Part 2 – The ritual continues “Force Majeure”

Before reading part 2, hope you have read part 1, if not we suggest check our blog section.

Let us continue, force majeure clauses have to be drafted in specific or general terms depending on business to business, project to project etc., and they can excuse a party from partially or wholly performing its obligations in a contract, permit termination of contracts, or permit its suspension. Its meaning would depend on which law governs the contract and the contract’s specific language. These clauses are risk shifting, meaning that Party A and Party B can agree that one of them will bear the economic damages of the disaster in question, or permit rescheduling or other delays until the force majeure event has passed within a reasonable period, or a specified time agreed upon.

In normal times, nothing of the sort occurred which could bring parties to the table deliberating the clause, but now the situation is totally different performance of “Act’s” are in question due to reasons like:

• Covid19 situations
• Lockdown
• Health Emergencies
• Death of the person supposed to act or perform
• Non availability of resources, skills required to act or perform
• Drastic change in price of supporting components or ingredients and many more

To understand how it works, let us have couple of cases which our best corporate lawyers are dealing as on day and how does it benefit

Case 1 – A branded spectacles company in Delhi – NCR leased a commercial property of a gentlemen say at a lakh rupee per month and while drafting the rental agreement, the smart head of the company appended the “Force Majeure” clause in the agreement, and sought relief for three months of rent giving all the reasons which were published during first wave of Covid19 in India as to government has waived of rentals, economic slowdown, salary cuts etc. along with that, they

• Pushed the owner of property in corner to reduce rent by 25%
• Not to increase the rent on yearly basis as agreed earlier and
• Repeated the same story of rental waiver during 2nd Corona wave

In this situation, we do empathise with owner of the property and advised them while entering into such tight agreements they should get it properly vetted by a qualified real estate lawyer, the agreement should be at least neutral if not totally favouring them, so as either it can be amicably discussed and sorted for the good of both the parties and not burdening only one party, which is the real meaning of “Force Majeure”, while representing our client we found a small window where the company loosely put the terms and are not in sync with what it would entail afterwards.

Case 2 – A media company which is actually a start-up owned by three partners, participated in high value tender banking on the credentials of their parent organisation, was awarded bill board tender, by a Municipal Authority of a city, the startup is now slapped with a notice of Rupees 3.35 crores, since it was pre-decided for the awarded agency to pay at a fixed rate per site per month immaterial of whether the agency did a business in that month out of the allotted sites or not, hence we assigned one of our best startup lawyer in Delhi NCR.for them. The story will continue after a break.