By Udbhav Bhargava
The virus has proved itself to be infectious economically as it is biologically. The present scenario of the coronavirus pandemic is a perfect example that portrays how disease outbreaks can cripple modern economies resting on the foundation of globalization by causing a multi-sectoral chaos, the repercussions of which are global, making their presence felt even in countries not affected from the virus.
In the Indian context, enforcement of containment measures and nation-wide lockdowns has resulted in a significant deprivation of workforce in almost every sector, industrial, tourism, hospitality, automotive, finance, power, construction, or healthcare and has rendered several public amenities like hospitality, malls, multiplexes, supermarkets, hotels, resorts, etc. impracticable dealing an enormous loss to the economy. Force majeure acts as a ray of hope for these hard-hit business ventures.
Usually, a force majeure clause involves discrete events that would qualify as force majeure events, requirements that must have been met for such force majeure clause to apply to the agreement, and the implications of any force majeure occurrence. The clause can be inclusive of new unforeseen events that render the performance impossible or kills the subject matter of the contract. From a contractual context, force majeure provides a party with immediate relief from meeting its contractual obligations when a force majeure incident occurs.
While the lex loci, Indian Contract Act, 1872 lacks specific mention of the concept, section 32 (Enforcement of a contract contingent on an event) and 56 (Frustration) contain reference to this concept. In case of commercial contracts, parties concerned have strictly abide by what is written in the contract as mandated by the court with respect to definition of Force Majeure event. They should be aware and take care of how such an intervening event satisfies the definition of Force Majeure event as per the contract. The procedure of notifying the other party includes giving a detailed notice specifying the occurrence of a Force Majeure event, impact of the event and suspension of underlying obligations till the continuation of the event.
If the contract is silent on it, parties can rely on section 56, that talks about performance rendered impossible by a supervening event. Here, impossibility, as laid down in Satyabrata Ghose vs Mugneeram Bangur and others following judgments, must be construed in strictest manner possible. It means commercial difficulty per se not an impossibility and unviability in terms of price or onerousness in operation would not constitute any impossibility.
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