Blog Details

Author - Advocate Rashi Suri (Managing Partner) and Dikshita Damodaran (Associate)

FAQ Index

1. Can force majeure provisions be invoked in the wake of COVID-19 pandemic?

2. In the wake of the Covid-19 pandemic, is it mandatory for an Employer to allow Work from home for all their employees?

Q.  Can force majeure provisions be invoked in the wake of COVID-19 pandemic?

Covid-19 has been declared a global pandemic by WHO and a notified disaster by the Indian government. The outbreak has sent shock waves across the global markets. It has disturbed supply chains globally; crashed stock markets around the world, and; caused a significant decline in the overall volume of global economic activities. It has led to businesses across the world to reconsider their working and dealings during this global public health crisis.

Due to the disturbance supply chains caused by Covid-19, it is likely that performance under commercial contracts will be delayed or even cancelled. The possibility of this delay/ cancellation of performance can either be legitimate because of the interruption in businesses or because the parties are seeking Covid-19 as a defense to excuse themselves from their contractual obligations. In such circumstances, it becomes important to analyze whether Covid-19 will be considered as a ‘force majeure’ event under the commercial contracts.

Force majeure clauses used in most contracts vary widely and, therefore, it is important to review these clauses carefully. It is important to understand that a force majeure clause cannot be implied under Indian law. It must be expressly provided for under a contract.

There are two possible instances, which may suggest that a force majeure clause covers Covid-19 in its ambit: 

1. if the contractual definition of a force majeure event in the contract expressly includes a pandemic; or
2. if the force majeure clause covers extraordinary events or circumstances beyond the reasonable control of the parties. A generally worded clause of such manner may be invoked if it is determined that the factual circumstances caused by Covid-19 for the affected party were beyond its reasonable control. 

However, it has to be understood that whether a party can be excused from a contract on account of Covid-19 is a fact-specific determination that may vary from contract to contract. 

The Department of Expenditure, Procurement Policy Division, Ministry of Finance of India issued an Office Memorandum on February 19, 2020, in relation to the Government’s ‘Manual for Procurement of Goods, 2017’. The Office Memorandum effectively classified the Covid-19 outbreak as a natural calamity, and covered by the force majeure clause (FMC) under Para 9.7.7 of the Manual of Procurement of Goods, 2017. The memorandum also stated that a ‘due procedure’ should be followed by any Government department seeking to invoke the force majeure clause.

We are of the opinion, though the force majeure clause of the contracts may be invoked to argue that a contract cannot be performed by virtue of the Covid-19 outbreak however, it is unlikely to give rise to a valid force majeure defense under every contract and in every circumstance. It is to be remembered that every contract and governing laws stipulate different set of requirements for different situations. Therefore, businesses must proactively manage the legal risks involved caused by COVID-19.

Q.  In the wake of the Covid-19 pandemic, is it mandatory for an Employer to allow Work from home for all their employees?

During these unprecedented times, the Employees of different organizations are allowing Work from Home for their employees. However, the question that arises is whether it is mandatory for all employees to implement a Work from Home policy for their employees.

The Ministry of Home Affairs has issued certain guidelines on March 24, 2020 under the National Disaster Management Act, 2005 for the Ministries/ Departments of Government of India, State/ Union Territory Governments and State/ Union Territory Authorities for containment of the Covid-19 epidemic in the country. The guidelines are to remain in force for a period of 21 days from March 25, 2020.

The guidelines clearly state that offices of all Offices of Government of India and State Governments, its Autonomous/ Subordinate offices and public corporations shall remain closed. 

Further, the guidelines also mandate that all commercial and private establishments shall remain closed. The guidelines however provides exceptions to certain commercial and private establishments:

1. shops dealing with food, groceries, fruits and vegetables, dairy products, and meat and fish;
2. banks, insurance companies and ATMS;
3. print and electronic media;
4. telecommunications, internet services, broadcasting, information technology services (only pertaining to essential services);
5. e-commerce of essential goods such as food, pharmaceuticals and medical equipment;
6. petrol pumps and gas;
7. power generation and transmission;
8. capital and debt market services under the purview of the Securities and Exchange Board of India;
9. cold storage and warehousing services; and
10. private security services.

The guidelines state that except the establishments provided, all the other commercial and private establishments shall remain closed but may allow Work from Home to their employees. Therefore, since the shutting down of the establishments has been mandated under the guidelines, in order to ensure the smooth functioning of work, the establishments at their discretion may allow its employees to Work from Home.

The guidelines further state that any person violating these containment measures will be liable to be prosecuted against as per the provisions of Section 51 to 60 of the Disaster Management Act, 2005, besides legal action under Section 188 of the Indian Penal Code.