The Contracts and Covid-19
A Japanese proverb says “It is precisely the uncertainty of this world that makes life worth living.”. The pandemic coronavirus was never expected by any of us. And now the whole mankind on earth is dealing with the threat of covid-19. Its horrendous effect is not only on health but also on Global economy, businesses, education system, tours and travel and so on.
The business, mainly medium sized, small businesses and start-ups are under pressure and they are wondering how to deal with current situation and the coming future and fear of Breach of Contract. Along with challenges of sales and purchase, the other major problem is ‘Contracts’. Contracts with different parties as partners, clients, customers, employees etc. So how to deal with it. We can! In Law of Contact we have clause called as ‘Force Majeure’.
During this novel coronavirus pandemic leading businesses are planning to apply force majeure clauses. China and many other countries may declare “Force Majeure” in response to the difficulties they are facing.
“Force Majeure” means “supreme force” is a common clause in Contracts that essentially liberates or lessen the obligation of both parties from liability or obligations during an extraordinary event that is beyond the control of the parties. It can be a War, Strike, Epidemic, Riots or Act of God (in legal term used for hurricane, flood, earthquake, volcanic eruption, etc.), it prevents one or both the parties from fulfilling their obligations under the Contract. However, it has been seen that most force majeure clause do not excuse a party’s non-performance entirely, but only suspend it for the duration of the force majeure. Also, a very important note is, appeal the incorporation of “Force Majeure” (FM) clause in the contract. If FM has been applied, the appealing party cannot avoid it. In the absence of a force majeure clause, parties to a contract are left to the common law i.e. section 32 (Contingent Contracts) and section 56 (Doctrine of Frustration) of Indian Contract Act, 1872, which rarely which rarely result in excuse of performance.
Many international trading contracts are governed by English law, and it is not guaranteed to rely on an FM clause to avoid contractual responsibility under English law. Yet, FM can be helpful in the coronavirus pandemic. “Force Majeure” can be a remedial to any kind of Contracts including Lease, Employment, Sale-Purchase, Partnership, Business transaction etc. It has been observed that Real Estate business may look for “Force Majeure” extensively before any other businesses.
Businesses and anyone having any contract need to go through the contract document thoroughly. And study of ‘Force majeure’ clause can be helpful. If finding difficulty may take assistance of legal practitioners.
For any further details and guidance on any legal matter you may directly contact us;
Contact person: Adv. Anupam Agarwal |Mobile no. +91 97406 45762 |Email: anupam@rslegal.in
