Article deals with aspects ascertaining COVID-19 as a force majeure event, the steps to be undertaken by a party to contract before invoking the force majeure clause, absence of the force majeure clause in a contract and impact on real estate sector.

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FORCE MAJEURE CLAUSE: RELEVANCE AND APPLICABILITY IN THE WAKE
OF COVID – 19 AND SHUTDOWN – IMPACT ON REAL ESTATE SECTOR
- Authored by Mr. Hitendra V. Hiremath, presently working as Legal Consultant to
RERA Consultants LLP and earlier worked as In-House Counsel with M/s. Shriram
Properties Private Limited and with an investment banking firm Capaegis at
Bengaluru, Karnataka, India.
I. INTRODUCTION
A force majeure clause in a contract excuses a party of non performance of its obligations when
such non performance is due to unforeseen circumstances which are beyond the control of such
parties. Thus the performance becomes impossible thereby frustrating the purpose and object of
the agreement. Such non-performance is typically excused by virtue of force majeure clauses
which may be categorized as acts of God such as natural disasters vis-a-vis earthquake, floods,
storms etc, acts of people such as terrorism, riots, strikes, wars and epidemics etc, act of
Government such as lockdowns, transport restrictions etc. The force majeure clause has regained
wide importance due to the shutdown and after the spread of the COVID – 19 virus.
COVID-19 has been declared as a pandemic by the World Health Organisation. Pursuant to
that, the Ministry of Family Health & Welfare Government of India issued advisory on social
distancingi
followed by which India has been shutdown for a period of 21 days commencing
from 23rd
March, 2020ii
and was continued for a further period of 19 days till 03rd
May, 2020iii
.
Much prior to the shutdown, The Ministry of Finance, Department of Expenditure Procurement
Policy Division, Government of India vide Official Memorandum bearing No. F.18/4/2020 –
PPDiv
clarified the applicability of the force majeure clause drawing attention to para 9.7.7 of the
‘Manual for Procurement of Goods 2017’ stating that force majeure clause may be invoked
wherever considered appropriate, following the due procedure, with respect to disruption in
supply chains due to spread of corona virus in China or any other country. It was further
clarified that the parties can terminate the contract, due to non-performance after a period of 90
days without having any financial repercussion on either of them. Though the official
memorandum dealt with the procurement and supply of goods, it can be seen that the Ministry
of Finance, Department of Expenditure Procurement Policy Division, Government of India has
considered COVID-19 as force majeure event
The novel COVID-19 outbreak followed by a complete shutdown of the nation has
repercussions on the economy due to transport restrictions, closure of commercial
establishments and manufacturing units. The businesses are experiencing the slowdown due to
shortage of labourers as employees are being quarantined to prevent exposure to COVID-19 and
to mitigate the spread of virus. As a result of this, many businesses are unable to meet their
contractual obligations and are determining to invoke a force majeure clause as a protective
measure to safeguard themselves from the delay in performance. This article deals with,
ascertaining COVID-19 as a force majeure event, the steps to be undertaken by a party to
contract before invoking the force majeure clause, absence of the force majeure clause in a
contract and impact on real estate sector.

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II. WHETHER COVID – 19 QUALIFIES AS FORCE MAJEURE EVENT?
In order to ascertain whether COVID-19 can be termed as a force majeure event in the eye of
law, party to a contract has to refer to the force majeure clause in a contract. Some force majeure
clauses include many broader references and categories such as ‘Act of Government’ or ‘other
circumstances beyond the reasonable control of the parties’. Such clauses have scope for wider
interpretation and have the ability to encompass circumstances not explicitly stated therein.
Now, looking at such clauses, it can be easily said that COVID-19 would likely qualify as a force
majeure provision as there is a shutdown of the country due to an Act of Government.
III. WHAT NEEDS TO BE CHECKED BEFORE INVOKING THE FORCE
MAJEURE CLAUSE?
Prior to invoking the force majeure clause, following must be carefully considered:
a) Determine the relevant provisions under the contract such as breach, termination,
cancellation and force majeure
b) Determine the governing laws, since all contracts may not include the force majeure
provision, however, the law applicable to such a contract may include the concept of force
majeure such as the doctrine of frustration. For example, under Sec.6 of the Real Estate
(Regulation and Development) Act, 2016 the end date of the project can be extended for a
period of one year without any fees being paid to the Authority due to a force majeure event.
Such being the case, even if the agreement for sale of an apartment/plot doesn’t include any
provision with respect to force majeure, the developer / promoter may rely on the applicable
law for extension of the end date of the project.
c) Determine the force majeure provision in the contract
d) Check if the non performance is due to spread of COVID-19 and shutdown thereafter.
e) Whether notice is required to invoke the force majeure clause
f) Does right of termination arise if the force majeure event continues for the extended period
of time
Above are only instances that have to be checked before invoking force majeure clause and the
same are to be determined on a case – by – case basis because the affected business/es should
also assess whether the disruption caused on invoking the force majeure clause will have other
impacts on functioning of the business such as its financing arrangements, market stability,
availability of labours etc.
IV. WHAT IF A CONTRACT DOESN’T INCLUDE THE FORCE MAJEURE
CLAUSE?
The non-performance shall be excused in case of absence of the force-majeure provision. The
reason of excuse is the principal purpose of the performing party of the contract has been
frustrated and the party due to perform under the terms of the contract shall terminate its
performance under the doctrine of the frustration.
Section.56 of the Indian Contract Act, 1872 deals with the doctrine of frustration and it states:
Agreement to do an act impossible in itself is void - Contract to do act afterwards becoming impossible or

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unlawful – 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.
One has to be very careful while depending on the doctrine of frustration as it denotes the word
void. However, due to COVID-19 and the consequent shutting down, the performance of an act
under the terms of the contract is suspended for some period of time. Hence, the parties while
invoking the doctrine of frustration have to rely on the essentials of the force majeure clause.
Alternatively, if the parties depend solely on the doctrine of frustration, it may lead to
termination of the contract, which may have financial affect on the parties. So, the doctrine of
frustration and force majeure clause are different under the terms of the contract, but when it is
read together under Section.56 of the Indian Contract Act, 1872, both are dependent.
Section.56 of the Indian Contract Act, 1872 is based on the maxim ‘les non cogit ad impossibilia’
which means that the law will not compel a man to do what he cannot possibly perform. In
Satyabrata v. Mugneeramv
, Supreme Court observed that various theories were propounded on
the juridicial basis of the doctrine of frustration and it is based on the impossibility to perform by
a party and as such, the frustration and impossibility are one and the same as well as
interchangeable. The term impossible under Section.56 was also explained. The Supreme Court
clarified that the word ‘impossible’ has not been used in the sense of literal impossibility. The
Supreme Court further explained that performance of an act may be impracticable and useless
from the object and whether it forms bases of the contract rightfully has to be decided by the
courts. Further in Sushila Devi v. Hari Singhvi
, it was observed that the impossibility as
contemplated under Section. 56 of the Contract Act is not confined to the thing that is humanely
not possible. So it can be inferred that a frustrated contract is valid until the time of the
supervening event but it ends immediately thereaftervii
.
V. IMPACT ON REAL ESTATE SECTOR
The real estate sector is badly hit due to lockdown and even after the lockdown gets lifted, the
re-commencement of construction activities in a real estate project will take time as most of the
related labour workforce were forced to leave the site. The lockdown has also impacted the
economy, more importantly the sales which were in a bad shape even before the COVID-19
outbreak due to unstable market conditions. Now, apart from the slowdown, the promoters may
face another challenge to complete the projects within the end date as set out before the Real
Estate Regulatory Authorities. Though the Karnataka and Maharashtra Real Estate Regulatory
Authorities have extended the end date of the completion of real estate projects by three months
for the projects that were to be completed on or after 15th
March, 2020viii
, a period of three
months may not prove sufficient. Such a situation will leave the promoters with no other
alternative but to seek for extension i.e., for a period of one (1) year. That being said, whether
the promoters will be absolved from the liability of paying the delay compensation will have to
be seen in light of the upcoming decisions of the Authorities. Such being the scenario, in all
likelihood there will be cases against the promoters where they will have to prove the impact on
their ongoing projects due to force majeure and Courts will have to decide such delay on a case
to case basis. It is suggested that the promoters must inform the allottee/s in advance about
invoking the force majeure provision as per the terms of the Agreement for Sale in order to
avoid the problems that may arise in future with the allottee/s. Further the explanation to

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Section 6 of the Real Estate (Regulation and Development) Act, 2016 also includes “any other
calamity caused by nature affecting the regular development of the Real Estate Project”, hence it may become
pertinent to make sure that this is kept in mind and possible to keep necessary records to prove
for how long the work was affected due to lockdown and when the work resumed in full force
to consider this as a force majeure event and thereby avoiding the resultant penal consequences.
VI. CONCLUSION
On analysing the relevant principles and invoking of force majeure clause or doctrine of
frustration, it can be seen that there is overlapping of both the doctrines and from time to time,
the force majeure clauses have evolved from being conventional in language, to a much detailed
provision. A contract sans a force majeure provision will not completely get frustrated and the
stake holders will have to consider other factors that influenced the non-performance.
However, the Courts have to ascertain in case of any liabilities arising due to non-
performance, the time period for which the force majeure event shall provide the relief.
Even if COVID-19 does not expressly form a part of the contract as a force majeure event, it
shall constitute as a force majeure event and in the absence of such a provision, the same has to
be decided by the courts in case of disputes based on its precedents and already decided tests.
The coming time shall clarify as to whether COVID-19 shall stand declared by the Courts as a
major force majeure event or just an event wherein the contractual obligations become costly to
be performed by the parties and such performance of obligations were delayed for some period
of time.
i
Ministry of Health & Family Welfare, ‘Advisory on Social Distancing Measure in view of spread of COVID-
19 disease’ Available at https://www.mohfw.gov.in/pdf/SocialDistancingAdvisorybyMOHFW.pdf, last visited
on 06th
of April, 2020 at 01:11pm.
ii
PM calls for complete lockdown of entire nation for 21 days, Available at:
https://www.pmindia.gov.in/en/news_updates/pm-calls-for-complete-lockdown-of-entire-nation-for-21-
days/?comment=disable, last visited on 06th
of April, 2020 at 01:22pm.
iii
Order, No. 40-3/2020-DM-I(A), Ministry of Home Affairs, Government of India, New Delhi and No. 1-
137/2018-Mit-II(FTS-10548), National Disaster Management Authority, Government of India, New Delhi, 14th
April, 2020, Available at https://www.ndma.gov.in/images/covid/MHA-Order-for-extending-the-Lockdown-
Period-till-030520.pdf, last visited on 15th
of April, 2020 at 06:52pm.
iv
Order, No. 40-3/2020-DM-I(A), Ministry of Home Affairs, Government of India, New Delhi and No. 1-
137/2018-Mit-II(FTS-10548), National Disaster Management Authority, Government of India, New Delhi, 14th
April, 2020, Available at https://www.ndma.gov.in/images/covid/MHA-Order-for-extending-the-Lockdown-
Period-till-030520.pdf, last visited on 15th
of April, 2020 at 06:52pm.
v
AIR 1954 SC 44; 1954 SCR 310
vi
AIR 1971 SC 1756; (1971) 2 SCC 288
vii
Abhishek Arya & Arvind Thapliyal, ‘India : Doctrine of Frustration’, 29th
June, 2015, Available at
https://www.mondaq.com/india/CorporateCommercial-Law/407868/Doctrine-Of-Frustration, last visited on 07th
of April, 2020 at 08:24pm
viii
Circular on extension on end date by Maharashtra Real Estate Regulatory Authority is available at
https://maharera.mahaonline.gov.in/Upload/PDF/Final%20Order%20for%20Revision%20of%20Duration%20v
4.pdf, last visited on 07th
of April, 2020 at 03:56pm and Karnataka Real Estate Regulatory Authority is available
at https://rera.karnataka.gov.in/reraDocument?DOC=nbHboHdOzsUUksQRs9UF%2Fw%3D%3D, last visited
on 07th
of April, 2020 at 04:01pm

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VII. DISCLAIMER
This article cannot be relied upon as a legal opinion and at all times we recommend the
Promoters to seek the assistance of the Professionals involved in the real estate practice in case
of any queries, clarifications with respect to applicability of force majeure clause due to
shutdown in the wake of COVID-19.
VIII. CONTACT
For any other details, clarifications, assistance, advise and other services, please visit
www.reraconsultants.in; or can get in touch with us at 080 – 2223 3003 or email to
sales@reraconsultants.in