Pandemic: Excuse for Dodging the Contractual Liability

  • Priya Pandey
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  • Priya Pandey

    Student at Department of Laws, Panjab University Chandigarh, India

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Abstract

COVID-19 was declared a global pandemic on 11 March 2020. To curb its spread, many countries around the world declared national lockdowns on practically all forms of social and business activities. With this, businesses around the world have been affected directly or indirectly by this turn of events and consequentially, the ability of parties to perform their contractual obligations may have been severely affected and impaired. Not surprisingly, there is a rising level of uncertainty as to the enforceability of commercial contracts or transactions which may have been impacted as a result of the national policies adopted to curtail the spread of the virus. Even as the immediate focus for many businesses is to determine how to continue to operate in spite of the challenges, parties to agreements may find themselves in positions where the performance of their contractual obligations are now arguably impossible or onerous to fulfill. As the global economy continues to groan under the effects of the pandemic, it is becoming apparent that parties may seek to delay and/or avoid performance of their contractual obligations and/or terminate contracts, either because COVID-19 has legitimately prevented them from performing their contractual obligations, or because they are seeking to use it as an excuse to avoid an otherwise bad transaction. This article explores when the concept of force majeure and the doctrine of frustration may legally excuse a party from the performance, in light of the disruption caused by the COVID-19 pandemic. The expression ´Force Majeure´ is a French term which literally means ´superior force´. It is a common clause in agreements that free parties from certain liabilities, where an extraordinary event or circumstance which is beyond their control occurs in a manner and way that limits their ability to perform or fulfill their contractual obligations. Force Majeure clauses are drafted to cover an imagined range of supposedly impossible events such as ´acts of God´, floods, earthquakes amongst others, and are relied on to insulate business relationships or contracts from the shock of unexpected, unimaginable or unforeseen happenings. Doctrine of frustration in common law provides a party with an excuse for non-performance of a contract because that party's ability to perform has become severely compromised because of a supervening event. In many respects, it resembles the civilian doctrine of Force Majeure, but there are notable differences. While civil law never accepted that a party could contract to do the impossible, in the early stage of the development of the doctrine of frustration, the common law accepted that impossibility was no excuse for failure to perform a contract. As a result of the COVID-19 pandemic, businesses and economies of countries worldwide have been adversely affected. The government of affected countries has had to roll out measures to combat the pandemic and prevent the spread of the virus.

Type

Research Paper

Information

International Journal of Law Management and Humanities, Volume 4, Issue 3, Page 2363 - 2369

DOI: https://doij.org/10.10000/IJLMH.11635

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This is an Open Access article, distributed under the terms of the Creative Commons Attribution -NonCommercial 4.0 International (CC BY-NC 4.0) (https://creativecommons.org/licenses/by-nc/4.0/), which permits remixing, adapting, and building upon the work for non-commercial use, provided the original work is properly cited.

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