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2020 SCC OnLine Blog OpEd 56

Covid-19 Pandemic : Whether a Force Majeure Event? A Legal

Analysis

COVID-19 PANDEMIC : WHETHER A FORCE MAJEURE EVENT? A LEGAL

ANALYSIS
by
Akber Ahmad and Maria Fatima**
*

When the existence of the novel Coronavirus started featuring in the

news space following China's confirmation of its spread in the month of
January, 2020, it was considered a novel, elusive actuality. It did not
qualify as sufficient cause for concern and alarm which could have
potentially sparked much needed preparations. However, in the past
three months, the number of confirmed cases and resultant deaths due
to Covid-19 (the disease caused by Coronavirus) has risen
exponentially across the globe leading the World Health Organisation
(WHO) to officially declare the corona virus outbreak as a “pandemic”
on 11-3-20201.
In such persisting circumstances, the Government of India, in its
endeavour to contain the extraordinary outbreak of the Coronavirus and
its staggering effects, declared a nationwide lockdown. In the face of
the unprecedented situations which have arisen as a result of the
complete lockdown, many facets of our system find themselves
temporarily inoperative. The disruption of the supply chain is one such
inevitable corollary. Given this context, it is likely that performances
under many existing contracts will be interrupted, postponed or
cancelled. Such state of affairs then throws open many questions viz :
Can the present day situation posed by COVID-19 pandemic qualify as
“Force Majeure”, whether or not parties to the contracts/agreements
can plead for being excused from performing their part of the contract
citing force majeure and how will the contracts/agreements wherein,
there is no specific force majeure clause would be governed in situation
of supervening impossibility etc. This article would attempt to cover
answers to all the afore-mentioned questions in light of the existing
statutory provisions and the law laid down by the various courts of law
in form of case laws.
Meaning of Force Majeure
2
The concept of force majeure owes its origin to Roman Law which
recognised the principle of “clausula rebus sic stantibus” which provides
that obligations under a contract are binding so long as the situation
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existing at the time the contract was entered into fundamentally

remains the same. The term force majeure refers to an event or effect
that can be neither anticipated nor controlled. To put it differently, any
event or circumstance which is within the reasonable control of the
contracting parties does not qualify as force majeure. Legally, it is a
contractual provision allocating the risk of loss if performance becomes
impossible or impracticable, especially as a result of an event that the
parties could not have anticipated or controlled3. From a contractual
perspective, the concept gains significance in as much as it provides
protection to contracting parties in cases of virtual and actual
impossibility of performance of contract. Hence, where reference is
made to force majeure, the intention is to save the performing party
4
from consequences of anything over which he has no control .
Force Majeure and Contract Act, 1872
While the provisions contained in the Contract Act, 1872 neither
define the term ‘force majeure’ nor do they typically spell out the
specific circumstances and events which would qualify as ‘force
majeure events’, nevertheless the references to the same may be
gathered from certain specific provisions laid therein.
In cases where the contract entered into between the parties
contains an express or implied force majeure clause, defining the type
of events, such as war, terrorism, earthquakes, hurricanes, acts of
government, plagues or epidemics etc., the dissolution of the contract
would take place under the terms of the contract itself and such cases
would be dealt with under Section 32 of the Contract Act, 18725. A
force majeure clause should be construed in each case with a close
attention to the words which precede or follow it, and with due regard
to the nature and general terms of the contract. The effect of the clause
6
may vary with each instrument . The relevant provision as contained in
Section 32 of the Contract Act, 1872 is as follows:
32. Enforcement of Contracts contingent on an event
happening.- Contingent contracts to do or not to do anything
if an uncertain future event happens, cannot be enforced by
law unless and until that event has happened. If the event
becomes impossible, such contracts become void.
However, when no relevant event is mentioned in a contract, the
occurrence of which frustrates the very purpose of the contract, the
provision contained in Section 56 of the Act comes into play. Section 56
of the Contract Act, 1872 embodies the “doctrine of frustration”. Briefly,
“frustration” is an English contract law doctrine that acts as a device
which serves to dissolve a contract when, as a result of an unforeseen
instance, the obligations covered by it are rendered impossible to fulfil
or the principal purpose for entering into the contact on the part of
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7
either party is fundamentally altered . Generally speaking, the doctrine
of frustration as embodied in Section 56 is relied upon for termination
of contract. Section 56 of the Contract Act, 1872 reads as follows:
56. Agreement to do impossible act.- An agreement to do
an act impossible in itself is void.
Contract to do act afterwards becoming impossible or
unlawful. A contract to do an act which, after the contract
made, becomes impossible or, by reason of some event which
the promisor could not prevent, unlawful, becomes void when
the act becomes impossible or unlawful.
Compensation for loss through non-performance of act
known to be impossible or unlawful. Where one person has
promised to do something which he knew or, with reasonable
diligence, might have known, and which the promisee did not
know, to be impossible or unlawful, such promisor must make
compensation to such promise for any loss which such
promisee sustains through the non-performance of the
promise.
As is manifest from the perusal of the aforementioned provision, the
first paragraph of Section 56 provides that “an agreement to do an act
impossible in itself is void” while the second paragraph of the same lays
that a contract to do an act becomes void when such an act becomes :
(a) impossible; or (b) unlawful by reason of some event which the
promisor could not prevent. Under Section 56, the court can proceed to
grant relief on the ground of subsequent impossibility when the very
foundation of the contract becomes upset by the happening of an
unforeseen event which was not anticipated by the parties at the time
8
when the contract was entered into by them . Such event or change
must be so fundamental as to be regarded by law as striking at the root
of contract as a whole9. Therefore, where performance is rendered
invalid by intervention of law, or where the subject-matter assumed by
the contracting parties to continue to exist is destroyed or a state of
thing assumed to be the foundation of the contract fails, or does not
happen, or where the performance is to be rendered personally by a
10
person who dies or is disabled, the contract stands discharged . Thus,
in a nutshell, it can be said that where there is clear stipulation in the
terms of the contract upon which the performance of the contract is
dependant, such contracts would be governed by Section 32 of the
Contract Act, 1872 and wherever, there is no such stipulation in the
contract, such contracts would be governed by Section 56 of the
Contract Act, 1872 in cases a supervening impossibility arises. The said
applicability of Section 32 vis-à-vis Section 56 of the Contract Act,
1872 has recently been delved into by the Supreme Court of India as
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an ancillary issue in National Agricultural Cooperative Marketing

11
Federation of India v. Alimenta S.A.
Whether situation posed by COVID-19 pandemic qualifies as
Force Majeure event?
In response to the potential ramifications of the Covid-19 pandemic
in the functioning of the economic and industrial machinery,
notifications and advisories have been issued by the Government of
India in an attempt to bring in some semblance of stability.
For instance, on 19-2-2020, the Ministry of Finance, Government of
12
India issued a notification clarifying that the disruption of supply
chains due to the spread of coronavirus should be considered as a case
of natural calamity and force majeure clause may be invoked, wherever
considered appropriate, following due procedures. The aforementioned
notification further stipulates that “coronavirus should be considered as
a case of natural calamity and force majeure may be invoked, wherever
considered appropriate, following the due procedure…a force majeure
clause does not excuse a party's non performance entirely, but only
suspends it for the duration of the force majeure. The firm has to give
notice of force majeure as soon as it occurs and it cannot be claimed ex
-post facto…If the performance in whole or in part or any obligation
under the contract is prevented or delayed by any reason of force
majeure for a period exceeding ninety days, either party may at its
option terminate the contract without any financial repercussion on
either side”. However, the aforesaid Office Memorandum may not
necessarily or implicitly serve as binding document for the contracting
parties, being more in the form of an advisory or recommendation.
In addition to the above, the question as to whether COVID-19
outbreak along with its consequential restrictions including the
quarantines, travel restrictions or other related limitations on normal
business imposed by government would qualify as force majeure, would
depend on the language of the clause and the rules of legal
13
interpretation of force majeure clauses . Hence, the wordings used in
different clauses of the contract assume salience in order to find out as
to whether or not parties to the contracts/agreements can plead for
being excused from performing their part of the contract citing force
majeure given the situation posed by the COVID-19 pandemic. For the
aforesaid purpose, further discussion in this article is broadly
categorised into two headings — (i) Firstly, cases where force majeure
clause is enshrined in the contract itself, and (ii) Secondly, cases where
force majeure clause is not enshrined in the contract.
1. If Force Majeure Clause is enshrined in the Contract
Pertinently, if the force majeure clause in the contract refers to a
pandemic or an epidemic, the same may be pleaded and urged by
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contracting parties where performance of the contract entered between

them has become practically and commercially impracticable on
account of COVID-19 outbreak. Where a contracting party seeks to
claim relief under the force majeure clause, the occurrence of one of the
events set out in the force majeure clause is needed to be proved and
the burden of proof lies on the party which invokes the force majeure
clause.
Now, in contracts where the force majeure clause explicitly covers
pandemics and epidemics or situations arisen by responses to the
pandemic or epidemic, the discharge of the aforementioned burden
remains fairly uncomplicated. However, complications arise in a
scenario where a force majeure clause simply uses the phrase ‘event
beyond the reasonable control of parties’. Here, to facilitate swift and
favourable discernment of disputes, it becomes vitally important for the
party invoking the force majeure clause to maintain any and all
documents related to the event in question which may prove to be
consequential in the ascertaining process. In regard to this discussion,
the said documents may include (i) any notification and/or guideline
issued by the national and/or state governments imposing restrictions
on trade, (ii) definite forms of information from reliable media sources
related to COVID-19 outbreak, restrictions on public movement and/or
mandatory shutdown of modes of travel (iii) documents revealing any
cancellations disrupting travel itinerary, such as cancelled/rejected visa
et al.
2. If Force Majeure Clause is not enshrined in the Contract
As has been discussed earlier, when an event which is not
mentioned in the contract takes place which frustrates the very purpose
thereof, the provision contained in Section 56 of the Contract Act, 1872
shall come into play. The Supreme Court of India, while explaining the
concept of frustration in contract law in Satyabrata Ghosh v.
14
Mugneeram Bangur & Co. has held that the word “impossible” has not
been used with respect to physical or literal impossibility. Where an
unexpected occurrence or change in circumstances decimates the very
objective of the contract the same may be considered as “impossibility”
to do as agreed.
A study of the landmark judgments rendered by the Supreme Court
of India over the course of time showcases a very high threshold to
apply the concept of force majeure which requires the entire foundation
of the contract to be shown to be obliterated. An existing contract shall
cease to bind the contracting parties only when consideration of the
terms of the contract, in light of the circumstances existing when it was
entered into, shows that there was no agreement to be bound in a
fundamentally different and unexpected situation. The performance of a
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contract is never discharged merely on the ground that the same may
15
become onerous to one of the parties . In order elucidate and highlight
the threshold defined by the Indian courts for citing force majeure by
contracting parties, certain celebrated judgments rendered by the
Supreme Court are discussed below:
In Satyabhrata Ghose case (supra), it was held by the Supreme
Court of India that the contract of sale for a chunk of land was not
frustrated and performance thereunder could not be said to be
rendered impossible under Section 56 of the Contract Act, 1872
merely because the said land had been requisitioned by the
Government for military purposes during the Second World War. The
Supreme Court even went ahead to observe that during the war, the
parties could naturally anticipate restrictions of various kinds which
would make performance under contracts more difficult than in times
of peace and therefore, the requisitioning of the land which formed
the subject matter of the contract of sale could not be said to affect
the fundamental basis upon which the agreement rested or strike at
the roots of the adventure.
16
Likewise, in Alopi Parshad & Sons Ltd. v. Union of India , the claim
of the appellant for enhanced prices for supply of ghee for Army
personnel during the second world war was rejected by the Supreme
Court despite enormous scarcity and enhanced procurement expenses
owing to conditions of war and it was categorically held by the court
that the parties to an executory contract are often faced with a turn of
events which they did not at all anticipate, such as, an abnormal rise or
fall in prices, a sudden depreciation of currency etc. However, the same
does not per se affect the bargain they have made.
17
In Naihati Jute Mills Ltd v. Hyaliram Jagannath while observing
that it is not hardship or inconvenience or material loss which brings
about the principle of frustration into play, the Supreme Court held that
rejection of an import licence to a jute supplier sourcing Pakistani jute
could not be said to have rendered performance under the contract
entered into between the parties as impossible.
More recently, in Energy Watchdog v. Central Electricity Regulatory
18
Commission the rise in price of coal consequent to change in
Indonesian Law, which though admittedly rendered the contract
commercially impossible, was not treated as a force majeure event by
the Supreme Court as neither was the fundamental basis of the
contract, which in this case was to generate and supply energy from
coal, was shown to be dislodged nor was any frustrating event, except
for a rise in the price of coal, pointed out. On the contrary, the Court
observed that where alternative modes of performance of obligations
under the contract were available, albeit at a higher price, the same
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could not be treated to have been frustrated.

Conclusion
There is no gainsaying that the behemoth of COVID-19 has inter alia
virtually brought economic activity to a halt and has disturbed the
chain of production, supply and distribution. However, it would be
extremely difficult, if not impossible; to prove beyond reasonable doubt
that disruptions qua unprecedented outbreak of COVID-19 pandemic
have radically and irreversibly dislodged the very bargain contemplated
in a contract, particularly in view of the temporariness of such
disruptions or for that matter the full probability of resumption of the
“pre-Corona” times. Mere inconveniences, difficulty, pause or delay in
performance of obligations under a contract owing to COVID-19
pandemic and its consequential restrictions would not hold ground to
treat the same as a force majeure event given the little judicial
importance offered by the courts of law to such parameters while
defining the high benchmark for force majeure to apply. However, given
that the Courts would assess the application of concept of force
majeure in light of the facts and circumstances of each case presented
before them, by either resorting to principle of equity or by adopting a
more technical approach, it would be imperative for the contracting
parties be thorough with the terms and clauses incorporated in the
contract as well as their contractual rights and obligations thereunder.
———
*
Author is a graduate of University of Cambridge (United Kingdom) with a specialisation in
Commercial Laws. Currently practicing law before the Lucknow Bench of Allahabad High Court.

**
Co-Author is a gold medallist in law from Unity Post Graduate and Law College
Lucknow (affiliated to Lucknow University, Lucknow). Currently practicing law before
the Lucknow Bench of Allahabad High Court.

The authors deeply acknowledge the guidance of Mr. Gaurav Mehrotra, Advocate

1 th
See World Health Organisation Virtual Press Conference on Covid-19, 11 March 2020
available at https://www.who.int/docs/default-source/coronaviruse/transcripts/who-audio-
emergencies-coronavirus-press-conference-full-and-final-11mar2020.pdf?sfvrsn=cb432bb3_2

2
The term force majeure has been borrowed from French, the literal translation whereof is
“superior force” in English.

3
Black's Law Dictionary, 11th Edition, at page 788.

4
Dhanrajamal Gobindram v. Shamji Kalidas & Co., (1961) 3 SCR 1020

5
Satyabrata Ghose v. Mugneeram Bangur & Co., (1953) 2 SCC 437 : 1954 SCR 310
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6
Lebeeaupin v. Crispin, [1920] 2 K.B. 714

7
Taylor v. Caldwell, (1863) 3 B&S 826

8
Naihati Jute Mills Ltd. v. Khyaliram, (1968) 1 SCR 821

9
Satyabhrata Ghose v. Mugneeram Bangur, (1953) 2 SCC 437 : 1954 SCR 310

10
Raja Dhruv Dev Chand v. Harmohinder Singh, (1968) 3 SCR 339

11
2020 SCC OnLine SC 381

12
Office Memorandum No. F. 18/4/2020-PPD titled ‘Force Majeure Clause’, issued by
Department of Expenditure, Procurement Policy Division, Ministry of Finance, Government of
India

13
Mulla & Pollock on Indian Contract Act, 1872 & Specific Relief Act, 1967, page 1181.

14
(1953) 2 SCC 437 : 1954 SCR 310 (12)

15
Alopi Parshad & Sons Ltd. v. Union of India, (1960) 2 SCR 793

16
(1960) 2 SCR 793

17
(1968) 1 SCR 821

18
(2017) 14 SCC 80

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