COVID 19 and Force Majeure: An Indian View

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COVID 19 and Force Majeure: An Indian View

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1. The virus - The corona virus has spread to as many as 112 countries and territories around the world. This virus has found a foothold on every continent except for Antarctica. There are now about 119,223 reported cases and more than 4,299 reported deaths attributed to this new virus. WHO has announced it a pandemic.
2. Act of God - This global outbreak may be construed as a force majeure event or an ‘act of God’, and can be taken as a defence to absolve a non-performing party from any liability arising out of failure to perform or delay in performance of its part of the obligations under an agreement.
3. What is Force Majeure (a French term) - At the outset, one of the fundamental premises of contract law is the principle of "pacta sunt servanda", which means "agreements must be kept".  Having said this, accounting for exceptional circumstances that may render a party unable to honour its part of the obligations a force majeure clause forms a boilerplate clause in agreements across the world today and aims at absolving one or both parties from liability to perform contract obligations when the inability to perform is due to some factor/ event/ circumstance beyond the parties' control.
4. The concept of force majeure is essentially a circumstance or event, the occurrence of which is beyond the control of the contracting parties rendering performance of their contractual obligations by the party (ies) impossible.
5. Will it possible to blame on virus for everything - Some in Corporate India could be looking to invoke in case of a breakdown in contracts because of the coronavirus outbreak. But it might not work in all cases. As different contracts and governing laws stipulate different requirements for different situations.
6. What companies need to do - The companies have to proactively manage the related legal risk and carefully assess which party would bear financial losses caused by breakdown. 

– Important Facts –

•  Stefan Lofven is the Prime Minister of Sweden.
•  SAARC Charter Day is celebrated on December 8.

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