MEANING AND DEFINITION

A force majeure clause in a contract exempts parties from fulfilling their obligations when unforeseen events, beyond their control, render performance impossible or impracticable. These events can include natural disasters, wars, or governmental actions. The term “force majeure” is broader than “act of God,” encompassing both natural and human-made events.

In Dhanrajamal Gobindram v. Shamji Kalidas & Co., the Supreme Court of India noted that force majeure is “not a mere French version of the Latin expression ‘vis major'” and has a wider import.

LEGAL PROVISIONS IN THE INDIAN CONTRACT ACT, 1872

The Indian Contract Act, 1872, does not explicitly define force majeure. However, two sections are pertinent:

• Section 32: Addresses contingent contracts and states that if an event on which a contract is contingent becomes impossible, the contract becomes void.

• Section 56: Embodies the doctrine of frustration, declaring that a contract becomes void if an act becomes impossible or unlawful after the contract is made, due to an event the promisor could not prevent.

In Satyabrata Ghose v. Mugneeram Bangur & Co., the Supreme Court clarified that the term “impossible” in Section 56 does not mean literal impossibility but includes impracticability due to unforeseen events.

ESSENTIALS OF INVOKING FORCE MAJEURE

To validly invoke a force majeure clause, the following conditions must be met:

1. Unforeseeable Event: The event must be beyond the control of the parties and unforeseeable at the time of contract formation.

2. Impossibility of Performance: The event must render the performance of contractual obligations impossible, not merely difficult or economically burdensome.

3. Causation: A direct link between the event and the inability to perform must be established.

4. Notice: Many contracts require the party invoking force majeure to notify the other party within a specified timeframe.

5. Mitigation: The non-performing party should take reasonable steps to mitigate the impact of the force majeure event.

In Energy Watchdog v. Central Electricity Regulatory Commission, the Supreme Court emphasized that a rise in costs or expenses does not constitute a force majeure event, and the doctrine applies only when the fundamental basis of the contract is affected.

DOCTRINE OF FRUSTRATION VS. FORCE MAJEURE

While both concepts deal with the inability to perform contractual obligations due to unforeseen events, they differ:

• Force Majeure: Typically arises from specific clauses within a contract that outline events excusing performance.
• Doctrine of Frustration: A legal principle under Section 56 of the Indian Contract Act, which applies when an unforeseen event renders the performance of the contract impossible or unlawful, and the contract lacks a force majeure clause.

In Satyabrata Ghose v. Mugneeram Bangur & Co., the Supreme Court noted that if a contract contains an express or implied force majeure clause, the situation will be analyzed based on that clause rather than the doctrine of frustration.

NOTABLE CASE LAWS

1. Satyabrata Ghose v. Mugneeram Bangur & Co. (1954 SCR 310)

• Facts: The defendant company agreed to sell a plot to the plaintiff. During World War II, the land was requisitioned by the military, delaying development.
• Issue: Whether the requisition frustrated the contract.
• Held: The Supreme Court held that the contract was not frustrated, emphasizing that “impossible” under Section 56 includes impracticability due to unforeseen events.

2. Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80

• Facts: Power companies sought relief under force majeure clauses due to increased coal prices following changes in Indonesian laws.
• Issue: Whether the rise in coal prices constituted a force majeure event.
• Held: The Supreme Court ruled that a mere increase in costs does not amount to a force majeure event, and the fundamental basis of the contract remained unaltered.

3. Dhanrajamal Gobindram v. Shamji Kalidas & Co. (AIR 1961 SC 1285)

• Facts: A contract included a clause subjecting it to the “usual force majeure clause.” Disputes arose regarding its interpretation.
• Issue: The scope and applicability of the force majeure clause.
• Held: The Supreme Court observed that force majeure is broader than “act of God” and includes events beyond the control of the parties.

INTERNATIONAL PERSPECTIVE

Globally, force majeure clauses are standard in contracts to allocate risk. The interpretation and enforcement of these clauses vary across jurisdictions:

• England: English law requires explicit inclusion of force majeure clauses in contracts. In their absence, the doctrine of frustration applies.
• United States: U.S. courts interpret force majeure clauses based on the specific language used and the foreseeability of the event.

CONCLUSION

Force majeure clauses play a crucial role in Indian contracts by providing a mechanism to address unforeseen events that impede performance. Their applicability depends on the specific language of the contract and the nature of the event. Understanding the interplay between force majeure and the doctrine of frustration is essential for legal practitioners and contracting parties to navigate contractual disputes effectively.