CONTRACT-FORCE MAJEURE-COVID 19 HANG IN THERE- WE CAN DO THIS!
Can corona virus repudiate the contract under the disguise of force majeure?
Force majeure-It is a boilerplate clause in the contract, it sets free the parties to the contract when extraordinary event or an event beyond the control of the parties happens, ultimately lead to the impossibility of performance of the contract.
Force majeure-It is a boilerplate clause in the contract, it sets free the parties to the contract when extraordinary event or an event beyond the control of the parties happens, ultimately lead to the impossibility of performance of the contract.
A force majeure/frustration clause can be exhaustive to include act of god, war, terrorism, earthquake, hurricane etc. If there is no such clause in the contract, the parties have to ascertain it from the nature and circumstances of the contract. Consequences of force majeure can be suspension of the obligations under the contract which may result in breach or termination of the contract causing distress to the parties.
The outbreak of corona virus led the governments across the world to announce the closure of business, schools, and financial institutions to protect the people from virus, control the movement of people. However, few countries opted to run as usual. In all the times -basic necessaries have been kept open, few opted to work maintaining distance and others are forced to close down.
This being the scene of the crisis, can we trigger the force majeure and make the contracts impossible.
The answer relates back to the question what contract is for? Does it completely affect?
Parties to the contract strive to re-consider their ability to perform the obligations under the contract. Check the obligations- is it beyond the control of the parties, the duty of care has been taken to avoid the impossibility of performance.
Parties to the contract strive to re-consider their ability to perform the obligations under the contract. Check the obligations- is it beyond the control of the parties, the duty of care has been taken to avoid the impossibility of performance.
Ultimately, it depends upon the wording/drafting of the contract and circumstances of each case. For instance- a recent judgement of the Delhi High Court in Ramanand and ors vs Dr.Girish soni and others, Date of decision 21 May 2020, court opined that, tenants can’t take advantage of the lockdown and they can pay rent since they are not vacating the premises. However some sort of relaxation to pay the rent is permitted.
It all depends upon the circumstances of each case.
How to deal with situation-
• Review the contract, amend the contract to carry on the contract if the performance is possible,
• Observe duty of care
• If the performance is impossible and the fact should be brought to the notice of the other party as soon as possible and force majeure can be triggered.
• Have a record of government order, memorandum to constitute force majeure evidence.
Despite above all, it is the good faith, trust and interest of the parties weighs the contract than the triggering the force majeure clause and opting disruption of the contract. Parties can review, alter the contract and move on to perform if it feasible.
How to deal with situation-
• Review the contract, amend the contract to carry on the contract if the performance is possible,
• Observe duty of care
• If the performance is impossible and the fact should be brought to the notice of the other party as soon as possible and force majeure can be triggered.
• Have a record of government order, memorandum to constitute force majeure evidence.
Despite above all, it is the good faith, trust and interest of the parties weighs the contract than the triggering the force majeure clause and opting disruption of the contract. Parties can review, alter the contract and move on to perform if it feasible.
Author: Nirmala Patil, Advocate
www.linkedin.com/in/nirmalapatil/
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