Section 531: Discharge of contracts in the event of fundamental changes in circumstances

1) If it becomes impossible to perform a contract as a result of a fundamental change in the circumstances that existed at the time of conclusion of the discharge of contract, the act according to the contract need not be performed.

2) Without prejudice to the generality of sub-section (1), the emergence of any of the following circumstances shall be deemed to constitute a fundamental change in the circumstances that existed at the time of conclusion of a discharge of contract:

(a) If the contract becomes illegal, and thereby it cannot be performed,

(b) If it becomes impossible to perform the contract due to the emergence of situations beyond human control, such as war, flood, landslide, fire, earthquake, and volcanic eruption,

(c) If the subject matter essential for the performance of the contract is destroyed or damaged, or no longer exists, or such subject matter cannot be obtained,

(d) If the contract is so concluded that its performance depends on the personal ability, skill, or talent of a person, and the performance of the contract becomes impossible for the reason that such a person dies or becomes insane or is incapable of performing the contract because of physical or mental disability.

3) Notwithstanding anything contained in sub-section (2), none of the following circumstances shall be deemed to constitute a fundamental change in the circumstance that existed at the time of conclusion of a contract:

(a) If the performance of the contract has become difficult,

(b) If the performance of the contract results in less profit or in a loss,

(c) If any party to the contract is dependent upon any third party who is not a party to the contract for its performance, and the third party makes a default or becomes incompetent,

(d) In the event of a strike or lockout,

(e) If additional tax, fee, or other revenue is required to be paid,

(f) If a contract is concluded with more than one object and some of the objects cannot be fulfilled.

4) In the case of the emergence of any of the circumstances referred to in sub-section (3), the parties may, except as otherwise provided for in the contract, negotiate to review or alter the terms and conditions of the discharge of contract.

5) If the performance of a contract becomes impossible due to a fundamental change in the circumstances as referred to in sub-section (2), the following matters shall be governed as follows:

(a) A party that has received any amount paid by the other party in consideration of the contract, before the occurrence of such a change in the circumstance, shall refund it to the other party.

(b) Payment to be made or due from one party to the other party in consideration of the contract shall not be payable after such a change in the circumstances.

(c) The amount payable to each other shall be determined in consideration of the act or amount already performed or paid, if any, by one party to the other party before such a change in the circumstance. One party shall be entitled to recover reasonable expenses incurred by that party in consideration of the contract from the other party.

6) Notwithstanding anything contained elsewhere in this Section, the contracting parties may agree to fulfill their respective obligations by continuing the performance of the contract after the end of the circumstance under clause (b) of sub-section (2).