What is Force Majeure Clause
The term force majeure (loosely translated as ‘superior force’) is derived from French Civil Law.
It refers to a clause which is typically used in agreements / contracts to exempt a party/ parties from performing their obligations where performance is impacted by unforeseen events which are outside its/ their control.
In India, the legal basis for this clause can be said to arise from Section 56 of the Indian Contract Act which states that a contract to do an act which is impossible or becomes impossible is void.
What events can be considered to be covered within this clause
Some of the events which are considered under this clause are natural disasters (earthquake, floods, tsunami, hurricane, tornado, forest fire), pandemic, war, terrorism, riots, civil disturbances, labour unrest and strikes.
The events which need to be covered in this clause need to be defined actively by the parties at the time of entering into the contract.
What is the impact of the Force Majeure clause
Upon the occurrence of the force majeure event, the party / parties are can delay, suspend or terminate their obligations without liability for breach. They can also make adjustments to the deadlines, payment schedule or any other contractual obligations.
The specific impact will also be determined upon the basis of the language of the clause, the events which are covered therein and the circumstances surrounding the triggering event.
It is to be noted that the mere existence of the force majeure clause does not automatically absolve a party from performance of its obligations. The party invoking the clause must demonstrate that the event in question falls within the scope of the force majeure event and that they have undertaken all the reasonable steps to ensure performance under the contract.
The above article provides a general overview on the topic. For further information with respect to the scope of the force majeure clauses in any agreement, kindly contact services@jneela.com.
