Covid-19 has dramatically changed the Indian Economic pattern. The everyday productive activities where social and physical movements were seen as staple elements have been completely truncated. The commercial sphere is now dependent on online and virtual communication to somewhat continue production; however, the impact of the restricted movement is felt no less. The Covid induced quarantine has forced people into their homes, it has stopped salaried employees from reporting at their jobs, non-essential government personnel’s from performing diurnal functions, and put multiple restrictions on commercial contract holders, struggling to somehow discharge their obligations. The Indian contractual sector has seen a major setback from the virus and the lockdown initiated in its response. The governmental notification mandating everybody to not step out of their houses has made it extremely difficult for all contract holders to maintain their commercial commitments. The unforeseen change allows significant space to advocate the force majeure as well as frustration clauses to negate contractual responsibilities. The global recognition of the virus as a pandemic and the Indian government’s notification advising citizens to treat it as an unanticipated event beyond any party’s control has provided enough substance for the force majeure clauses to be invoked. The government itself has used the force majeure principle to extend contractual periods for renewable energy agreements. Accordingly, the aim of this feature is to analyze the need and enforceability of force majeure clauses in the global Covid stage and other aspects available to mitigate the damages currently faced by the commercial sector.
Impact and Overview
The major supply chain disruption caused by the pandemic has resulted in a number of interruptions and delays for contractual arrangements. An unforeseen and uncontrollable event that displaces all the requirements to necessitate obligations, must be negated with a reasonable construct for contract termination without the consequences of a breach. The force majeure element essentially subscribes to such situations. The concept may not be present in skeletal form in the ICA, nonetheless, its application is extracted from section 56 of the said act. A force majeure provision essentially excuses or temporarily amends all contractual obligations; a napoleon code for events beyond prevention. The concept goes past acts of god restraints, covering every determinant unanticipated and outside the control of the parties. The most essential requirements to utilize force majeure provisions are:
a) The existence of a valid contract,
b) The contract’s application must be provisionary and for the future,
c) The obligations become unenforceable due to law or facts.
The clause talks of amending the contractual provisions for an agreement; nevertheless, those obligations not affected by the unanticipated event in question, must be performed. The concept does not unilaterally impose on all parts of a contract, but on only those hit by uncertainty. The parties claiming relief under the force majeure clause must prove from a subjective viewpoint that the pandemic has made it impossible for them to carry out their functions. The clause does not objectively apply overall contracts nor does it have an overarching usance for a particular industry. All parties trying to extend contractual periods or excuse their responsibilities need to individually prove substantial reasons for nonperformance.
Covid-19 is provisionally undefined, accordingly a previously unexpected change that chiefly disrupted a few sectors of the economy was the 2016 demonetization. The Indian government without any notices invalidated two major currency notes of the country. Many sectors of the economy, such as real estate and Industrial construction to name a few, are mostly cash-based, which saw their most essential mode of the transaction get rescinded overnight. The Central Electricity Regulation Committee, a governmental body recognized that Demonetization, though not an act of god was an unpredictable event that made carrying out particular contractual obligations impossible. The acknowledgment precedented a very wide sector of recognition for force majeure events, governmental initiatives were adhered to inclusive. The regulation committee’s ad missal was contrary to the narrow understanding of force majeure clauses by the apex court in Energy Watch Dogs v. CERC. The Indian Commercial sector recognized a new idea for force majeure clauses, delineating the earlier very narrow outlook.
The Indian government has recognized the impacts of the global pandemic. It acknowledges that the lockdown, a necessary exercise to control the spread of the virus has extensively disrupted the economies’ supply chain. The Ministry of finance very recently issued a memorandum recognizing any delays in contractual supplies or obligations with China or any other country due to the virus will be allowed relief under respective force majeure clauses. The contracting parties need not situate obligatory breaches to get extensions or excuse themselves from their now impossible to perform responsibilities. Accordingly, the Ministry of new and renewable energy with respect to their solar energy projects issued a notice recognizing Covid-19 as a global pandemic and allowed all contractors to obtain necessary succor through the force majeure agreements in their contracts.
These governmental efforts come at a time when recognition of the struggling contract-based commercial sphere has become imperative. In an attempt to alleviate some of the impetuous strains upon many contract holders, a governmental recognition to invoke force majeure clause even though temporary is a substantial form of reposition.
The force majeure clause in agreements substantiates, some if not all, losses from impossible obligations. The pandemic has in many parts not just disrupted but immobilized the supply chain. The amount of diminution caused due to restricted economic movement, cannot all be controlled; however, such contractual arrangements provide some breathing space to the agreeing parties. There is no simple procedure to utilize the force majeure provision; nevertheless, a few factors must be kept in mind. The terms of the agreement must be reviewed and assessed to substantiate the ‘rule of excuse.’ Any and all alternative measures, if possible, must be utilized to carry out the contractual obligations. The notice method must be adhered to for all formalities, while evidence must be presented by the party interested in applying the clause that the pandemic has negated all ways to carry out their obligations. The records for unaccounted expenditure from the economic slowdown must be maintained. The last but equally important provision is to document and record all governmental notifications as a preventive measure for future litigation or arbitration. The coronavirus has caused extensive losses to both life and business, the commercial sector, much like all other parts of the economy is deeply affected. However, while adhering to some of the basis of norms of business, the force majeure clause can substantially negate the losses from uncertainty. The current field requires preventive action to maximize control of collateral damage. The force majeure element is one of the few most substantial factors available, if utilized in adherence to the legal mandates, to substantiate all primary and unforeseen losses and unequivocally support the economies’ movement.
 The Quint, Force Majeure: Why coronavirus hit firms won’t be sued to death, March 25,2020 available here
 Energy Live news, India invokes Force Majeure Clause as renewable supplies face disruption, March 31,2020, available here
 The Indian Contract Act, 1872, §§ 56.
 Pollock and Mulla, The Indian Contract and Specific Reliefs Acts, Vol.2, 1361 (31st ed., 2012).
 Mondaq, India: Impact of Covid-19 on Indian Commercial contracts, April 4, 2020, available here
 Singhania and Partners, Impact of Covid-19 on Indian Commercial Contracts, March 27, 2020, available at here
 Field Fisher, Covid-19: Effect on Commercial Contracts, April 2,2020, available here
 Supra note. 5.
 Government of India, Central Electricity Regulatory Commission, F No. 27/MP/2018, available here
 Energy Watchdogs v. Central Electricity Regulatory, AIR 2017 SC 378.
 India Corporate Law – Cyril Amarchand Mangal Das, Covid-19 officially a pandemic, March 18,2020, available here
 World Health Organisation, India ramps up efforts to contain the spread of the novel coronavirus, March 11,2020, available here