Enforcement of Force Majeure provisions in Covid19 Era

1. Force Majeure in
Covid19 Era
Brought to you by:
Bhumesh Verma, Managing Partner
Avni Agarwal, Student Researcher

2. Literal meaning
– (French)
‘superior
strength’
Oxford dictionary -
“unexpected circumstances,
such as war, that can be used as
an excuse when they prevent
somebody from doing
something that is written in a
contract”
These events must be
unforeseeable and
unavoidable, and not the
result of the defendant's
actions, hence they are
considered "an act of god".
Force
Majeure

3. Force Majeure Clauses and their importance
Force majeure clause is an agreement between contracting parties that their contract may be
varied or suspended in specified exceptional circumstance;
The clause is important as it provides the parties the benefit of doubt when the performance of
contract becomes impossible due to situations which are out of control of either of the Parties;

4. Whether COVID-19 is a Force Majeure Event?
There has been quite a considerable amount of debate going on whether Covid-19 qualifies as a
Force Majeure Event or not.
Let’s examine what are the factors that make up a Force Majeure Event:
• The situation must be out of control of Parties; or
• There must be Government Interference involved or such Government Rules that makes the
performance of a Contract impossible; and
• A situation that can be characterized for being Unforeseeable.

5. COVID-19 ~ a Force Majeure Event
As per our previous discussion earlier, Covid-19 should be considered as a Force Majeure Event.
However, we cannot ignore the fact that there do exist such Contracts which might not get
affected by such a Global Pandemic. For instance, Contracts that require a performance online or
such contracts wherein the performance is such that it is not hindered due to the Government
restrictions on movement during the ongoing lockdown.

6. INDIAN Courts on Covid-19
It is interesting to note that in the case of State Co-Operative
Election Authority v. Ishwar [cited as 2020 SCC OnLine Bom
449], the Court has recently held that COVID-19 qualifies as a
force majeure event.

7. Absolving of Liability in case of a ‘Force
Majeure’ Clause in the Contract
For a Party to escape its liability by invoking force majeure has to prove the following:
• That it has been directly affected by the force majeure event in performing his/ her duties
under the contract (For this it becomes essential that all evidence pertaining to the same are
preserved to present in the court);
• That the force majeure event was the cause of the inability to perform or delayed performance;
• their non-performance was due to circumstances beyond their control; and
• That there were no reasonable steps that they could have taken to avoid or mitigate the event
or its consequences;
• That it has taken reasonable steps to avoid or mitigate the event and its consequence;
• That there are no alternate means for performing under the contract (What constitutes a
reasonable mitigation measure is fact-specific and depends upon the nature and subject matter
of the contract in question).

8. Exceptions – When inability is not considered
owing to Force Majeure
A disruption that merely impacts the profitability of a contract may not be
sufficient for a force majeure claim unless there is express contractual
provision for such a situation. Nor would an economic downturn or other
general adverse business conditions likely be sufficient, even if it could
clearly be shown that a key trigger for the downturn was COVID-19.

9. Doctrine of Frustration
Section 56 of the Indian Contract Act – provides 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….”
Impossibility - Refers to cases where a supervening event beyond the control and contemplation
of the parties renders the contract impractical to perform and substantially useless in view of the
object and purpose which the parties intended it to achieve.
The “supervening event” must not be the fault of the non-performing party. Clearly, contracting
parties cannot be held responsible for the spread of COVID-19

10. Thank you
Team Corp Comm Legal