FORCE MAJEURE @LEXCLIQ BY KANUPRIYA BHARGAVA

The COVID-19 pandemic has disrupted global economic ties, creating hardship for employees, customers, and enterprises. Businesses have rushed to renegotiate contracts as supply chains, manufacturing, and other economic activity have been disrupted; as a result, the term “force majeure” has become increasingly relevant in contractual contexts for businesses today, and it is unclear how this term would be construed in a contract in the context of COVID-19.

Force majeure clauses are contractual provisions that allow one or both parties to halt or terminate performance in the event of a “force majeure event,” and these clauses have influenced and will continue to affect renegotiations in a variety of contexts.

Force majeure clauses are contractual provisions that allow one or both parties to suspend or terminate performance in the event of a “force majeure event,” and these clauses have influenced and will continue to affect renegotiations in a number of scenarios. Contracts and contract obligations are being examined in order to assess the consequences of the present COVID-19 scenario, since it has had a wide-ranging impact on enterprises and activities.

On February 19, 2020, the central government released an office memorandum stating that supply chain disruptions caused by COVID-19 should be classified as a natural catastrophe and that force majeure measures may be invoked in the field.

We must first define the term “force majeure.”

A force majeure, according to Black’s Law Dictionary, is an occurrence or effect that cannot be foreseen or controlled. It is a contractual clause that distributes the risk of loss if performance becomes impossible or impracticable, often as a result of an unforeseen or uncontrollable occurrence.

 

While force majeure is neither defined or expressly addressed in Indian law, it is mentioned in Section 32 of the Indian Contract Act of 1872 (the “Contract Act”), which states that if a contract is reliant on the occurrence of an event that becomes impossible, the contract is null and void.

When a force majeure event happens, a force majeure clause provides a party with temporary respite from fulfilling its contractual duties. A force majeure clause often defines specific situations or occurrences that qualify as force majeure events, as well as the criteria that must be fulfilled for the force majeure clause to apply to the contract and the consequences of such occurrence. As a consequence, in order for a force majeure provision to apply (should a force majeure event occur), the occurrence of such events must be beyond the parties’ control, and the parties must show that reasonable measures were taken to mitigate the effect of the force majeure event.

If an occurrence or situation comes within the scope of a force majeure event and satisfies the clause’s application requirements, the parties shall be exempted from fulfilling their respective contractual obligations for the period of the force majeure event.

Depending on the wording of the provision, the parties may be obliged to give a written notice to the other party notifying them of the occurrence of such an event and the invocation of the force majeure clause. Some contracts also specify that if a force majeure event lasts a long time, the parties may be entitled to cancel the contract.
As a result, force majeure events include war, natural disasters such as hurricanes and earthquakes, and other unforeseen situations that are beyond the parties’ control and prohibit or negate the economic value of performance.

While the COVID-19 pandemic was undoubtedly beyond the control of contract parties, whether it excuses performance of any particular contractual obligation depends on how the relevant contract’s force majeure clause is drafted, the nature of the pandemic’s impact on a party’s ability to perform, and related fact-specific contractual relationship conditions.
Parties claiming that a pandemic excuses them from performance may be able to rely on a force majeure clause that explicitly includes pandemics as a list of force majeure occurrences. In other cases, parties will depend on catchall wording such as other comparable reasons (as stated above) or including but not limited to, which are intended to guarantee that courts properly understand force majeure.

The following list of force majeure events in a force majeure clause exemplifies, but does not exhaust, the meaning of force majeure in these and related words. The COVID-19 pandemic is similar to the kind of calamities that are frequently referenced in force majeure agreements. Pandemics, like wars and natural catastrophes, are uncommon occurrences that cause substantial disruptions in daily living and normal economic activity. Even if a force majeure clause does not specifically include pandemics (which most do), a party claiming force majeure as a result of the COVID-19 pandemic will be able to argue that pandemics are covered implicitly.

Conclusion

As a result of the COVID-19 pandemic, the concept of force majeure has become a contentious matter, as there have been delays in payments, completion of conditions precedent, and other requirements agreed upon by the parties to contracts, the pandemic

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