Perishing of Goods under the Sale of Goods Act, 1930 and Frustration under Section 56 of the Indian Contract Act, 1872: How the Two Rules Divide the Field

Sections 7 and 8 of the Sale of Goods Act and Section 56 of the Contract Act all deal with contracts that cannot be performed because something has happened to make performance impossible. The sale provisions are narrow. They apply only to specific goods that perish, and they turn on the moment the risk passes. Section 56 is general. It applies to any contract, including a sale, where performance becomes impossible or unlawful through an event the parties did not provide for. The practical task is working out which rule governs a particular event, and the answer follows from Section 3 of the 1930 Act: the special rule applies where it reaches, and the general law fills the rest.

Three questions, taken in order, decide which rule applies

1. The Relationship

Section 7 deals with initial impossibility: goods that had perished before the contract. In the general law this would be treated as a common mistake as to the existence of the subject matter under Section 20 of the Contract Act, and the result is the same: the contract is void.
Section 8 deals with supervening impossibility of one kind: specific goods perishing after an agreement to sell but before the risk passes. It is a particular statutory instance of frustration.
Section 56 deals with all other supervening impossibility or illegality, and applies to sales through Section 3 of the 1930 Act, which continues the Contract Act except where inconsistent.
A force majeure clause displaces both. Where the parties have provided for the event, the contract is a contingent one under Section 32 of the Contract Act, and the clause governs.

2. Where Section 56 Applies to a Sale

The goods are unascertained. Sections 7 and 8 do not apply, since unascertained goods do not perish in law. The seller must supply other goods of the description, unless a named source was a term of the contract and that source fails, in which case frustration may be argued.
The event is not perishing. A prohibition on sale, a requisition, an export ban or the outbreak of war does not destroy the goods, but may make delivery unlawful or impossible.
The goods perish after property has passed but the contract remains partly unperformed, for example where the seller had still to deliver and the risk had been agreed to remain with him.

📖 Re Shipton, Anderson & Co. and Harrison Brothers & Co., [1915] 3 KB 676

Facts: A parcel of wheat lying in a warehouse was sold, but before property passed and before delivery, the Government requisitioned it under wartime emergency powers. The seller could not deliver, and the buyer sued for non-delivery.

Held: The seller was excused. Performance had become impossible because of a lawful act of the State, without fault of either party, before the property had passed. The contract was discharged, and the seller was not liable in damages.

Ratio: Where specific goods are taken by lawful authority before property passes, making performance impossible without fault, the contract is discharged. The goods had not perished, so the case is one of frustration rather than of Section 8.

3. Where Neither Rule Excuses the Seller

Rise in price or cost. Commercial hardship does not frustrate a contract of sale, as in the general law.
Failure of the seller's own supplier, where the contract did not make supply from that source a condition. In Ganga Saran v. Firm Ram Charan Ram Gopal, AIR 1952 SC 9, the seller's expected source of cloth failed, and the contract was not frustrated.
Partial failure where the seller can still perform in part. The seller must usually deliver what he can.
Self-induced impossibility, where the seller's own act or default caused the problem.

📖 H. R. & S. Sainsbury Ltd. v. Street, [1972] 1 WLR 834

Facts: A farmer agreed to sell about 275 tons of barley to be grown on his farm. Owing to a poor season, only about 140 tons were produced. Prices had risen, and he sold the 140 tons to a third party at a higher price, contending that the contract had been discharged by the failure of the crop.

Held: The farmer was liable in damages. The failure of part of the crop did not discharge the whole contract. He was excused from delivering the shortfall, but was obliged to offer the buyer the quantity that had been grown, and his sale of it elsewhere was a breach.

Ratio: Where a contract for goods from a specified source fails in part without fault, the seller is excused only to the extent of the failure and must offer what is available.

4. The Consequences Compared

	Section 7	Section 8	Section 56
Scope	Specific goods perished before the contract	Specific goods perishing before risk passes	Any supervening impossibility or illegality
Effect	Contract void from the start	Agreement avoided	Contract becomes void
Money paid in advance	Recoverable, s. 65 or s. 72	Recoverable under the general law	Recoverable, s. 65
Damages	None	None	None; it is not a breach

5. The Position Stated Shortly

Section 7 covers initial perishing of specific goods, and parallels common mistake under Section 20 of the Contract Act.
Section 8 covers perishing of specific goods before risk passes, and is a particular case of frustration.
Section 56 applies to sales for all other supervening impossibility or illegality, through Section 3.
A force majeure clause displaces both, under Section 32 of the Contract Act.
Re Shipton, Anderson: requisition before property passed discharged the contract.
Price rises, failure of the seller's own supplier and self-induced impossibility do not excuse the seller.
Sainsbury v. Street: on a partial crop failure the seller must offer what was grown.