Frustration of contract under Section 56 applies when supervening circumstances make performance legally impracticable, not just physically impossible.

A contract is rendered void under Section 56 when a supervening circumstance, not contemplated by the parties, makes performance legally impracticable or impossible in substance. Here, the development agreement assumed the project land could be used for residential construction, but later objections from forest and pollution authorities prevented construction and left the land's status uncertain. The Court treated the environmental clearance barrier as destroying the foundation of the bargain, and held that impossibility under Section 56 is not limited to physical impossibility. The agreement was therefore frustrated, and resistance to refund of the deposit with interest was not justified.

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Issues: Whether the development agreement between the parties was frustrated under Section 56 of the Indian Contract Act, 1872 because of intervening circumstances that made construction on the project land impossible or impracticable.

Analysis: The contract was entered into on the basis that the project land could be developed for residential construction, but subsequent objections from the forest authorities and the pollution control authorities prevented commencement of construction. The exact status of the land remained uncertain for a considerable period, and the competent environmental authorities ultimately treated the land as part of the Ridge or as land requiring clearance from the Ridge Management Board and this Court. The contractual stipulations requiring the developer to obtain clearances did not extend to a situation where development itself became legally impermissible because of a supervening circumstance not contemplated by the parties. Applying the settled meaning of Section 56, impossibility is not confined to physical impossibility but includes impracticability where the foundation of the bargain is destroyed.

Conclusion: The development agreement was frustrated under Section 56, and the appellant was not entitled to resist refund of the deposit with interest as directed.

Ratio Decidendi: A contract becomes void under Section 56 when, after its formation, a supervening circumstance not contemplated by the parties renders performance legally impracticable or impossible in substance, even if literal physical performance is not impossible.

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