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Author - KnK Legal

Extraordinary situations usually resultant into extraordinary consequences. As we can recall, the hardships that were caused universally during the economic crises of 2008. Although, it is too early to forecast but the current crises due to pandemic of corona virus is likely to have major setbacks i.e. worse in decades, which could adversely impact our health, economy, habits, lifestyle etc.

Particularly for businesses, it could have unprecedented impact, as already predicted by various renowned institutes worldwide. While at practical side, organisations already experiencing the tough time, apart from shrinkage of funds, its capabilities visa vis to carry out business activities freely were also restricted or delayed due to various lockdowns or restrictions as imposed by government orders. Despite best of available minds in the organisation, it is unlikely for any organisation either to anticipate such crises or to make provisions for the same. Hence, most of the organisations are currently busy in reviewing its existing contracts or even otherwise doing brainstorming to find out right strategy to overcome from the current situation of non-performance, delays etc. In this pursuit, most heard phrase is force majeure.

In order to be familiar with the concept, firstly let’s understand the concept of force majeure from Indian legal perspective and its application from the contractual point of view.

A. Basic concept of Vis major AND Force majeure:

1. Vis major or act of God, is an extraordinary occurrence or circumstances , which could not have been guarded against or more accurately, an accident due to natural causes, directly and exclusively, without human intervention and which could not have been avoided by any amount of foresight and care.
2. Whereas, the expression force majeure has a more extensive meaning than act of God or vis major as decided by Hon’ble Supreme court in the landmark judgement titled as M/S Dhanrajmal Gobidram v. M/S Shamji Kalidas & Co. (AIR 1961 SC 1285), while interpreting the meaning of force majeure Hon’ble court stated that the expression force majeure is not a mere French version of the Latin expression vis major , and that strikes , breakdown of machinery and such thing which though normally not included in vis major are included in force majeure.
3. With the above background, now we can explore the concept of force majeure from Indian legal perspective, in our law force majeure is not defined in any statute, although the Indian Contract Act 1872(Act) through section 56 para first , provides that an agreement to do an act impossible in itself is void.
   Furthermore, second para of same section  tates that a contract to do an act which, after the contract is made , becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. This is called as Doctrine of Frustration.

B. Check list to help you familiar with your specific force majeure clause, please see:

• Whether force majeure clause specifically provided in your contract or not?
  Note: even if, force majeure clause is missing still relief may be claimed, subject to provisions of section 56 of the Act, as discussed above.
• Thereafter, in case force majeure clause is provided in your contract, please ascertain other conditions such as tolerance period, suspension, notice, period, consequences etc.

Final words:

With caveat, we would like to state that force majeure situation usually dependent upon facts/ merit as well as respective contracts. Nevertheless, no logical mind can deny that the current scenario i.e. corona outbreak, appropriately calls for triggering the force majeure provision. In this regard, it is also pertinent to note the following sequence:

1. World Health Organisation on 30th January 2020, declared the coronavirus outbreak as public health emergency of international concern.
2. Government of India, Ministry of Finance, Department of Expenditure, Procurement Policy Division via Office Memorandum No. F.18/4/2020-PPD dated 19th February 2020 addressed to the Secretaries of all Central Government Ministries/ Departments, states “2. A doubt has arisen if the disruption of the supply chains due to spread of corona virus in China or any other country will be covered in the Force Majeure Clause (FMC). In this regard it is clarified that it should be considered as a case of natural calamity and FMC may be invoked, wherever considered appropriate, following the due procedure as above.”
   Note: The above clarification only pertains to the contracts in respect of which the memorandum was issued.
3. Through media reports, we also understand that similar approach has been adopted by other enterprises of the government, as well.

Still, we reiterate w.r.t private parties, they need to be vigilant and thoroughly review their contract/s particularly its relevant terms, requirement to notify and most importantly these steps must be taken asap, to mitigate probable risk and liabilities.