COVID 19 force majeure and it’s effect on the performance of contracts.

As the whole world is struggling to curb the spreading of COVID-19 pandemic in 2019 who would have thought that we will witness a sudden wave of transformations in various fields. It is apposite to say that desperate times call for desperate measures.  The impact of COVID-19 can be seen in the commerce and business also as the lockdowns have vehemently restricted the movement required for these businesses. As they say that every action has an equal reaction thus the above restrictions have influenced the contracts and other liabilities of the businesses forcing them to interpret the force majeure clause.

What is force majeure?

In layman language force majeure can be said to be any unforeseeable circumstances that prevent someone from fulfilling a contract. Even though the word force majeure has never been specifically defined in the Indian Laws, however, one can find the genesis of the same under section 32 of the Indian Contract Act 1872.  

Section 32 Enforcement of contracts contingent on an event happening.—Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened." If the event becomes impossible, such contracts become void.

Thus from the bare reading of the above section, it is apposite to say that the section 32 provides relief to the parties from performing the obligations on the happening of a force majeure / contingent event.  Generally in contract parties through an exhaustive list spell out certain conditions/events because of which the respective parties will be relieved from performing required obligations /liabilities as laid out in the contract.

Doctrine of Frustration

In a contract, it is generally assumed that both the contracting parties have the intention to fulfill the obligations/liabilities as per the contract. However in Doctrine of Frustration the contract becomes null and void due to certain events as a result of which the enforcement of the contract is not at all possible. One can find this doctrine under section 56 of the Indian Contract Act, 1872.

"Section 56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or 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."

The Apex court in numerous cases has held that this doctrine will also not be applicable in cases, where there was a mere delay in performance and contract, can still be performed.

It is pertinent to mention here that the in case of force majeure the contracting parties usually tries to identify an exhaustive list of events due to which enforcement of the contract will be impossible however in the doctrine of frustration entire subject matter or underlying rationale for the contract be destroyed.  If one is confused about the applicability of the above doctrines on his own situation then, in this case, the Apex court has held that in those circumstances wherein a force majeure event has taken place when (that is to say that the event is one of the events mentioned in the exhaustive list in the contract) whereas if a force majeure event occurs dehors the contract, Section 56 of the Act applies.

Conclusion

Due to lockdown courts are hearing matters through video conferencing as a result of which only urgent matters are listed, however, one can expect rise in the commercial cases post lockdown, especially those involving the applicability of force majeure clause. Therefore very soon one can expect the interpretation of the above issue by the courts with regard to the interpretation of section 32 and 56 of the Indian Contract Act with regard to the COVID-19 epidemic.  It cannot be disputed that the onus of proof will be on the party seeking to have it non-performance executed.