What is force majeure?
Force majeure is a French term that means “greater force.” It is related to the concept of an act of God. Force majeure is a clause included in a contract to remove the liability of a party in a contract; who is unable to perform the terms of the contract due to unavoidable and unforeseeable events.
The law relating to Force Majeure is incorporated under Sections 32 and 56 of the Indian Contract Act, 1872. It is a contractual provision agreed upon between parties. The main objective of the clause is to protect a party from the consequences over which the party has no control. Force Majeure is an exception to what would generally amount to breach of contract.
COVID-19 or coronavirus has made the terms force majeure more prominent in the present situation. As we all know the world has kneeled before this deadly disease; trapped inside their houses against their wills because of the lockdown situation. This has affected the businessmen all around the globe irrespective of the scale of the business.
The performance of the act is considerably an impossible task rather than mere financial difficulty or inappropriation. In the case of Morroco, all across western Africa, ebola virus spread suddenly; concerned with this spread of the virus the Morrocan government decided to postpone those years’ African Nations cup. In the present case, the Court of Arbitration for Sport ruled that Ebola did not constitute force majeure; because the deadly virus had not made hosting the event impossible—just more difficult. Liability arised on Morroco, alongside a fine of $1 million. From this event, everyone knew even though force majeure is a very simple term. But it is practically quite difficult to establish it.
After the 2008 economic crash the contract disputes started to come up quite frequently in the united states. In this matter, the court declared the inability of performing the contractual duties due to the lack of financial resources not to take into the consideration the force majeure clause. Further the court added that Changes in the cost or availability of materials, components, resources/services, or changes in market conditions will be specifically excluded from the definition of force majeure event.
Covid -19 would make it very tough or in some cases impossible to perform their contractual obligations; with all the flights shutting down i.e., international and domestic; alongside the state-city lockdown which makes it practically impossible for the goods to travel from one place to another. Even if the party completes the contractual obligation it could not have reached them at the agreed time. Coronavirus may not affect the force majeure clause itself, but the effects that it is producing are.
In Feb, 2020, the China Council for the Promotion of International Trade, revealed its detail of already issued 1,600 ‘Force Majeure certificates’ to firms in 30 sectors. However, validity of the contract is arguable because of such a certificate; but it is highly unlikely that this pandemic can prove to be a valid force majeure defense. For instance, these certificates may or may not be accepted in the contract laws of the united states. As we all know that, every contract has different circumstances and a different set of governing laws.
Conclusion
Force majeure clause is a very important and very helpful clause. At times, it protects one party from taking advantage of another party on the basis of non-compliance of the contractual obligation; and not taking into consideration the situation because of which the breach in the contract happened. A situation that was an act of god and was unforeseeable and unavoidable should be taken into account. But at the same time the parties should make sure that they do not take undue advantage of the clause.
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