Part 1 – The ritual clause “Force Majeure”

The ritual clause “Force Majeure”

An event or effect that can be neither anticipated nor controlled

Being one of the best Corporate Law Firm in Delhi NCR , we do tons of contracts, agreements for various Government entities, enterprise clients, software firms, IT vendors, contractors, subcontractors, consultants etc covering terms like civil designs, stress load, EULA, PIP, kick off and what not its was kind of ritual for all the clients normally while bidding, negotiating, signing contracts to add a clause “Force Majeure”

Yes, it’s a ritual clause for most of the agreements to embed “Force Majeure” clause into the agreements

Since its a ritual, most of the client don’t realise the value and power of the word “Force Majeure”, as to where, when and how it should be triggered, I guess since most of the clients don’t encounter situation which were part of its real explanation

So, what is Force Majeure?

From a contractual perspective, a force majeure clause provides temporary (permanent in some conditions) reprieve to a party from performing its obligations under a contract upon occurrence of a force majeure event, example of such events: war, riots, earthquakes, hurricanes, lightning, and explosions, are force majeure events. The term also includes energy blackouts, internet blackouts, unexpected legislation, lockouts, slowdowns, and strikes etc. and Coronavirus recently.

How it can be dealt in India, briefly

Under section 56 The Indian Contract Act, 1872

“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.”

and

Under, Section 32 in The Indian Contract Act, 1872

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. —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.

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 earlier or have control over.

Is it Necessary to have such clause?

It is not necessary, we know being one of the top Law Firm in Delhi NCR,since The Indian Contract Act, 1872 does not provides any waiver or temporary suspension of obligations under a contract nor it defines “Force Majeure”, it truly depends on assessment of contract, nature of business, performance and other related aspects and drafting of conditions accordingly.

However, having team of best corporate lawyers in Delhi NCR and remaining within topic of day, parties cannot rely on force majeure if there is no such clause in the contract. If such a provision exists, the effect of the clause depends on how the clause is drafted, what benefit or waiver it could give, and courts generally review the plain language of the contract to determine if it is applicable in situation. We will delve further in case study in the next part.