Covid-19, its implication and force majeure - by Vishnu Langawat
Covid-19 has been declared a worldwide pandemic by WHO and because of
which manufacturing, trading and all other commercial activities across the
globe came to halt and created an act or event which is phenomenal and never
witnessed in human history as far as I remember. The Parties are invoking
force majeure clause and claiming excuse to perform the contractual obligations
whereas parties on other hand are taking pleas that it’s not a force majeure
event and parties can still perform their contractual obligations as enumerated
in the contracts. I was researching all these legal aspects and here is my
small note on the subject.
The Indian Contract Act, 1872 as such has no word “force majeure”, however, its concept can be traced in
Section 56 of the Indian Contract Act which says that “an agreement to do an
act impossible in itself is void”, which is more or less based on “doctrine of
frustration” of contract. The concept of force majeure has
its origins in Roman law. Roman Law by “vis major” or “vis divina” grant excuse
to a debtor to perform upon unforeseeable and irresistible events. This concept
was later on adopted in civil law countries which dates back to 1804
(Napoleonic Civil Law)[1].
In stricto sensu, force majeure is a
concept of civil law, therefore, there is no direct reference of it in the
Indian Contract Act which is based on Common Law. Furthermore, prior to the
decision in Taylor v. Caldwell {EWHC QB J1}, in England, parties in
the contract were held to be absolutely bound and a failure to perform was not
excused by the change of circumstances, however, by this decision, Justice Blackburn established the doctrine of common
law impossibility by holding that if some unforeseen event occurs during the
performance of a contract which makes it impossible of performance, in the
sense that the fundamental basis of the contract goes, it need not be further
performed as insisting upon such performance would be unjust.
In India, the first significant decision on these aspects was made by
Supreme Court in the case of Satyabrata Ghose v Magneeram
Bangur & Co., & Anr {AIR 1954 SC 44} wherein the court held
that Section 56 of the Contract lays down a rule of positive law and does not
leave the matter to be determined according to the intention of the parties. In
this case, Supreme Court further held that where the court gathers as a matter
of construction that the contract itself contained impliedly or expressly a
term, according to which it would stand discharged on the happening of certain
circumstances, the dissolution of the contract would take place under the terms
of the contract itself and such cases would be outside the purview of Section
56 and shall be dealt under Section 32 of the Act which deals with contingent
contracts etc.
It has consistently been held by courts in India that the doctrine of
frustration has to apply in a narrow sense and where performance is otherwise
possible it cannot be claimed by the other party that the contract was
discharged by impossibility of performance. It is also a settled law that only
because contract becomes onerous would not discharge the party from performance
of the contract, only in case, where the very foundation of the contract on
which it is based is altered, the doctrine of frustration can come in rescue,
however, in all other cases, the party has to perform its part of the bargain as
they have entered into a contract by their own free will and set out all the
terms governing their contractual relationship[2].
Despite the fact that the Central Government has termed “covid-19” as a
disaster and invoked its power under the Disaster Management Act, 2005, parties
are required to analyse its impact on the contract, its performance and if
there is no other alternative way to perform its part of the bargain, force majeure clause can come to its rescue otherwise
not.
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