Contracts amid Covid-19 Pandemic: The Need for a Well Defined and Non-Exhaustive Force Majeure Clause in Contracts
Volume IV, Issue I, 2021
The Covid-19 pandemic and the lockdowns have affected the entire World catastrophically and have had a devastating effect on the economy. Fulfilling contractual obligations, in particular, became a challenge as the restrictions imposed made the performance of contracts impossible. Unforeseen and supervening events that can render the performance of contracts impossible and impractical can occur at any point in time. It is this uncertainty that is covered by the defences of Force Majeure and the Doctrine of Frustration. However, an analysis of precedents affirms that due to the high standards of frustration propounded by the Indian Courts and the absence of a provision expressly defining Force Majeure, it is impossible to positively state that a pandemic and a government-imposed lockdown would fall within the ambit of the said defences. Section 32 of the Indian Contract Act, 1872 governs the concept of Force Majeure but does not define it. Hence the scope of invoking the defence is determined by the language of the Force Majeure clause, which, if not drafted accurately, will forbid the parties from claiming its defence. These defences aim at protecting the welfare of contracting parties, but ambiguity concerning its application will only further the hardships endured by the parties. This paper analyses the concepts of Force Majeure and Frustration by conducting doctrinal research using legislation and case laws and suggests that the only way to tackle the issues that arise while invoking the force majeure clause is to ensure that the clause is drafted in a non-exhaustive way. Though this paper’s primary focus is the defence of force majeure, the doctrine of frustration is also analysed to emphasise the need to have an all-inclusive force majeure clause in the contract.
Keywords: Covid-19, contracts, force majeure, frustration, pandemic, lockdown.