This article is written This article is written by Khushboo Sharma, LLB student of Campus Law Centre, Delhi University during her internship with LeDroit India.
Introduction
The word “Force Majeure” means “superior force”. This word is a French term equivalent to “Vis Majeure”. Black’s Law dictionary defined “Force Majeure” as ‘an event or effect that can be neither anticipated nor controlled‘. The term includes both acts of nature (e.g. floods and hurricanes) and acts of people (e.g. riots, strikes and wars).
Black’s Law Dictionary defines force-majeure clause as ‘A contractual provision allocating the risk if performance becomes impossible or impracticable, esp. as a result of an event or effect that the parties could not have anticipated or controlled.’
If a company fails to fulfil any terms of a contract or attempts to do so but results in loss or damages of goods which are beyond its control, may enter Force Majeure clause. The concept of Force Majeure clause is, if an act becomes impossible for performance, this clause exempts that party for performance, due to intervention of superior force.
Force Majeure has not been defined in Indian Statutes but the legislators has dealt to some extent with this concept through Section 32 of the Indian Contract Act, 1872; which states as:
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.”
If an event occurs of Force Majeure under contract, then as per contractual perspective, this clause provides pardon to the party from performing its obligations.
Essentials of Force Majeure
- There must be some unforeseen superior intervention has been occurred,
- The parties who entered into an agreement has assumed that the intervening event will not occur,
- If an event has occurred, it would have made the contract impossible to perform,
- All the measures should have been taken into consideration for mitigating the damage or loss,
- The affected party can claim relief under force majeure,
- The burden of proof will lie on the affected party that an event has affected such party’s performance of the contract.
This clause is also related to Section 56 of the Indian Contract Act, 1872:
Section 56 of the Indian Contract Act, 1872 reads as follows:
“Agreement to do impossible act. Contract to do an 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. Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non performance of the promise.
Primary Ingredients of Section 56:
- The contract must be valid,
- The performance of the contract or is yet to be made,
- The performance becomes impossible to perform by any fact or law.
Section 56 deals with two distinct levels:
- All agreements to do impossible acts will be considered as void, and
- It considers a situation wherein a lawful act has subsequently become impossible or unlawful to perform.
Having analyzed the ingredients if Section 32 and Section 56 of the Indian Contract Act, 1872, it is pertinent to note that where the contract itself, as a matter of construction, contains impliedly or expressly a term according to which it would stand discharged on the happening of certain circumstances, the question of dissolution of the contract according to its term falls to be determined under Section 32 and not under Section 56 of the Indian Contract Act, 1872. Under the English law, they are all treated as cases of frustration, but under the Indian law such cases would fall under Section 32, which deals with contingent contracts.
Conclusion
To analyze the Force Majeure application, following points needs to be taken into consideration in order to check whether Force Majeure is attracted or not:
- Whether a contract contains force majeure clause or not?
- If the contract contains Force Majeure clause, Section 32 of the Indian Contract Act, 1872 is attracted.
- If the contract does not contain Force Majeure clause, Section 56 of the Indian Contract Act, 1872 is attracted.
If a party establishes that it has caused damage or loss due to intervention of superior force then it will be relieved from its obligations to perform till the supervening Force Majeure subsists; the affected party will be suspended from the performance of its obligations and is relieved of its liability to pay damages for breach of contract as the act was impossible; and as per Section 56 of the Indian Contract Act, 1872, renders void all agreements which are impossible to perform.
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