IMPORTANCE OF FORCE MAJEURE IN COVID 19

COVID 19, it seems has changed the world forever. Barely a couple of months ago this virus was declared  a pandemic on 11^th March 2020 by World Health Organization, and in such short a time it has impacted each and every one on this planet[1]. It has made an adverse impact on almost all the economies of the world as major populations have been under some form of lockdown. Thereby, the pandemic has disrupted the normal functioning of industries and businesses which has further disrupted the day to day working and has resulted in affecting various operations and contracts. People are rightly afraid that the restrictions imposed on movement of people and goods would result in nonperformance of contracts by the parties involved. During such times the parties are trying to ascertain what will be their rights and remedies on non-performance of contracts.

In such uncertain times the clause of ‘force majeure’ might come in handy for the parties involved. The Black’s Law Dictionary defines Force Majeure as ‘superior or irresistible force’, basically an ‘event where part of the contract cannot be performed due to causes which are outside the control of the parties and could not be avoided by exercise of due care’[2].  Force majeure includes both kinds of acts i.e. the acts of nature like floods, earthquake etc and also the acts of humans like wars, strikes etc. In India, there is no codified law for the concept of force majeure rather, it is provided as a clause by way of contract.

Whether the parties would be able to invoke the immunity provided under the clause of force majeure depends upon whether they have such clause in their contracts. If the clause is included in the contract then a classically worded force majeure contract basically requires wordings that include any disruption or non performance which is caused was beyond the control of the parties and the event in question was not foreseeable in nature[3]. Such contract would ensure that the parties do not have to suffer through the ramifications which otherwise would have happened on non performance of contract.

The parties whose contracts do not include the force majeure clause, the situation might seem discouraging to them but even they have recourse available to them in Law of Contract through the doctrine of frustration of contract under section 56. The Indian courts grant relief to parties when the parties are unable to perform their contract due to some kind of subsequent impossibility by the intrusion or occurrence of an unexpected event which could not have been foreseen by the parties involved at the time of the execution of contract.

Apart from this the Government of India has also taken steps to prevent such uncertainty regarding non performance of contract by declaring COVID 19 as a force majeure event through a circular by Ministry of Finance dated 19^th February 2020[4]. The circular states that the pandemic should be considered a natural calamity and it can be invoked wherever considered appropriate.

So force majeure and doctrine of frustration would come in handy and play an important role in ascertaining the rights and remedies available to the parties on non fulfillment of contractual obligations. They would provide the much needed relief to the parties in such stressful times.

 

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[1] WHO, Rolling Updates on Corona virus Disease (COVID19) https://www.who.int/emergencies/diseases/novel-coronavirus-2019/events-as-they-happen

[2] Black’s Law Dictionary, https://blacks_law.enacademic.com/11167/force_majeure

[3] Nishant Menon, India: COVID 19 – A Force Majeure Event or Simply a Pandemic?, https://www.mondaq.com/india/litigation-contracts-and-force-majeure/913944/covid-19-a-force-majeure-event-or-simply-a-pandemic

[4] GOI, Office Memorandum, https://doe.gov.in/sites/default/files/Force%20Majeure%20Clause%20-FMC.pdf