PUNEET DHAWAN | Force majeure has been underlined in Black’s Law Dictionary as “an event or effect that can be neither anticipated nor controlled. It is a contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled”. The philosophy behind the idea of Force majeure clause emerged in England. In Taylor v. Caldwell, an English court agreed on the situation that were beyond the control of the two contracting parties and liberate the performance under the contract. The court held rule of law as follows: “In contracts which require the continuous existence of a particular person or a thing, for performance, a condition is implied that the arising of impossibility in the performance, shall excuse the performance”.
Different states have different approaches towards provision force majeure. The not so different at the domestic level, i.e. in France, Cour de Cassation has observed that the civil courts are entitled to hold that an unfair term to be null and void. Also, in the United Kingdom, the court a number of times in the past and in the case of Banif plus bank Zrt v. Csaba Csipai observed “…the national court is required to assess of its own motion whether a contractual term falling within the scope of the Directive is unfair, compensating in this way for the imbalance which exists between the consumer and the seller or supplier.”. Further, in Canada, Canadian courts usually permit the applicability of clause force majeure after looking at several factors.
- Whether the extent of contract’s clause force majeure captures the certain event that has been invoked by the issue.
- Whether non-performance was not anticipatory and whether the risk of non-performance could’ve been lessened; and
- Whether the contractual performance in question has truly been prevented or rendered impossible, rather than merely more expensive.
In the course of no provision, court has observed in the case of Naylor Group Inc v Ellis-Don Construction Ltd that the frustration occurs when a change in course arises for which the contracting parties has made no provision in the contract and performance of the contract becomes ‘a thing radically different from that which was undertaken by the contract’.
The French considers a test before the application of provision force majeure, the three conditions for which defence of force majeure is applicable are: un-foreseeability of the event, external source of the event, irresistibility of the event. The concept of force majeure for many jurisdictions that derive their legal provisions from the Napoleonic Code emerged from the French civil law. In state law systems, such as those of the United States and the United Kingdom, force majeure clauses are acceptable but must be more explicit about the events that would trigger the clause.
Force majeure has not been defined specifically under the Indian statues, but the said clause can be injected in any contract if allowed by the parties, and would typically include an all-inclusive list of events such as
‘Act of God’; ‘War’; ‘Terrorism’; ‘Earthquakes’; ‘Hurricanes’; ‘Acts of Government’; ‘Explosions’; ‘Fire’; ‘Plagues’; or ‘Epidemics’; or a non- exhaustive list wherein the contracted parties would simply unfold what broadly what all-in-all constitutes force majeure events and thereafter provide an addition of “and such other acts or events which beyond the control of parties”. As mentioned above, it would also be inclusive to all the conditions which have been fulfilled for such force majeure clause to be made applicable to the contract. Consequences of the clause would include the termination of the obligations upon the parties during the occurrence of a force majeure event. The “force majeure” term itself doesn’t have to be necessarily included in the agreement between the parties, rather any term specifying to exclude the liability of the parties in an unavoidable scenario shall be considered to have the neutral effect as force majeure clause.
If a contract does not include a force majeure clause or any similar term to exclude the liability of the parties, the parties would have to establish the rule according to the essence of the contract, and the sort of event. Section 56 of the Indian Contract Act (which deals with agreements between the parties from their contractual obligations.) The very first instance of provision of force majeure has been laid down in the seminal decision of Satyabrata Ghose v. Mugneeram Bangur & Co. which provided an insight on the word ‘impossibility’: “If an outward event changes the occurrences of the contract completely and eliminates the very base of the contract which the parties agreed upon. It was further held that where the Court finds that the contract itself either impliedly or expressly contains a term, according to which performance would stand discharged under certain circumstances.”
As the range of the contract act goes, there is no codified form of provision, which restricts the applicability of force majeure clause to contract specific only. On multiple instances the court have decided, that the, provision for force majeure isn’t entirely necessary to invoke the impossibility clause by either of the parties nor mere the existence of force majeure clause would be a definitive remedy for either of the parties. The court similarly observed in Energy Watchdog v. CERC & Ors. and provided that, “Force majeure clauses are to be narrowly construed and a mere rise in price rendering the contract more expensive to perform will not constitute force majeure.”
Whether the applicability of force majeure eliminates the obligation for the parties for eternity or not has been stated out in Mahatma Gandhi Sahakra Sakkare Karkhane vs National Heavy Engg. Coop. Ltd. and Ors. Where the court decided “if the agreement period has been extended with due reasoning or the parties cannot fulfil their obligations stated under the agreement or for any other reason. The parties shall have guarantees extended up-to the corresponding extended period, and failure of the same would amount to breach of contract”.
CONCLUSION
The coronavirus pandemic presents unprecedented challenges and is sure to disrupt contractual relationships. Individuals shall be ready to invoke, and defend against force majeure clauses and nature-like doctrines that may be applicable and allowed to excuse performance. The question of whether having the clause or not depends on the circumstances and the operational work.
Puneet Dhawan is a fifth year student of Fairfield Institute of Management and Studies affiliated to GGSIPU. He can be reached at puneet29.dhawan@gmail.com.
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Cup of Court 