Sonu Mehtha
On account of the ongoing COVID-19 pandemic, almost every business has struggled with following the terms of contracts that were agreed upon long before the novel coronavirus was even discovered, let alone foreseen as the cause of a worldwide health crisis. This has inevitably led parties to a contract to invoke the force majeure clauses present in their contract invoking the idea that the COVID-19 pandemic is an unforeseeable “Act of God” that has hindered the ability of parties to perform their duties as agreed in the contract.
Force majeure is derived from a French word that translates literally to mean superior force. Force majeure is a saving provision that is agreed upon by parties to a contract to exclude extraordinary events or circumstances beyond the control of parties to a contract and typically includes events described as acts of god or natural disasters, war or war-like situations, labor unrest or strikes, epidemics or pandemics. The intention of a force majeure clause is to save the performing party from consequences of something over which it has no control.
Almost in all multinational contracts, Article 79 of the United Nations Convention on Contracts for the International Sale of Goods (“CISG”) decides the applicability of the concept of Force Majeure. In India, where a force majeure event occurs in a contract, it is dealt with by Section 56 of the Indian Contract Act, 1872.
The following aspects are relevant while considering the implications of COVID-19 on contractual obligations: -
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