Whether Contractual Obligations Can Be Excused During A Health Crisis Such As Coronavirus Outbreak?


Throughout the ages the worst fear of men is war. But if we think deeply the worst fear of any country would be an infectious disease. It is the best bio-weapon any country can have. This bio-weapon can be used by any country to erase half of the human race without even having a nuclear weapon. The outbreak of coronavirus is not new to the human race. Before that, many flues have shunned humans to the core. We have seen influenza that was wiped out of humans more than any the number of World War-1.

As we all know the outbreak of Coronavirus is increasing rapidly. It started in Wuhan, China but now it has reached almost every part of the world. As the number of cases is increasing day by day so the best solution any country can have is to put everything in pause until the situation gets better. Due to this, India has been in a 4-month complete lockdown. If everything has been shut from the past 4 months so what happens to the contractual obligations? Is there any remedy given to the person who violates the contractual obligations due to the current pandemic? In this article, we will answer these questions as to what happens to the non-completion of the contracts in the time of the pandemic.

Indian Contract at the time of pandemic

Contract laws are based on the principle- “pacta sunt servanda” which means contracts must be kept. So one cannot get out easily of the legally binding agreement. But exceptions do exist from which one can easily escape. These exceptions are the Force Majeure clause and the doctrine of frustration.

Force Majeure

One can understand this as a ‘Supreme Force’. Almost in every contract, this clause is present so that the promisor can escape from the liability if he can’t carry the obligations.

Force Majeure means- an unexpected situation or any event which is unprecedented because of which it becomes impossible to fulfill contractual obligations.

Although our Indian Contract, Act 1872 does not explicitly define this term it has impliedly mentioned it in both sections 56 and 32 of the Contract Act. Section 32 talks about the contingent contracts where happening of an uncertain event or non-happening decides the enforcement of the contract. If by any chance the happening of a certain event becomes impossible than the contract becomes void.

Section 56[1] of the Indian Contract Act, 1872- An agreement to do an act impossible in itself is void.

Contract to do act afterward becoming impossible or unlawful —A contract to do an act which, after the contract is made, becomes impossible, or, because of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.”

This section clearly defines a force majeure clause. This means wherever after the contract, things become impossible for the promisor to perform without his fault the contract becomes void. This clause includes earthquakes, floods and other human activities like war, terrorist attacks, etc.

Court has used the narrower approach in applying the force majeure clause. It only tends to cover those cases which are there in the list. But Court has started to broaden its approach. For example- In 2016 the Government of India suddenly announced demonetization of the 500 and 1000 rupees’ currency notes due to these people suffered so much and it became impossible for them to complete the contract. After that parties tried to end the contract and termed demonetisation as force majeure. The Central Electricity Regulation Committee (CERC) recently held “demonetization” as a valid threshold to invoke the force majeure clause that was entered upon by the party[2]. In this case, the Court tried to interpret force majeure broadly by adding demonetisation as one of the force majeure to invoke the contract.

Energy Watchdog v. Central Electricity Regulatory Commission & Ors.[3]

In this Supreme Court has laid down certain guidelines to invoke force majeure clause-

  1. To invoke such clause, the event should be beyond the control of the promisor and because of that he is unable to perform the contract, in such situation parties cannot be held liable for the non-performance of the contract.
  2. While analyzing the clause, it is important to check that reasonable measures or the parties have done their best to avoid the force majeure event.
  3. To qualify the force majeure clause, the event must be unforeseeable by the parties.
  4. Because of this event, it has rendered impossible for the parties to perform the contract.

So it is clear from the above, that if the clause has been mentioned in the contract then the parties can go to the court and prove that they can’t fulfill the contract and after that, they can escape from their liabilities.

Whether clause can be invoked in light of the current pandemic?

Being contractual the force majeure clause depends on facts and circumstances of each case. It is for the court to go into the facts of each case and decide whether the clause can be invoked or not.

Lebeaupin v Crispin[4]

Held that- “A force majeure clause should be construed in each case with the close attention to the word which precedes or follow it and with due regard to nature and general terms of the contract[5].” Thus where the clauses contain the situation of the outbreak of epidemic or pandemic as the force majeure event then the clause can be invoked. COVID-19 seems to fit well in the situation as the World Health Organization already announced it as a pandemic.

Another option from which the clause can be invoked is the governmental action or order. For example, recently The Ministry of Finance, Government of India vide an office memorandum dated 19.02.2020 recently clarified with respect to ‘Manual for Procurement of Goods, 2017’, and declared that in the event of any disruption in the supply chains due to spread of coronavirus in China or any other country, such situation will be covered in the Force majeure Clause (FMC) in the contract. It is further clarified that such a situation should be considered as a natural calamity and Force Majeure clause may be invoked, wherever considered appropriate, following the due procedure.[6]

Another instance can look into the judicial response towards this pandemic where Delhi High Court vide order dated 21.4.20 observed that “Lockdown prima facie in nature of Force majeure” where it put a stay on Bank guarantee invocation[7].

Thus by the above discussion, we can conclude that having the term “pandemic” or “epidemic” in force majeure clause does make the invocation of such easier but again as we all are in a certain extraordinary situation certain other ways can also be opted to convince the courts.[8]

The Doctrine of Frustration

The concept of Force majeure clause is also imbibed under Section 56 of the Contract Act. The doctrine is based on the maxim “less non cogit ao impossibilia”. It means the law will not compel a man to do anything which he cannot possibly perform by himself. The origin of the doctrine is from the English case of Taylor v. Caldwell[9]– In this case, an opera house was rented for organizing concerts but due to some mishap it caught fire, the contract was frustrated.

The very base of the contract was ceased to exist because of which the contract was made in such cases doctrine of frustration can be applied.

This is also one of the ways where parties can go to the court to terminate the contract. Even if the force majeure clause is absent still the party can go to the court to invoke the contract by proving that the performance of the contract has become impossible.

The Supreme Court in many cases has interpreted this doctrine and explained that if the very purpose of the contract ceases to exist then the contract is frustrated.

In the case of Satyabrata Ghose v. Mugneeram Bangur & Co.[10]

Held- “the unprecedented event or change in the circumstances because of which If the very base of the contract perishes and the promisor finds it difficult to do what he has promised.”

Again in Naihati Jute mills ltd v. Khyaliram Jagannath[11]– Held that the mere change in the circumstances is not sufficient. Thus Courts must be satisfied that the whole purpose of the contract is frustrated and not just the current pandemic has altered the circumstances.[12]

In the recent judgement in Standard Retail Pvt. Ltd vs M/s G. S. Global Corp & Ors,[13]   – It was held that lockdown cannot rescue the importers as it is for a limited period only. So the importers cannot take advantage of the current pandemic to escape from their contractual liabilities.


Thus from the above discussion, it is clear that to invoke the force majeure clause it depends upon the facts and circumstances of each case. And if the parties don’t have the clause in their contract then they can go for the doctrine of frustration but this is also not possible in difficult times for every case.  The only way possible is to adjust the price and deadline harmoniously because only co-operation with each other can save the parties from the current crisis.

[1] https://indiankanoon.org/doc/648614/

[2]Cercind.gov.in. 2020. [online] Available at: <http://www.cercind.gov.in/2018/orders/95-MP-2017.pdf> [Accessed 21 April 2020].

[3] ((2017) 14 SCC 80).

[4] [1920] 2 KB 714

[5] Ruth Wilkinson, Force majeure – the devil is in the detail, September 1, 2012, http://www.cmguide.org/archives/2853#:~:text=in%20Lebeaupin%20v%20Crispin%20%5B1920,general%20terms%20of%20the%20contract.

[6] No. F18/4/2020-PPD, Ministry of Finance.

[7] Lockdown Prima Facie in Nature Of Force Majeure’: Delhi HC Stays Bank Guarantees’ Invocation [Read Order]. Livelaw.in. Available at: https://www.livelaw.in/news-updates/lockdown-prima-facie-in-nature-of-force-majeure-delhi-hc-bank-guarantee-155525  [Accessed 22 April 2020].

[8] Riddhi Daga and Akansha Uboveja, COVID-19 and Contracts, June 2020, Available at https://eee0c521-e3d8-4c34-83c0-a26072308d3d.filesusr.com/ugd/9f5e1f_c386bc00c6e844599eb78e426669b031.pdf.

[9] (1863) 3 B & S 826.

[10] AIR 1954 SC 44.

[11] AIR 1968 SC 522.

[12] Supra note 8.

[13] Commercial Arbitration Petition (L) NO. 404 OF 2020.

This Article is authored by Riddhi Daga, 3rd Year B.A.L.L.B (Hons.) Student from Hidayatullah National Law University, Raipur.

Also Read – Is it Time for India to Issue its Second Compulsory License – The COVID-19 Vaccine.

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