party who has received any benefit under it must restitute it or compensate the other party . This section is based on the philosophy that unjust enrichment should not be allowed. 15. The Contract Act was enacted during the British rule. India has also adopted it after the independence like Pakistan though both the countries have made some amendments over time to address their needs. Dilating on the meaning and scope of section 56 in Satyabrata Ghose Y. Mugneeram Bangur and Company and others (AIR 1954 SC 44) the Supreme Court of India held: "The first paragraph of the section lays down the law in the same way as in England. It speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to perform such an act. The second paragraph enunciates the law relating to discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The wording of this paragraph is quite general, and though the illustrations attached to it are not at all happy , they cannot derogate from the general words used in the enactment. This much is clear that the word "impossible' has not been used here in the sense of physical or literal impossibility . The performance of an act may not be literally impossible but it may be impracticable and unless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promisor finds it impossible to do the act which he promised to do." 16. In Alopi Parshad and Sons Ltd. v. Union of India [(1960) 2 SCR 793] the Indian Supreme Court further explained that a contract is not frustrated merely because the circumstances in which it was made are altered. The courts have no general power to absolve a party from the performance of his part of the contract merely because it has become onerous on account of an unforeseen turn of events. The Supreme Court said: "If, on the other hand, a consideration of the terms of the contrac t, in the light of the circumstances existin g when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point - not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true consideration it does not apply in that situation." 17. In Energy Watchdog v. Central Electricity Regulatory Commission and others [(2017) 14 SCC 80] the Indian Supreme Court reaffirmed the above principles and approvingly quoted The Sea Angel case which held that the doctrine of frustration requires a multi-factorial approach. Besides, it laid down that force majeure clause is to be narrowly construed. 18. In Pakistan, Kadir Bakhsh & Sons v. Province of Sind (1988 CLC 171) held that the doctrine of frustration applies where unanticipated circumstances take place for which provision has not been made in the contract and they substantially prevent its performance. The parties would not be discha rged of their obligations if a considerable part of the contract is capable of performance. 19. Section 108(e) of the Transfer of Property Act, 1882 (the "TPA"), also embodies the doctrine of frustration. It enacts: 108. Rights and liabilities of lessor and lessee.-- In the absence of a contract or local usag e to the contrary , the lessor and the lessee of immovable property , as against one another , respectively , possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased: (A) Rights and Liabilities of the Lessor - (a) to (c) ... (B) Rights and Liabilities of Lessee - (d) ........... (e) If by fire, tempest or flood, or violence of an army or of a mob or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void:5 6
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Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision. (f) to (q) ... 20. In Kidar Lall Seal and another v. Hari Lall Seal (AIR 1952 SC 47) the Supreme Court of India ruled that the Contract Act is a general law while the TPA is a special law and the latter excludes the former . In Mahadeo Prosad Shaw v. Calcutta Dyeing and Cleaning Co. (AIR 1961 Cal. 70) the Calcutta High Court considered the question as to whether the doctrine of frustration embodied in section 56 of the Contract Act applies to leases. It held: "19. Reading therefore Section 108(e) together with the proviso, I cannot but hold that the entire law of frustration of leases is codified under Section 108(e) of the Transfer of Property Act. The result is that under the Contract Act the contract stands discharged as this is a part of positive law; whereas under the Transfer of Property Act it depends on the option of the lessee. Therefore, the result of frustration, if a lease is to be treated as a contract would contradict the result as stated in Section 108(e) because in one case the contract stands automatically discharged and in the other only discharged at the option of the lessee. As the Transfer of Property Act is a special provision regarding leases, the general provision as enacted in Section 56 of the Contract Act, would not apply in view of the specific provision relating to leases under Section 108(e) of the Transfe r of Property Act. In that view, I hold Section 56 of the Contract Act has no application to leases and instead of that section, Section 108(e) will apply so far as frustration relating to leases is concerned." 21. Another case on the point is Raja Dhruv Dev Chand v. Raja Harmohinder Singh and another (AIR 1968 SC 1024) . The Supreme Court of India ruled that section 56 does not apply to leases. It further held that a lease is a completed conveyance even though it involves monthly payments and that section 56 cannot be invoked to claim waiver , suspension or exemption from payment of rent. This view was reaffirmed in T. Lakshmipathi and others v. P. Nithyananda Reddy and others, [(2003) 5 SCC 150], and Energy Watchdog v. Central Electricity Regulatory Commission and others [(2017) 14 SCC 80]. The Indian courts have applied these principles for deciding cases involving rent obligations in the situation following COVID-19 outbreak. Reference in this regard may usefully be made to Ramanand and others v . Girish Soni and others (AIR 2020 Delhi 96). 22. Another important statute which contains provisions relatable to the doctrine of frustration is the Easements Act, 1882 (the "Easements Act"). Section 62(f) thereof reads as under: 62. Licence when deemed revoked - (f) Where the licence is granted for a special purpose and the purpose is attained, or abandoned, or becomes impracticable. 23. Black's Law Dictionary defines "impracticability" as: "Impracticability" Contracts . (1) A fact or circumstance that excuses a party from performing an act, esp. a contractual duty, because (though possible) it would cause extreme and unreasona ble difficulty . For performance to be truly impracticable, the duty must become much more difficult or much more expensive to perform, and this difficulty or expense must have been unanticipated. (2) The doctrine by which such a fact or circumstance excuses performance. 24. " 'Impracticability' is a concept different from `impossibility' for while the latter is absolute, the former introduces at all events some degree of reason and involves some regard for practice." `Impracticable' presupposes that the action is `possible' but owing to certain practical difficulties or other reason it is incapable of being performed." According to Stroud's Judicial Dictionary of Words and Phrases, "in matters of business a thing is said to be impossible when it is not practicable, and a thing is impracticable when it can only be done at an excessive or unreasonable cost." In Jenson v. Haynes, 633 S.W. 2d 154, the Court held that "`doctrine of impracticability of performance' excuses performance by contracting party because happening of event unforeseen by parties destroys value of performance or object of contract." 25. The courts in India have consistently held that they must decide the cases according to the statutory law of the country and it is not permissible to import the principles of English Law as they are in conflict with it. Reference in this regard may be made to Ganga Saran v. Ram Charan Ram Gopal (AIR 1952 SC 9) and Satyabrata Ghose v.7 8 9
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Mugneeram Bangur & Co. and another (AIR 1954 SC 44). Our jurisprudence also holds the same. In Abdul Mutaleb v . Mst. Rezia Begum ( PLD 1970 SC 185 ) the Hon'ble Supreme Court of Pakistan ruled: "Section 56 of our Contract Act lays down as rule of positive law relating to frustration of contract by reason of supervening impossibility or illegality of the act agreed to be done by the contracting parties. Next, section 111 of the Transfer of Property Act provides the various modes for the determination of a lease in respect of immovable property of the kind involved in this case. In view of these statutory provisions, there is really no scope for importing the doctrine of frustration under the English Common Law, although the English decisions possess persuasive value and may be helpful in showing how Courts in England decide cases under circumstances similar to those which have come before our Courts ( see AIR 1930 PC 59 )." 26. Similarly , in Bengal Oil Mills Ltd. v . Dada Sons [PLD 1964 (W .P.) Karachi 18] the High Court held: "It, however , appears to me that having regard to the express words of section 56 of the Contract Act it is not really necessary to wander into the English decisions on the subject though there is no doubt that the pursuit may be extremely fascinating and instructive. Mulla in his Commentary on the Contract Act has observed that: 'Nothing resembling this section has been found among the materials known to have been used by the framers of the Act. It varies the Common Law to a large extent, and moreover the Act lays down positive rules of law on questions which English and American Courts have of late more and more tended to regard as matters of construction depending on the true intenti on of the parties. English authorities, therefore, can be of very little use as guides to the literal applications of this section.' "We must, therefore, turn to the section itself and the question which falls for determination in this case is whether by reason of some event which the buyers could not prevent the contract became impossible of performance or that performance became unlawful." 27. Again, in Syed Ahmed through Special Attorney v. Syed Muzaf far Hussain through L.Rs. (2008 CLC 175) it was held: "However , I am not convinced with this contention of the learned counsel for the appellant for the simple reason that judgment of House of Lords relied upon by learned counsel for the appellants is based on a general principle of contract as in vogue in England at the relevant time and such law cannot override the statutory provision of the Contract Act mentioned above." Determination by the Court 28. On 30 January 2020, the Director General of the World Health Organization declared that the outbreak of COVID-19 constitutes a "public health emergency of international concern". He advised that "all countries should be prepared for containment, including active surveillance, early detection, isolation and case management, contact tracing and prevention of onward spread of 2019-nCoV infection, and to share full data with WHO." Following the said advice the Government of Pakistan took various measures in consultation with the Provincial Governments which inter alia included lockdowns, social distancing and travel restrictions. In the present case, admittedly agreement dated 20.7.2019 does not contain a force majeure clause so the Petitioner seeks to invoke the doctrine of frustration. 29. The foremost question that arises for consideration is as to what is the nature of contract between the Petitioner and Respondent No.3. More particularly , whether it is a lease or a licence. A lease is grant of property , for a time, by one person who is in possession of a greater interest in the property to another in…
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