Author Details:-

Arjit Kumar
Chotanagpur Law College Ranchi
1st Year, LLB

Introduction

“Imagine signing a multi-million dollar contract, only to have a once-in-a-century pandemic render it impossible to fulfill”. This nightmare scenario became reality for countless businesses in 2020, thrusting the legal concept of Force Majeure into the spotlight.

Understanding Force Majeure

Legal Concept

Force Majeure refers to unforeseeable, unavoidable, and external events or circumstances beyond the control of the parties to a contract, which prevent or delay the fulfillment of contractual obligations. Commonly recognized in legal, commercial, and insurance contexts, these events may include natural disasters, wars, strikes, government actions, pandemics, or other extraordinary situations that make performance impossible or impractical. Force Majeure clauses, when included in contracts, protect parties from liability for non-performance or delays caused by such events.

History

The concept of Force Majeure, often referred to as an “Act of God^[1],” has evolved over centuries to address unforeseen disruptions in commerce and contractual obligations. Its origins trace back to Roman law under the principle of vis major^[2], which excused individuals from liability in cases of natural disasters or unavoidable calamities. Another significant Roman legal maxim, ad
impossibilia nemo tenetur^[3] , further emphasized that parties cannot be held accountable for events beyond their control.[1]

By the 17th and 18th centuries, the doctrine of Force Majeure became integral to French civil law, especially under the Napoleonic Code^[4]. French courts meticulously defined the conditions under which parties could be excused from contractual liability, emphasizing that the event must be unforeseeable, irresistible, and external. These criteria established a foundation for modern interpretations of Force Majeure in civil law jurisdictions.

In the 20th century, international legal bodies such as the United Nations Commission on International Trade Law (UNCITRAL) and the International Institute for the Unification of Private Law (UNIDROIT) integrated Force Majeure into global trade principles to ensure consistency in cross-border agreements. As globalization intensified, multinational enterprises—particularly in sectors like energy, construction, and insurance—adopted more precise Force Majeure provisions to address complex international risks. [2]

Force Majeure & Indian Contract Act 1872

The concept of Force Majeure, originating from French civil law, refers to unforeseen events that prevent parties from fulfilling their contractual obligations. While the term itself is not expressly mentioned in the Indian Contract Act, 1872, its essence is embodied within certain provisions of the Act, notably Sections 32 and 56.

Section 32 deals with contingent contracts—agreements contingent upon the occurrence or non-occurrence of a future uncertain event. It states that if a contract is contingent on the happening of an event, it becomes void if the event becomes impossible, this provision aligns with the principle of Force Majeure by acknowledging that certain unforeseen events can nullify contractual obligations when they render the performance impossible.

Section 56 addresses the doctrine of frustration of contract. It stipulates that an agreement to do an act impossible in itself is void. Furthermore, if an act becomes impossible or unlawful after the contract has been made, and the promisor could not prevent the event leading to impossibility, the contract becomes void. This section is crucial in situations where performance is hindered by events beyond the control of the parties, such as natural disasters, wars, or legal prohibitions—circumstances typically classified under Force Majeure.

Indian jurisprudence has interpreted these sections to incorporate the principles of Force Majeure. In the landmark case of Satyabrata Ghose v. Mugneeram Bangur & Co. (AIR 1954 SC 44), the Supreme Court elucidated that the doctrine of frustration under Section 56 is not confined to literal impossibility but extends to situations where the fundamental basis of the contract is disrupted. The Court emphasized that impossibility under Section 56 includes impracticability and futility due to unforeseen events. [3]

COVID-19 and Force Majeure

The outbreak of the COVID-19 pandemic has posed unprecedented challenges to contractual relationships globally, and India is no exception. The pandemic’s disruptive impact on businesses and supply chains has brought the concept of Force Majeure into sharp focus within the Indian legal framework.

Standard Retail Pvt. Ltd. v. G.S. Global Corp & Others, the Bombay High Court considered a plea where the petitioner sought to prevent the respondents from invoking letters of credit due to delays caused by the lockdown. The court refused to grant an injunction, emphasizing that the mere occurrence of the lockdown did not void the contract. It held that financial difficulties or economic hardship do not constitute a Force Majeure event unless explicitly stated in the contract’s Force Majeure clause[4].

In another significant case, Halliburton Offshore Services Inc. v. Vedanta Limited & Anr., the Delhi High Court examined whether the pandemic could activate the Force Majeure clause in an offshore drilling services contract. The court recognized COVID-19 as a Force Majeure event under the specific terms of the contract and granted interim relief by restraining the encashment of bank guarantees. This case underscored the critical importance of precise contractual language in Force Majeure clauses[5].

In M/s Indrajith Power Private Limited v. State of Tamil Nadu & Others, the Madras High Court addressed delays in project completion caused by the pandemic. The court acknowledged COVID-19 as a Force Majeure event and granted an extension for fulfilling contractual obligations, highlighting judicial recognition of the pandemic’s impact on contractual performance[6].

References:-

1. L. Sue Baugh, Force Majeure, Encyclopædia Britannica,  (last visited Oct. 3, 2024).

2. UNIDROIT Principles of International Commercial Contracts (2016), (last visited Oct. 3, 2024).

3. Adarsh Saxena, Aditya Sikka & Drishti Das, Force Majeure in the Times of COVID-19, Cyril Amarchand Mangaldas Blogs,  (last visited Oct. 3, 2024).

4.Standard Retail Pvt. Ltd. v. G.S. Global Corp & Ors., (2020) SCC OnLine Bom 678 (India).

5.Halliburton Offshore Services Inc. v. Vedanta Ltd. & Anr., (2020) SCC OnLine Del 542 (India).

6. M/s Indrajith Power Pvt. Ltd. v. State of Tamil Nadu & Ors., (2020) SCC OnLine Mad 939 (India).