Understanding the force majeure clause in tenancy agreements

Chandana.L

A force majeure clause is used by the different sectors of the economy differently. From a business perspective, a force majeure clause is inserted to avoid the events which are uncontrollable (war). Whereas from a company perspective, a force majeure clause is inserted by the company in its contract to relieve itself from the liability when it cannot fulfil the terms of the contract when an event occurs which is beyond its control. Force majeure includes both the acts of nature (flood) and acts of people (war).

The relevance of the Force Majeure clause in tenancy agreements

The tenant can obtain the benefit of force majeure clause only if the tenant fulfils the below-mentioned conditions:

In Ramanand & Ors v Girish soni & another (2020) In this case an important question was raised whether the lockdown would entail the tenants to claim waiver or exemption from payment of rent or suspension of rent. The court in determining whether the tenants are entitled to any relief of suspension the following factors have to be taken into account

1. The nature of the property of the landlord.

2. The financial status of the parties.

3. The amount of rent which has been agreed by the tenant.

4. Any contractual arrangements which have been agreed by the parties.

5. And to check whether the tenants are protected under the executive orders.

The court concluded and gave its opinion that suspension of rent is not possible in this case based on force majeure event but the court may grant some relaxations in the payment of the rent considering the lockdown.

Can the doctrine of frustration be invoked by the lessee?

Section 56 of the Indian Contract Act, 1872 defines frustration of contract as when the performance of the contract becomes impossible due to the reason of the supervening event, and for such reason, the promisor is excused from the performance of the contract.

The term impossibility does not merely include the physical impossibility to perform the contract but it also covers where a contract becomes impossible due to changed circumstances the performance would not fulfil the object which the parties had in mind.

Dhruv Dev Chand v Harmohinder Singh and Another (1968) In this case the court held Section 56 of theIndian Contract Act, 1872 is not applicable where there is a complete transfer of the property and where the rights and obligations of the parties arising from the transfer of the property. The lessee can invoke Section 108B(e) of Transfer of Property Act, 1882 when there is no express mention of a force majeure clause in the contract. The above views were also upheld in the case of Trustee M. Rama- Nanda Nainar and Ors. v. T. S. A. Hamid and Another (1959)

The order was passed by the Ministry of Home Affairs in March 2020 that there is a waiver of obligations under the lease, reduction of rent during the lockdown.